Antitrust Law Daily Wrap Up, TOP STORY: Comcast abandons Time Warner Cable acquisition over Justice Department concerns, (Apr 24, 2015)

By Linda O’Brien, J.D., LL.M.

Comcast Corporation has ended its plans to acquire Time Warner Cable (TWC) for approximately $45.2 billion, after the U.S. Department of Justice informed the companies that it had significant antitrust concerns regarding the merger. The transaction would have combined the country’s two largest cable operators and made Comcast “an unavoidable gatekeeper for Internet-based services that rely on a broadband connection to reach consumers,” according to the Department’s announcement today.

Comcast is headquartered in Philadelphia and has approximately 21.7 million video subscribers and 20.7 million broadband subscribers. Comcast is both the largest video and wired broadband Internet-access provider in the U.S.

Time Warner Cable has headquarters in New York City and has approximately 11.4 million video subscribers and 11.6 million broadband subscribers. TWC is the fourth-largest video and the third-largest wired broadband Internet-access provider in the U.S.

In February 2014, Comcast announced that it had entered into a definitive agreement to merge with TWC. Through the acquisition and management of Time Warner Cable systems, Comcast projected acquiring approximately 8 million managed subscribers in the transaction. However, the transaction faced scrutiny from government regulatory agencies over competitive concerns and received criticism from Congressional leaders, consumers, and industry groups.

Specifically, in October 2014, Consumers Union recommended in a detailed document submitted to the Justice Department that the Department block the proposed acquisition, arguing that no conditions could cure the anticompetitive harms posed by the transaction. On April 20, 2015, dozens of industry trade associations and consumer groups sent a letter to the Federal Communications Commission (FCC), urging the agency to reject the merger. In a letter dated April 21, 2015, six U.S. Senators informed the Justice Department and the FCC of their opposition to the proposed merger and met with the Justice Department to express their concerns.

Comcast and Time Warner statements. “Today, we move on,” Comcast Chairman and CEO Brian L. Roberts said in a written statement. "Of course, we would have liked to bring our great products to new cities, but we structured this deal so that if the government didn’t agree, we could walk away.”

“We have always believed that Time Warner Cable is a one-of-a-kind asset,” said TWC’s Chairman and Chief Executive Officer Robert D. Marcus. “We are strong and getting stronger. Throughout this process, we’ve been laser focused on executing our operating plan and investing in our plant, products and people to deliver great experiences to our customers. Through our strong operational execution and smart capital allocation, we are confident we will continue to create significant value for shareholders.”

Justice Department, FCC reactions. "The companies' decision to abandon this deal is the best outcome for American consumers," said Attorney General Eric Holder. "The Antitrust Division of the United States Department of Justice has demonstrated, time and again, that it can and will defend the interests of the American consumer no matter the complexity of the issue or the size of the opponent. This is a victory not only for the Department of Justice, but also for providers of content and streaming services who work to bring innovative products to consumers across America and around the world."

In a statement released today, FCC Chairman Tom Wheeler agreed with the Attorney General’s sentiments. “Comcast and Time Warner Cable’s decision to end Comcast’s proposed acquisition of Time Warner Cable is in the best interests of consumers. The proposed transaction would have created a company with the most broadband and video subscribers in the nation alongside the ownership of significant programming interests. Today, an online video market is emerging that offers new business models and greater consumer choice. The proposed merger would have posed an unacceptable risk to competition and innovation especially given the growing importance of high-speed broadband to online video and innovative new services.”

American Antitrust Institute President Diana Moss commented that mergers, such as this one, generally have been detrimental to competition and consumers. “New economic evidence shows that mergers have, on average, raised prices to consumers. And management consulting surveys reveal that that managers do not produce the predicted cost savings from the mergers they are tasked with implementing. So before the war cries begin over merger enforcement and Comcast-Time Warner Cable, let us take a moment to let this sink in, and remind ourselves what competition laws are designed for: to protect competition and consumers – but more important – to protect our market-based economic system.”

Companies: Comcast Corporation; Time Warner Cable, Inc.

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