AT&T-Time Warner deal
sparks calls for scrutiny in Washington
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[October 24, 2016]
By Julia Edwards and Diane Bartz
WASHINGTON
(Reuters) - AT&T Inc's proposed $85 billion takeover of Time Warner Inc
generated skepticism among both Democrats and Republicans on Sunday,
making it more likely that regulators will closely scrutinize the effort
to create a new telecommunications and media giant.
The biggest deal of the year, announced just over two weeks before the
Nov. 8 U.S. election, is a gamble on a victory for Democratic
presidential candidate Hillary Clinton and a continuation of the status
quo on anti-trust and regulatory enforcement.
The Republican candidate Donald Trump, who is trailing Clinton in the
polls, has said he would block the takeover.
The billionaire businessman has railed against the media's role in what
he has described as a "rigged" election and he believes the acquisition
of Time Warner, which owns CNN and Warner Bros, Hollywood's largest film
and television studio, would concentrate too much power in one
organization.
"AT&T, the original and abusive 'Ma Bell' telephone monopoly, is now
trying to buy Time Warner and thus the wildly anti-Trump CNN. Donald
Trump would never approve such a deal because it concentrates too much
power in the hands of the too and powerful few," Trump economic advisor
Peter Navarro said in a statement on Sunday.
Clinton, who has expressed misgivings about other corporate mega
mergers, has not yet commented on the takeover.
But Senator Bernie Sanders, Clinton's former rival for the Democratic
party's nomination, said on Twitter that the administration should
"kill" the Time Warner takeover because it would mean higher prices and
fewer choices for consumers.
Sanders' comments carry weight because Clinton needs Sanders' coalition
of young and left-leaning voters to propel her to the presidency.
Clinton spokesman Brian Fallon told reporters on Sunday there were "a
number of questions and concerns" about the deal "but there's still a
lot of information that needs to come out before any conclusions should
be reached."
The Senate subcommittee on antitrust will hold a hearing on the
acquisition sometime in November, said subcommittee chair Senator Mike
Lee, a Republican, and the ranking Democrat, Senator Amy Klobuchar.
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Tim Kaine, Clinton's running mate and a senator from Virginia, said
lawmakers and regulators would have to review the deal and "get to the
bottom" of questions over whether the merger would decrease competition.
"Less concentration, I think, is generally helpful especially in the
media," Kaine said on NBC's "Meet the Press."
The U.S. Justice Department, not the president, has the power to reject
such a deal if it violates antitrust laws. AT&T said it is unclear if
the Federal Communications Commission will also have jurisdiction to
review the deal.
A spokesman for the Justice Department declined to comment.
AT&T has described the deal as a "vertical merger" because there is no
overlap between the two companies and hopes that such a tie-up will get
the regulatory green light by the end of 2017.
“In the modern history of the media and the Internet, the U.S.
government has always approved vertical mergers like ours, because they
benefit consumers, strengthen competition, and, in our case, encourage
innovation and investment,” David McAtee, AT&T senior executive vice
president and general counsel, said in a statement on Sunday.
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The
Time Warner takeover mirrors the 2013 $30 billion purchase of NBCUniversal by
its rival Comcast , a deal which was cleared after regulators imposed
concessions on the cable operator.
COMPETITORS ENVISION 'CLOSE' SCRUTINY
The cash and stock deal brings together two very different companies -- one a
telecoms company that traces its heritage back to Alexander Graham Bell, the
other an entertainment company founded in the Hollywood of the 1920s.
But
the tie-up, which is designed to boost the content AT&T can stream over its
network, raises concerns that AT&T might try to limit distribution of Time
Warner material.
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Competitors such as NBCUniversal, Twenty-First Century Fox Inc and the Walt
Disney Co. could find that their content could be put at a disadvantage, some
consumer advocacy groups suggested.
"A transaction of this magnitude obviously warrants very close regulatory
scrutiny," said Zenia Mucha, chief communications officer for Disney.
NBC
Universal, which is owned by Comcast Corp and Fox declined to comment on the
merger.
Netflix Chief Content Officer Ted Sarandos, speaking on Saturday at the
Institute on Entertainment Law and Business conference at the University of
Southern California, said he expected a close examination of the deal by
regulators.
CONGRESSIONAL EXAMINATION
Senators Lee and Klobuchar said their subcommittee would "carefully review" the
merger to make sure it does not harm consumers.
Lawmakers may pursue inquiries into the merger and build support for or against
it, but it is ultimately up to the Justice Department to approve, block or place
conditions on the deal.
Two of
the biggest congressional critics of the mega-mergers among media companies and
elsewhere in the U.S. economy said late on Saturday that they would take a hard
look at this deal.Senator Richard Blumenthal, who is on the Senate Judiciary
Committee, noted the proposed acquisition would combine a wireless company, a
pay-TV provider and a studio."I will be looking closely at what this merger
means for consumers and their pocketbooks and whether it stands up to the
rigorous review standards set by the Department of Justice's antitrust division
in the last few years," he said.Senator Al Franken, who is also on the Judiciary
Committee, said that the deal raised "immediate flags.""I'm skeptical of huge
media mergers because they can lead to higher costs, fewer choices, and even
worse service for consumers," he said. "And regulators often agree, like when
Comcast unsuccessfully tried to buy Time Warner Cable, a deal that I fiercely
opposed."
(Additional reporting by David Shepardson in Washington and Jessica Toonkel in
New York.; Editing by Bill Trott and Mary Milliken)
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