Antitrust Law Daily Wrap Up, ACQUISITIONS & MERGERS NEWS: FCC outlines conditions for Charter’s acquisition of Time Warner, Bright House, (May 11, 2016)

By Linda O’Brien, J.D., LL.M.

In approving Charter Communications, Inc.’s proposed $78 billion acquisition of Time Warner Cable and its related $10.4 billion acquisition of Bright House Networks LLC, the Federal Communications Commission (FCC) explained that the transaction would materially alter the companies’ incentives and abilities in ways that were potentially harmful to the public interest and that the imposition of certain conditions were necessary in order to reduce the risk of public interest harms.

In a Memorandum Opinion and Order released yesterday, the FCC consented to the transfer of certain licenses from Charter, Time Warner Cable, and Bright House to a new combined entity, New Charter, after an analysis of the potential harms and benefits of the transaction to ensure that the public interest, convenience, and necessity were served.

First, New Charter will be prohibited from imposing data caps or charging user-based pricing for its residential broadband service for a period of seven years. This condition ensures that New Chapter will continue Charter’s past pricing practices and protects subscribers from paying fees designed to make online video consumption more expensive, according to the FCC. The transaction is also conditioned on the companies’ commitment to interconnect with qualifying companies for free as to prevent New Charter from raising prices on providers of Internet traffic.

Since New Charter would have an increased incentive to use its leverage over programmers to limit online video competition, New Charter is prohibited for seven years from entering into or enforcing contract terms that prevent or penalize programmers from distributing content online.

In the order, the FCC acknowledged that, while the conduct remedies may not eliminate all harms and require close monitoring to prevent evasion, the conditions are intended to permit the transaction’s likely efficiencies and benefits to proceed while mitigating likely harms.

Dissent. In a dissenting statement, Commissioner Ajit Pai noted, while the Commission majority did not believe that the transaction was not in the public interest, the agency approved the merger in order to impose greater regulation on the Internet economy. In Pai’s view, the FCC order targeted paid peering and usage-based pricing on an industry-wide basis and moves away from free-market policies that have made the U.S. Internet economy “the envy of the world.” He claims that the FCC “has turned the transaction into a vehicle for advancing its ambitious agenda to micromanage the Internet economy.”

Companies: Charter Communications Inc.; Bright House Networks LLC; Time Warner Cable Inc.

News: AcquisitionsMergers Antitrust