There Are Two Things That Could Stop The Comcast/TWC Merger, And We Might Get Both

Comcast-TWCLogoUpdate: Comcast is reportedly planning to back out from the merger deal as early as tomorrow in the face of the likely opposition from both the FCC and Justice Department.

Original Story:

Comcast and Time Warner Cable announced their intention to merge well over a year ago. They assured shareholders that the process would be relatively quick, beneficial to all, and likely to be approved and move forward in less than a year. Reality, however, has proved less accommodating to the would-be juggernaut. After months of lobbying, advertising, and public commenting from all comers, we’re down to the actual brass tacks of regulation, holding our collective breath to see if we get the rulings that will effectively kill the merger where it stands.

In the past, we’ve likened the merger to a corporate marriage. The two companies may be engaged, or even standing at the altar, but we’re essentially poised waiting for the, “speak now or forever hold your peace” part to clear before anything else happens.

There are two entities that both have to give the yea or nay before anything can move forward. If either of those agencies, the FCC and the Department of Justice, puts the kibosh on the deal, then Comcast and TWC have to call it off and argue over who’s paying the caterer.

A merger like this planned one has to go before both the FCC and the DoJ because each organization has a different mandate. Though there are areas of overlap, they’re looking over the pros and cons of the transaction from different angles.

The FCC is required to oversee the issuing and the transferral of licenses and authorizations for communications companies — so TWC handing over its licenses to Comcast, for example, triggers a review. The standard the FCC has to use to judge mergers is whether the public interest is actively served by the transaction, not just if it would fail to cause harm.

The Justice Department, meanwhile, is specifically responsible for antitrust issues: if something is anticompetitive or likely to cause a monopoly, the DoJ is supposed to step in and stop them before they can go around causing harm.

Way back in the long-long-ago time of 2014, we outlined in-depth the review process the merger has to go through at both the FCC and the DoJ.

The TL;DR version of the FCC’s process goes something like this:

  1. The parties that want to merge file their application
  2. The FCC makes a public notice and creates a docket
  3. The cycle of comments, reply comments, and replies to reply comments kicks off
  4. The FCC does its homework on all the issues for however long it takes, informally but not statutorily within a 180 day “shot clock”

After all of that, there are basically three possible outcomes. Two of them are approval: either the FCC can give the green light to the merger as-is, or it can request potentially significant conditions be attached. But the third is basically a giant red light: if the FCC is for any reason not able to find the merger in the public interest and give it a go-ahead, the deal goes to a hearing before an Administrative Law Judge.

Such a hearing is a really, really bad sign for the companies that want to merge, because it indicates that the FCC has been unable to come up with any conditions for the merger that would make it in the public interest. The last time the FCC recommended a major merger — AT&T and T-Mobile — go to a hearing, the companies instead gave up and withdrew their application, realizing the gig was essentially up.

And that kind of hearing is what reports indicate FCC staff are now recommending for Comcast and Time Warner Cable.

That’s one of two. As for the other…

The FCC’s process is more public than the DoJ’s, so we have a fractionally better sense of what’s going on. Over at Justice, the process goes more like this:

  1. Companies announce their intention to merge
  2. [a whole lot of highly confidential research and legal stuff]
  3. A lawsuit appears in public, and the merger happens or doesn’t

A lawsuit from the DoJ doesn’t mean the agency is blocking the merger. Sometimes, as in the Comcast/NBCU merger in 2011, a lawsuit and its settlement are announced at the same time, and the settlement is that the companies agree to the conditions that the DoJ is placing on the merger. The lawsuit is simply the way that the agency can legally respond.

However, a lawsuit can also seek to block the merger outright as being anticompetitive. And reports once again indicate that Justice is considering just that. Everyone’s favorite, “people familiar with the matter,” say that merger review staff at the DoJ could recommend filing a lawsuit to stop the merger as soon as next week.

The FCC, much to the cable industry’s chagrin, has been making a habit in the last year of actually working very hard to prioritize the well-being of consumers over the desires of entrenched corporate interests. The commission’s net neutrality and municipal broadband rulings, and the momentum behind those movements, have merger opponents cautiously optimistic that the FCC will stand in the way of Comcast’s plans.

Justice is more opaque, but the arguments made in public forums by the opposition (including us) show that there are tons of reasons why letting this merger happen would be anticompetitive in the extreme. So it’s easy to believe — or at least, to want to believe — that the rumors are right.

If the merger were going to be rubber-stamped as is, it would already have been sometime in the last 14 months. At the very least, the merger will face mitigating conditions — but those are unlikely to be enough really to help consumers (or other businesses). And so maybe, just maybe, we’re finally reaching the end of this road… and it will be an end that makes everyone except Comcast (and TWC, and Charter) happy.

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