The Merger Control Review: US Merger Control in the Media Sector
I Overview of agency review
Like mergers in other industries, mergers involving media companies are reviewed by the Antitrust Division of the Department of Justice (DOJ) and the Federal Trade Commission (FTC) under Section 7 of the Clayton Act. In addition to these antitrust agencies, the Federal Communications Commission (FCC) also plays an important role in reviewing media mergers. This chapter describes these agencies' procedures and methods of analysis before turning to a summary of recent mergers in the media industry.
i Antitrust agency review
Under the Hart-Scott-Rodino (HSR) Act, parties to mergers and acquisitions that exceed specified thresholds must make pre-merger notification filings and wait for government review. The parties may not close their deal until the waiting period outlined in the HSR Act (typically 30 days) has passed or the government has granted early termination of the waiting period.
The agencies sometimes require additional time to review a transaction that raises serious competitive issues, in which case they will issue a formal request for additional information, or 'second request,' at the end of the initial 30-day waiting period.2 A second request is a highly detailed and burdensome request for documents, data and written responses, and generally requires at least three months (and often much longer) to respond. The response process typically involves the collection, review and production of tens or hundreds of thousands of documents (including emails) related to the competing products; collection and analysis of large amounts of data regarding the companies' pricing and sales (typically with the help of an outside economist); and significant time from the parties' management personnel.
The DOJ and FTC conduct a fact-specific review of whether a proposed merger would enable the merged entity to raise prices, reduce output, diminish innovation or would otherwise harm consumers, such as by facilitating collusion among the remaining market participants. These agencies have issued guidance on how they evaluate the likely competitive impact of mergers in the Horizontal Merger Guidelines (19 August 2010) (the Merger Guidelines), which outline the analytical techniques used to evaluate mergers. The DOJ has generally taken the lead in antitrust review of media mergers.
The first step in determining whether a proposed merger raises substantive antitrust concerns is usually defining the market. To define the market, the agencies will consider which product or group of products are reasonable substitutes for one another, and the geographic area in which customers may reasonably seek suppliers of the products.
Generally, the second step is to evaluate concentration in the market as a screen for the likelihood of possible anticompetitive effects. The US antitrust enforcement agencies measure market concentration by the Herfindahl–Hirschman Index (HHI). The HHI requires determining each market participant's respective market share, squaring that share, and then summing the squares. According to the Merger Guidelines, mergers that result in an increase in the HHI of less than 100 points, or post-merger HHIs below 1,500, are unlikely to have adverse competitive effects and ordinarily do not require additional analysis. Markets with post-merger HHIs between 1,500 and 2,500 are regarded as moderately concentrated. Mergers resulting in moderately concentrated markets that involve an increase in the HHI of more than 100 points potentially raise significant competitive concerns and often warrant scrutiny.
Markets with post-merger HHIs above 2,500 are regarded as highly concentrated. If the HHI is over 2,500, and the increase from pre-merger would be between 100 and 200 points, such mergers may raise significant competitive concerns and often warrant scrutiny. If the increase would be more than 200 points, then the merger raises significant competitive concerns and will be presumed by the enforcement agencies to create or enhance market power unless consideration of qualitative factors militates against that conclusion.
When the enforcement agencies are concerned that a transaction may have anticompetitive effects, they will analyse the market carefully to determine whether the transaction is likely to result in injury to competition based on either unilateral effects (the ability of the combined entity to raise prices or reduce output unilaterally post-merger) or coordinated effects (including not only an increased likelihood of explicit collusion, but also a reduction in the incentive of market participants to undercut each other's attempts to raise prices or reduce output).
ii FCC review
The Communications Act of 1934 provides a separate, but complementary, role for the FCC in reviewing transactions. The FCC's review is informed by competition principles derived from the Clayton Act, but also focuses more broadly on whether the merger serves the public interest.3 This standard encompasses the goals of the Communications Act of preserving and enhancing competition in relevant markets, accelerating private-sector deployment of advanced services, ensuring a diversity of information sources and services to the public, and generally serving the public interest.4
The FCC also has issued detailed rules regarding permissible levels of multiple ownership of radio broadcast licences5 and television stations,6 as well as cross-ownership between radio and television stations7 or between daily newspapers and radio or television stations.8 The purpose of these rules, a full treatment of which is beyond the scope of this chapter, is to ensure a diversification of programming sources and viewpoints and prevent excessive concentration in the broadcasting industry.
Once an application to the FCC is complete, the FCC issues a public notice and sets a schedule for public comment.9 The FCC also may send requests for information to the applicants and third parties.10 The FCC may approve a transaction or approve it with conditions necessary to ensure that the public interest is served.11 Unlike the antitrust review process, in which the DOJ and the FTC bear the burden of proving in court (or, for the FTC, sometimes in an administrative proceeding) that a transaction is likely to have an anticompetitive effect, applicants before the FCC bear the burden of proving that the transaction is in the public interest.12 If the FCC is unable to approve a transaction, it designates the transaction for review by an administrative law judge (ALJ).13 Once the ALJ issues an initial decision, the full Commission will then vote on whether to approve the application.14
The FCC typically seeks to complete its review within 180 days.15 It endeavours to coordinate with the antitrust review by the FTC or DOJ to avoid creating duplicative work for the parties, or work that requires conflicting remedies.
II Recent media mergers
The FCC and the DOJ reviewed several very large proposed media mergers between 2015 and the first half of 2021, in addition to more modest-sized deals in the television and radio spaces. The most prominent transaction during that time is AT&T's acquisition of Time Warner Inc. Other prominent deals in this period included two proposed transactions involving Time Warner Cable – the first of which was abandoned by the parties in the face of opposition by the FCC and the DOJ but the second of which was approved – and AT&T's US$49 billion acquisition of DirecTV. Most deals that posed competition issues closed, although in several instances only after the acquirer agreed to conditions (including divestitures) to address the regulators' concerns.
i AT&T/Time Warner Inc
On 22 October 2016, AT&T announced its intended US$85 billion acquisition of Time Warner, Inc. AT&T touted the benefits of combining 'Time Warner's vast library of content and ability to create new premium content' with AT&T's 'extensive customer relationships, world's largest pay TV subscriber base and leading scale in TV, mobile and broadband distribution'.16 AT&T also stated that 'the combined company will strive to become the first US mobile provider to compete nationwide with cable companies in the provision of bundled mobile broadband and video'.17
The antitrust review of the AT&T/Time Warner deal received considerable attention, including in the 2016 US presidential election campaign. As a candidate, former President Trump expressed opposition to the transaction.18 While the head of the DOJ Antitrust Division, Makan Delrahim, said in 2016 (before taking that role) that he did not view the transaction as 'a major antitrust problem', after a lengthy investigation the DOJ ultimately sued to block the merger.19 On 18 December 2017, AT&T announced that the company was unable to reach a satisfactory settlement with the DOJ.20 A six-week trial on the DOJ's challenge to the merger began on 19 March 2018 becoming the first vertical merger challenge litigated to judgment in nearly 40 years. As discussed below, the Court ruled in June 2018 that the government failed to meet its burden to establish that the proposed transaction is likely to lessen competition substantially, and let the merger proceed without conditions. In February 2019, the Court of Appeals for the DC Circuit affirmed the trial court's ruling.
The FCC did not review this transaction. Although Time Warner held dozens of FCC licences at the time the deal was announced, in February 2017 it announced the sale of its lone TV station – the subject of its FCC licences – to Meredith Corporation for US$70 million.21 Shortly following this announcement, FCC commissioner Ajit Pai confirmed that he did not expect the FCC to review the merger.22
In its complaint, the DOJ raised three specific antitrust concerns in connection with the merger: (1) that the merged entity could raise costs of, or withhold content from, cable competitors, harming end consumers through passed-on price increases, (2) that AT&T/ Time Warner could harm emerging cable competitors by raising prices or withholding content, and (3) that the resulting increase in market concentration would increase the likelihood of oligopolistic coordination.23
The DOJ asserted that the merged entity could harm competition by withholding content from, or raising its price to, cable companies that compete with DirecTV, ultimately resulting in harm to the consumer in the form of higher prices. The DOJ premised its argument on several observations about the cable television market, namely: (1) even a small loss of customers could have a large financial impact on a cable provider, (2) customers lost during a content blackout imposed in the event of a negotiation stalemate are expensive to recruit back and are unlikely to return, (3) internal studies by DirecTV had shown a number of Turner networks, including HBO, to be particularly important to customers, and (4) cable providers typically passed price increases on to their customers.24 Based on the above, the DOJ alleged that the merged entity would be in a position to demand higher prices for some or all of its content, and its competitors, fearing customer loss and the expenses of reacquiring customers, would agree to higher prices rather than lose the content. In turn, these competitors would pass the price increases onto their customers, resulting in higher prices for cable television as a result of the merger. The DOJ also noted that the merged company would have advance notice that a competitor cable provider was likely to lose access to the Time Warner content, putting the merged company in a position to specifically target customers moving away from that provider, which would provide additional financial incentive for the merged entity to engage in anticompetitive conduct.25
Potential harm to new cable competitor entrants by denying them content or increasing the cost of entrance by increasing the price of content. The same conduct that could harm current competitors also could hurt new entrants into the cable market. The DOJ's complaint highlighted internal documents that suggested that the emerging competitor Sling TV could not survive without Turner content.26
Increased likelihood of oligopolistic coordination. The DOJ cited internal documents that praised the increased concentration that would occur in the industry if the merger went through, and noted that the merger would, in AT&T's words, bring about 'stability' in the market.27 It also noted that the industry relies heavily on most-favoured-nation clauses, which would assist in any oligopolistic coordination between the competitors post-merger.
AT&T countered that imposing higher fees on distributors (or denying distributors access to Time Warner content) would not be a profit-maximising strategy, and that the transaction would actually provide the opportunity for efficiency in advertising. According to AT&T, the transaction would allow AT&T to better compete in the advertising market with Apple, Google and Facebook, and it would lead to lower prices for subscription television.
The court rejected the DOJ's positions across the board. The court rejected the DOJ's purported 'real-world' evidence of likely anticompetitive effects as speculative, unconvincing or inconsistent with the bulk of real-world evidence. The judge found that 'Turner's content is not literally “must-have”', and any negotiating leverage resulting from the desirability of such content existed before the merger and would not be enhanced by the merger. The court also found no likelihood that the combined company would withhold programming from competing distributors or would gain increased negotiating leverage given the high cost of forgoing affiliate fees and advertising revenue. And the judge found testimony by AT&T's competitors opposing the merger to be unpersuasive.
For a host of reasons, mostly based on the court's findings of fact, the judge also rejected the DOJ's expert testimony asserting that the combined company would have increased negotiating leverage that would result in higher prices. The DOJ's expert witness conceded that the merger would result in savings of US$352 million annually through elimination of double marginalisation, a concession he failed to overcome when the court rejected his projected price increases. The court specifically rejected the expert's reliance on the complex 'Nash bargaining model', which the judge likened to a 'Rube Goldberg contraption', finding that the model lacked 'both “reliability and factual credibility”'.
More broadly, most court challenges by the DOJ and FTC have been to horizontal mergers between competitors. AT&T/Time Warner, by contrast, is a vertical merger; the competitive implications were alleged to arise from the combination of distribution and content. The court's ruling highlighted the challenges of opposing vertical mergers, noting that they typically are pro-competitive to some degree by eliminating 'double marginalisation'. Thus, the enforcement agency must establish that the likely harm to competition exceeds the pro-competitive benefit. The court's rejection of the DOJ's efforts to show an anticompetitive effect could dampen the enforcement agencies' appetite for challenging other vertical mergers.
Finally, AT&T had offered to address competitive concerns by adopting a process to arbitrate complaints by competing distributors that AT&T was overcharging for Time Warner content. In turning down this proposal, the DOJ questioned the effectiveness and desirability of conduct remedies, insisting that, even in vertical mergers, competition must be protected through structural remedies such as divestitures. That point of view is consistent with the current DOJ leadership's statement that the antitrust agencies should be enforcers of merger law, not regulators of ongoing post-merger conduct. One week after the DOJ filed its complaint, AT&T irrevocably committed Turner to 'baseball-style' arbitration to settle fee disputes with other cable distributors for seven years after the merger closed. The court found that Turner's commitment to arbitrate disputes with its distributors over renewal terms and not to impose blackouts once arbitration is invoked would likely have 'real world effects' on negotiations between Turner and its distributors. The court's ruling may encourage the agency to accept conduct solutions, rather than insist on structural remedies, in future vertical transactions. The DOJ remains sceptical, but recently announced it is considering how such offers may affect future merger challenges. Although the court's ruling did not break substantial new ground in merger analysis, its careful and detailed application of existing antitrust principles to this significant vertical transaction is likely to encourage additional, substantial transactions in media and other dynamic industries.
On 26 February 2019, the DC Circuit Court of Appeals affirmed the District Court's ruling.28 The appeals court, which reviewed the District Court's determination for clear error, found that the government failed to respond to defendant's expert's 'analysis of real-world data for prior vertical mergers in the industry that showed “no statistically significant effect on content prices”'.29 It stated that 'the government offered no comparable analysis of data and its expert opinion and modeling'. The appeals court also concluded that the government's economic model 'failed to take into account Turner Broadcasting System's post-litigation irrevocable offers of no-blackout arbitration agreements, which a government expert acknowledged would require a new model'.
Further, the appeals court was convinced that 'the industry had become dynamic in recent years with the emergence, for example, of Netflix and Hulu'.30 While the decision itself does little to expand upon the District Court decision, it does solidify its findings and further suggests that future vertical mergers in the media sector may be difficult for the government to challenge successfully.
ii Comcast/Time Warner Cable and Charter Communications/Time Warner Cable transactions
In April 2015, Comcast Corporation abandoned its proposed acquisition of Time Warner Cable in the face of a prolonged review and opposition from the FCC and the DOJ.31 Shortly thereafter, Time Warner Cable entered into an agreement to merge with Charter Communications and Bright House Networks, which was approved with conditions by the DOJ on 25 April 2016 and by the FCC on 5 May 2016.32 Both the failed Comcast/Time Warner merger and the successful Charter/Time Warner merger involved FCC consideration of whether the transactions would serve the public interest, including growing consumer preference for cord cutting, namely, consumers cancelling traditional cable subscriptions in favour of more targeted viewing over the internet.33 The FCC's reviews also highlighted its goal of geographic expansion of high-speed internet access to underserved areas of the United States.34 The DOJ's review also focused on the concern that the new company could make it more difficult for online video distributors (OVDs) to obtain video content from programmers.
Comcast/Time Warner Cable merger
On 24 April 2015, Comcast and Time Warner Cable cancelled their proposed transaction after the FCC told the companies that it had 'serious concerns that the merger risks outweighed the benefits to the public interest'.35 FCC Chairman Wheeler stated that the merger 'would have created a company with the most broadband and video subscribers in the nation alongside the ownership of significant programming interests'.36 He added that the decision to abandon the merger was 'in the best interests of consumers', specifically noting that 'an online video market is emerging that offers new business models and greater consumer choice[,] . . . especially given the growing importance of high-speed broadband to online video and innovative new services'.37
Charter/Time Warner Cable merger
On 23 June 2015, the FCC opened a docket for a proposed merger of Charter, Time Warner Cable and Bright House Networks. The proposed transaction would bring together the fourth (Time Warner Cable), seventh (Charter) and 10th (Bright House Networks) largest multichannel video programming distributors (MVPDs) in the country to create the third-largest provider. The new company would also have 19.4 million broadband subscribers, creating the second largest broadband internet provider in the United States.38 The FCC sought public comments and made requests for information to the applicants and numerous third parties. Following nearly a year's review, the FCC approved the merger, subject to certain conditions. The FCC's approval order detailed the potential benefits and harms of the merger and also described the required conditions.
Potential harms and benefits
The FCC suggested that Charter and Time Warner Cable would have an incentive to harm OVD competition. OVDs are entities, such as Sling TV, that compete with more traditional television services by offering the same programming streaming online, often with more flexibility and consumer choice. As part of their applications, Charter and Time Warner submitted an economic study showing that it would not be profitable for the merged entity to foreclose competition from OVDs,39 but the study did not persuade the FCC. The agency found that:
[b]ecause of [the merged company's] increased MVPD and broadband footprint, and its increased number of homes passed, it will capture a greater share of the benefits that would accrue to MVPDs should [the merged company] take actions that reduce the competitive viability of OVDs.40
Therefore, the FCC concluded, the merged company was likely to have a greater incentive to take actions negatively impacting OVDs following the merger.41
The FCC's description of public benefits highlighted its goal of providing high-speed internet to more US consumers. The approval order noted that Charter and Time Warner committed to providing high-speed access to one million additional customers within four years of closing.42 The FCC found that this benefit was not specific to the transaction, however, because there would be a natural build-out to new customers within that time frame regardless of whether the transaction was approved. The FCC therefore modified the planned build-out, requiring the merged entity to build out high-speed internet access to at least two million additional customer locations within five years.43 Moreover, to increase competition, it required that at least one million of those customer locations be outside of the merged entity's current footprint where any provider other than the merged entity offers 25Mbps or faster broadband internet access service.44
Conditions for approval
Some of the conditions for approval of the Charter/Time Warner Cable merger reflect the FCC's public interest goal of facilitating consumer preferences for cord cutting. First, the FCC required the merged entity to adopt a free interconnection policy allowing OVDs to access its networks.45 Without such a policy, the merged company could arguably freeze out OVDs or charge them prices too high to allow them reasonable access to the merged entity's networks, thereby depriving consumers of the option to use OVDs.
Another condition of approval was related to the disclosure of interconnection agreements (i.e., agreements regarding what internet traffic is exchanged between parties, over what route, and whether one party is compensated). The FCC noted that interconnection agreements are often subject to non-disclosure provisions. The FCC was concerned that, without a requirement that the merged company disclose all interconnection agreements to the FCC, it could deny or impede access to its networks. The disclosure requirement was designed to deter anticompetitive practices and alert the FCC if they did occur.46
Some Commissioners believed that the FCC should have done more to protect consumers. Commissioner Mignon L Clyburn, for example, objected to the absence of a condition requiring a stand-alone broadband offering, stating:
Why does this matter? In a world in which consumers are increasingly cutting the cord and relying on [OVDs], a competitively priced, stand-alone broadband offering ensures consumers truly have a choice in where they get their video programming.47
The DOJ and FCC 'consulted extensively to coordinate their reviews of the proposed merger and devise remedies that were both consistent and comprehensive'.48 The DOJ's review, like the FCC's, was animated by the concern that the new company 'could make it more difficult for [OVDs] to obtain video content from programmers'.49 The DOJ imposed several conditions to address that issue. The DOJ prohibited the new company from entering into or enforcing any agreement with a programmer that forbids, limits or creates incentives to limit the programmer's provision of content to OVDs.50 The DOJ also precluded the new company from taking advantage of other distributors' most favoured nation provisions if they are inconsistent with this prohibition.51 Finally, the DOJ barred the new company from retaliating against programmers for licensing to OVDs.52
iii Other media mergers
Fox Corporation and Tubi
On 17 March 2020, Fox Corporation announced its intent to acquire the free, ad-supported streaming service Tubi for approximately US$440 million.53 The deal represented Fox's entrance into the market for direct-to-consumer streaming services.54 At the time of the agreement, Tubi was available on more than 25 digital platforms in the United States and had doubled its usage and monetisation over the previous 12 months. Fox expected that its acquisition of Tubi would bring it a younger viewer base that, when combined with its existing market of national and local news and sports programming, would allow its advertisers to reach audiences at scale.
Fox and Tubi expected to close the transaction before 30 June 2020, subject to regulatory approval. The transaction was not challenged, and on 9 April 2020 the FTC announced that it had granted early termination status to the parties' pre-merger notification.55 The deal closed on 20 April 2020.
ViacomCBS Inc and Miramax
On 3 April 2020, ViacomCBS acquired a 49 per cent stake in Miramax from Qatar-based beIN Media Group, which retained the remaining 51 per cent controlling stake. ViacomCBS agreed to pay beIN US$150 million at closing and an additional US$225 million over five years.56 The deal, announced on 20 December 2019 – less than three weeks after the Viacom/CBS merger closed – gave ViacomCBS subsidiary Paramount Pictures exclusive worldwide distribution rights to the Miramax film library.57 In announcing the deal, ViacomCBS noted that the combined entity and ensuing licensing rights would increase Miramax's value, given its access to Paramount's extensive content library and global distribution reach.
The transaction was not reviewed by antitrust regulators.58
TiVo and Xperi
On 19 December 2019, technology licensing company Xperi Corporation and digital video recording pioneer TiVo Corporation announced their intent to merge in an all-stock transaction valued at approximately US$3 billion. Xperi, a holding company whose brands included DTS, HD Radio and IMAX Enhanced, stood to gain from greater access to TiVo's extensive IP portfolio. The transaction also allowed TiVo to suspend plans to spin off its patent portfolio from its products division. The combined entity expected to realise at least US$50 million in annual cost savings by combining their products and IP licensing business.
On 5 February 2020, Xperi and TiVo announced that they had received early termination under the Hart-Scott-Rodino Act, and the transaction formally closed on 1 June 2020.59 The surviving entity operates under the name Xperi Holding Corporation and is one of the world's largest licensing companies. The merging entities' business lines were both reconfigured as subsidiaries of the new holding company.
Viacom Inc and CBS Corporation
On 4 December 2019, Viacom Inc and CBS Corporation concluded a merger of the mass media companies forming ViacomCBS. Both Viacom and CBS were television broadcasting companies, with Viacom controlling hallmark cable networks such as Comedy Central, Nickelodeon and MTV, and CBS controlling its broadcast CBS network. Both companies also own production studios, including Viacom's Paramount Pictures' film studio. The companies share a common history, with Viacom originating as a spin-off of CBS in 1971 and with the companies operating as one entity between 1999 and 2006.
The 2019 merger closed just four months after it was announced and was not subject to enforcement actions by antitrust regulators. The absence of action or even a lengthy review was almost certainly because of the pre-existing common control of the two entities. The Redstone family's company National Amusements Inc owned a controlling stake in both Viacom and CBS.60 Under US antitrust law, a merger occurs 'when two firms that had been separate come under common ownership or control'.61 Viacom and CBS have been under the control of Redstone family since at least 1999 when Viacom acquired CBS the first time, so Viacom and CBS were not under separate control when the companies merged (again) in 2019. The deal's size may also have played a role. While large in absolute terms – the merged entity had about US$26 billion in combined market capitalisation at the time of the merger – ViacomCBS is substantially smaller than its rivals, such as Walt Disney (with US$274 billion market capitalisation) and Comcast (with US$197 billion market capitalisation).62
Nexstar Broadcasting Group Inc and Tribune Media
In late 2018, Nexstar Media announced its intent to acquire Tribune Media, bringing together two large television station operators and further expanding Nexstar's broadcast television station portfolio. In anticipation of potential regulatory oversight, the announcement was accompanied by a statement of Nexstar's intention to divest 14 television stations in 14 markets to comply with regulatory ownership limits.63 Ultimately, 19 stations were spun off in two separate divestiture deals. As a result, on 16 April 2019, the Justice Department announced it would permit the merger and terminated its review of the merger early.64 No conditions were placed on the merged entity by the Justice Department. On 16 September 2019, the FCC blessed the merger and gave requisite approval for the sales that were part of Nexstar's planned divestment.65
Meredith Corporation's Time Inc acquisition
Meredith Corporation completed its acquisition in January 2018. Time Inc was a leading multi-platform consumer media company. Time's influential brands included the magazines People, Time, Fortune, Sports Illustrated, Instyle, Real Simple, Southern Living and Travel + Leisure, as well as approximately 60 international brands. Although the merger brought two large magazine providers together, the deal ultimately received an early termination of the regulatory review period.66 This is consistent with US regulatory agencies' generally permissive attitude towards mergers in the traditional media relative to deals involving emerging media and digital distribution.
Tronc, Inc and the Chicago Sun-Times
On 15 May 2017, Tronc, Inc, the owner of the Chicago Tribune, announced its intent to purchase Wrapports LLC, the owner of the Chicago Sun-Times.67 The transaction would have combined the two largest newspapers in Chicago. The DOJ immediately began an investigation into the potential acquisition. The investigation focused on whether the Chicago Sun-Times was a failing company under the Merger Guidelines, which provide that a transaction is not likely to be anticompetitive if one of the firms (or its assets) would otherwise exit the market. Shortly after the DOJ began its investigation, Wrapports announced a public sale process for the Chicago Sun-Times. If no reasonable alternative offers were made in the public auction, Tronc might have been able to establish one prong of the failing company provision of the Merger Guidelines. The DOJ closely monitored the sale process, which ultimately resulted in the Chicago Sun-Times being sold to a third party outside the Chicago newspaper market.68
Discovery Communications and Scripps network interactive merger
In summer 2017, Discovery announced a proposed merger with Scripps, bringing together the owners of several well-known cable channel brands, including Discovery's Discovery Channel, Animal Planet and TLC, and Scripps' HGTV, Travel Channel and Food Network. Some commentators suggested that the deal might face regulatory hurdles because it would increase the combined company's bargaining leverage with cable companies.69 The parties did receive a second request from the DOJ, but the DOJ ultimately allowed the deal to proceed without any remedy.70 On 6 March 2018, it was announced that the deal had closed.71
US v. Nexstar Broadcasting Group, Inc and Media General Inc
In September 2016, the DOJ approved the US$4.6 billion merger of Nexstar Broadcasting Group, Inc and Media General, Inc, with conditions. The parties, both owners of broadcast television stations, competed in certain geographic markets both in the sale of broadcast television spot advertising and for viewers who are MVPD subscribers. The DOJ noted that, while broadcast advertising competes with other forms of advertising, including increasingly online advertising, there was no suitable substitute for broadcast television ad buys because of their audiovisual nature and broad demographic reach. Accordingly, the DOJ believed that the transaction 'would lead to (1) higher prices for broadcast television spot advertising in each [local market] and (2) higher licensing fees for the retransmission of broadcast television programming to MVPD subscribers in each of the [local markets]'.72 The consent decree called for the divestiture of properties in six markets in which the merger would result in a combined market share of broadcast television stations of 41 per cent or higher, including one market where the share would be 100 per cent post-merger, absent divestiture.73
US v. AMC Entertainment Holdings, Inc and Carmike Cinemas, Inc
In December 2016, the DOJ approved the merger of AMC Entertainment Holdings, Inc and Carmike Cinemas, Inc, two companies with national networks of theatres offering first-run movies. The DOJ expressed concerns about competition in markets for first-run film displays and pre-show services and cinema advertising. It contended that in 15 markets the merger would result in impermissibly high levels of concentration, with post-merger HHIs of 3,800 to 10,000.74 The consent decree called for divestiture of either the AMC or the Carmike theatres in each of these markets.75
AT&T and DirecTV
In July 2015, the FCC approved the AT&T/DirecTV merger, with several conditions.76 AT&T was one of the largest phone and internet providers in the United States, while DirecTV was the largest satellite provider. The FCC found that the merged company would offer consumers more choices and lower prices. To ensure that those benefits would be realised, however, the FCC required the merged company to expand its broadband internet service and offer discounted rates on that service to low-income subscribers.77
US v. Gray Television, Inc and Cchurz Communications, Inc
In March 2016, the DOJ entered into a consent order with Gray Television, Inc (Gray) and Schurz Communications, Inc (Schurz) to resolve the agency's concerns about Gray's proposed acquisition of Schurz.78 Gray and Schurz each owned television broadcast stations in various designated market areas (or media markets), including South Bend, Indiana and Wichita, Kansas,79 in which Gray and Schurz competed head-to-head in the sale of broadcast television spot advertising (which targets viewers in specific geographic areas).80 The DOJ distinguished this advertising from other types of advertising, such as national advertising on cable and satellite television (which has a more limited reach than broadcast television) and radio, newspapers, or billboards (which are less likely to create memorable advertisements because they do not combine sound and motion in the way television advertisements do).81
The DOJ alleged that the parties' combined market shares were approximately 57 per cent in Wichita and 67 per cent in South Bend82 and that the acquisition would increase spot advertising prices in each of the two markets.83 The consent order required Gray to divest to pre-approved buyers one station in each of the Wichita and South Bend markets.
Disney acquisition of 21st Century Fox
In late 2017, Disney announced the proposed acquisition of key parts of 21st Century Fox, a deal that would eliminate one of the six major Hollywood studios and bring more sports programming under the control of Disney, which owns ESPN. The DOJ investigated the transaction and identified the combination of Disney's ESPN network – the most popular cable sports network in the US – with Fox's array of regional sports networks as likely to substantially lessen competition by resulting in higher prices for cable sports programming in the local markets served by the regional sports networks.84 The DOJ filed a complaint and simultaneously announced a settlement with Disney that required the divestiture of all 22 of Fox's regional sports networks as a condition of the sale.85 On 23 August 2019, the sale of Fox's regional sports networks to Sinclair Broadcast Groups was completed.86
US v. Entercom Communications Corp and Lincoln Financial Media Company
In October 2015, the DOJ entered into a consent decree with Entercom Communications Corp (Entercom) and Lincoln Financial Media Company (Lincoln) to allay the DOJ's concerns about Entercom's proposed acquisition of Lincoln.87 Entercom and Lincoln each owned English-language radio stations in numerous metropolitan areas, including the Denver, Colorado area. After the acquisition, Entercom would have 37 per cent of advertising sales in the highly concentrated Denver market.88 The DOJ also alleged that the Entercom and Lincoln stations were particularly close substitutes that (among other things) targeted similar customers.89 For these reasons, the DOJ alleged that the acquisition's likely effect would be to increase English-language broadcast radio advertising prices in the Denver area.90 To address these concerns, Entercom agreed to divest three of its Denver area radio stations.91
US v. Entercom Communications Corp and CBS Corporation
In a transaction with parallels to Entercom's proposed acquisition of Lincoln Financial Media Company, Entercom's proposed acquisition of CBS's radio stations in November 2017 also raised antitrust concerns. As in the Lincoln deal, the DOJ identified competitive concerns in the market for advertising and noted three particular markets – Boston, Sacramento and San Francisco – in which there would be significant overlap in radio station ownership that would allow the merged entity to raise advertising prices.92 In these markets, there would be only a single provider of wide-reaching, English-language radio advertising post-merger, leaving advertisers with no effective substitutes should Entercom raise prices. The DOJ noted the advertising market for sports commentary would be particularly affected, as the competitors owned the two highest-rated sports talk shows in Boston, these stations had similar listener demographics, and the stations competed against each other on price.93 To remedy these concerns, the final judgment required divestiture of the CBS radio stations in the Boston, Sacramento and San Francisco markets.94
US v. Tribune Publishing Company
In March 2016, the DOJ sued to enjoin Tribune's proposed acquisition, through a bankruptcy sale, of Freedom Communications Inc. Tribune owns the Los Angeles Times,95 while Freedom owned local newspapers in Orange County and Riverside County, both of which are in the greater Los Angeles area.96 The key issue was whether the relevant market should be limited to local newspapers, as the DOJ asserted, or expanded to account for internet-based sources of local news (including Google News and Apple News), as Tribune contended.97 The court agreed with the DOJ, noting that local newspapers serve the unique function of creating local content.98 Using that market definition, the proposed acquisition would have resulted in Tribune's share of local daily newspapers increasing to 98 per cent in Orange County and 81 per cent in Riverside County.99 The court held that 'such a concentration clearly constitutes a threat to competition'.100 Accordingly, only one day after the DOJ sued and immediately before the bankruptcy court was to consider the proposed acquisition, the court issued a temporary restraining order enjoining the transaction.101 The bankruptcy court thereafter approved an alternative purchaser for the two newspapers.
In addition to the DOJ's consideration of traditional antitrust concerns, the FCC's review of media mergers involves broader public interest considerations. With the renewed importance placed on homegrown technology, the FCC under the former Trump administration placed a focus on supporting US excellence in telecommunications technologies, especially in regard to 5G. That has resulted in less predictable enforcement against media deals on the FCC side than in prior administrations. President Biden has appointed enforcement officials who have expansive policy objectives and do not believe antitrust laws should only address consumer welfare concerns.102 Companies can therefore expect greater antitrust scrutiny under the Biden administration. Regardless of administration, companies would be wise to consider the factors outlined in this chapter in any merger applications submitted to antitrust regulators and the FCC.
1 Ted Hassi and Michael Schaper are partners at Debevoise & Plimpton LLP. The authors would like to thank Gary W Kubek, a former litigation partner and co-author of prior editions of this chapter, as well as Bobby Papazian and Peter Urmston, litigation associates in the New York office of Debevoise & Plimpton LLP, and former litigation associates Will Bucher and Ethan D Roman, for their assistance in preparing this chapter.
2 In some circumstances the parties may decide to 'pull and refile' to allow the agencies an additional 30 days to review the transaction without issuing a second request.
3 See Jon Sallet, 'FCC Transaction Review: Competition and the Public Interest', FCC, http://www.fcc.gov/news-events/blog/2014/08/12/fcc-transaction-review-competition-and-public-interest (12 August 2014, 12:39 PM); Mem Op & Order, Charter Commc'ns, Inc, 16 FCC Rcd 59 Paragraph 28 (FCC 5 May 2016) (In re Charter).
4 See Sallet, footnote 3; In re Charter, footnote 3, Paragraph 27.
5 See 47 CFR Section 73.3555(a) (2010).
6 See id. Section 73.3555(b), (e).
7 See id. Section 73.3555(c).
8 See id. Section 73.3555(d).
9 FCC, The Public and Broadcasting 11–12 (2008 ed).
10 'Overview of the FCC's Review of Significant Transactions', FCC (10 July 2014), http://www.fcc.gov/reports-research/guides/review-of-significant-transactions.
12 See Sallet, footnote 3.
13 'Overview of the FCC's Review of Significant Transactions', footnote 10.
14 See Sallet, footnote 3.
15 'Overview of the FCC's Review of Significant Transactions', footnote 10.
17 See id.
18 See http://www.wsj.com/articles/trump-says-he-would-block-at-t-time-warner-deal-1477162214 (last visited 24 May 2017).
19 See http://www.bloomberg.com/politics/articles/2017-03-21/trump-antitrust-pick-saw-few-hurdles-for-at-t-time-warner-nod (last visited 24 May 2017).
20 Ben Munson, 'AT&T unable to reach Time Warner settlement deal with DOJ', 18 December 2017, available at http://www.fiercecable.com/video/at-t-unable-to-reach-time-warner-settlement-deal-DOJ.
21 See 'Time Warner to Sell TV Station Amid AT&T Merger', Wall Street Journal, available at http://www.wsj.com/articles/time-warner-to-sell-tv-station-amid-at-t-merger-1487892385.
22 See 'FCC Chairman Says Doesn't Expect Agency to Review AT&T-Time Warner Deal', Wall Street Journal, available at http://www.wsj.com/articles/fcc-chairman-says-doesnt-expect-agency-to-review-at-t-time-warner-1488212231.
23 US v. AT&T, Complaint, p. 15.
24 id. at pp. 16–18.
25 id. at p. 18.
26 id. at p. 20.
28 United States v. AT&T Inc, 916 F.3d 1029, 1032 (D.C. Cir. 2019).
29 United States v. AT&T Inc, 916 F.3d 1029, 1031 (D.C. Cir. 2019).
30 United States v. AT&T Inc, 916 F.3d 1029, 1032 (D.C. Cir. 2019).
31 'Statement from FCC Chairman Tom Wheeler on the Comcast–Time Warner Cable Merger', FCC (24 April 2015), https://apps.fcc.gov/edocs_public/attachmatch/DOC-333175A1.pdf.
32 'Justice Department Allows Charter's Acquisition of Time Warner Cable and Bright House Networks to Proceed with Conditions', DOJ (25 April 2016), http://www.justice.gov/opa/pr/justice-department-allows-charter-s-acquisition-time-warner-cable-and-bright-house-networks; 'FCC Grants Approval of Charter–Time Warner Cable–Bright House Networks Transaction', FCC (6 May 2016), http://transition.fcc.gov/ Daily_Releases/Daily_Business/2016/db0506/DOC-339243A1.pdf.
33 FCC chairman Tom Wheeler expressed his support for cord cutting and other forms of innovation in the television industry in an article he wrote for the influential tech blog Recode. See Tom Wheeler, 'It's Time to Unlock the Set-Top Box Market', Recode (27 January 2016), http://www.recode.net/2016/1/27/11589108/its-time-to-unlock-the-set-top-box-market.
34 In addition to conditions in mergers, the FCC recently revamped its Lifeline programme to help low-income consumers afford access to high-speed internet. See 'FCC Modernizes Lifeline Program for the Digital Age', FCC (31 March 2016), https://apps.fcc.gov/edocs_public/attachmatch/DOC-338676A1.pdf.
35 See 'Statement from FCC Chairman Tom Wheeler on the Comcast–Time Warner Cable Merger', footnote 31.
38 Charter–Time Warner Cable–Bright House Networks, MB Docket 15–149, FCC, http://www.fcc.gov/ proceedings-actions/mergers-transactions/charter-time-warner-cable-bright-house-networks-mb-docket (last visited 21 June 2016).
39 In re Charter, footnote 3, Paragraph 37.
40 id. Paragraph 47.
42 See id. Paragraph 382.
43 Specifically, New Charter must provide access of at least 60Mbps. id. Paragraph 388.
45 See id. Paragraph 132.
46 See id. Paragraphs 135–36.
47 'Statement of Commissioner Mignon L Clyburn Approving in Part and Concurring in Part, Charter Commc'ns, Inc', 16 FCC Rcd 59 (FCC 5 May 2016).
48 See DOJ Press Release, http://www.justice.gov/opa/pr/justice-department-allows-charter-s-acquisition-time-warner-cable-and-bright-house-networks (last visited 12 July 2016).
49 See id.
50 See [Proposed] Final Judgment, US v. Charter Communications Inc et al, No. 1:16-00759 (DDC 25 April 2016).
51 See id.
52 See id.
53 'Fox Corporation to Acquire Tubi', 17 March 2020, https://investor.foxcorporation.com/news-releases/news-release-details/fox-corporation-acquire-tubi.
54 'Fox Closes Purchase of Tubi in Day Of Streaming Deals', Deadline, 20 April 2020, https://deadline.com/2020/04/fox-closes-tubi-streaming-purchase-1202912935/.
55 FTC, 20200919: Fox Corporation; Tubi, Inc., http://www.ftc.gov/enforcement/premerger-notification-program/early-termination-notices/20200919.
56 'ViacomCBS Closes Purchase of Stake in Miramax, With Distribution and First Look Deals', Deadline, 3 April 2020, https://deadline.com/2020/04/viacomcbs-deal-stake-miramax-closes-1202899997/.
57 ViacomCBS, 20 December 2019, http://www.viacomcbs.com/press/viacomcbs-to-make-strategic-investment-in-bein-media-groups-miramax.
58 European Commission, Case M.9714 – Viacom/beIN/Miramax, 21 February 2020, https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32020M9714&qid=1622659754686&from=EN.
59 'Xperi and TiVo Complete Merger', Business Wire, 1 June 2020, http://www.businesswire.com/news/home/20200601005246/en/Xperi-and-TiVo-Complete-Merger#:~:text=TiVo%20common%20stock%20previously%20traded,no%20longer%20listed%20for%20trading.
60 'CBS and Viacom Complete Merger: “It's Been a Long and Winding Road to Get Here”', Variety, 4 December 2019, https://variety.com/2019/biz/news/cbs-viacom-merger-completeredstone-bob-bakish-1203424316/.
61 'Merger Policy and the 2010 Guidelines', Herbert Hovenkamp, November 2010, Penn. Law. 1847.
62 'Here Is Everything You Need To Know About The Viacom-CBS Merger', Forbes, 26 November 2019, http://www.forbes.com/sites/jonathanberr/2019/11/26/here-is-everything-you-need-toknow-about-the-viacom-cbs-merger/#3ab35651147d.
63 'Nexstar Identifies Where it Will Divest to Acquire Tribune', John Eggerton, 30 January 2019, http://www.multichannel.com/news/nexstar-identifies-where-it-will-divest-to-acquire-tribune.
64 'Justice OKs Nexstar's Station Spinoffs to Scripps', John Eggerton, 16 April 2019, http://www.broadcastingcable.com/news/justice-oks-nexstars-station-spin-offs-to-scripps.
65 'FCC Grants Approval of Nexstar-Tribune Merger', Neil Grace, FCC News, 16 September 2019.
66 'Meredith's Acquisition of Time Inc. Receives Antitrust Clearance', Cision PR Newswire, 12 January 2018, http://www.prnewswire.com/news-releases/merediths-acquisition-of-time-inc-receivesantitrust-clearance-300582212.html.
67 '[T]ronc Makes Bid for Owner of Chicago Sun-Times', Tronc Press Release (5 May 2018).
68 Department of Justice, Office of Public Affairs, 'Department of Justice Statement on the Closing of Its Investigation into the Possible Acquisition of Chicago Sun-Times by Owner of Chicago Tribune', 12 July 2017.
69 See, e.g., 'Potential Scripps, Discovery Merger Shows Seismic Media Shift', Eleanor Tyler, https://web.archive.org/web/20170731175149/www.bna.com/potential-scripps-discovery-n73014462433/.
70 'U.S. Department of Justice clears Discovery-Scripps deal', Meagan Kashty, 27 February 2018, available at http://realscreen.com/2018/02/27/u-s-department-of-justice-clears-discovery-scripps-deal/. There was a minor remedy in Europe (https://ec.europa.eu/competition/mergers/cases/decisions/m8665_687_3.pdf ).
71 'Discovery Closes $14.6B Acquisition Of Scripps Networks Interactive', Deadline, 6 March 2018, available at http://deadline.com/2018/03/discovery-closes-14-6b-acquisition-of-scripps-networksinteractive-1202312478/.
72 See Competitive Impact Statement: US v. Nexstar Broadcasting Group Inc and Media General Inc (DDC 2 September 2016).
73 See id.
74 Final Judgment: US v. AMC Entertainment Holdings Inc and Carmike Cinemas Inc, No. 16-2475 (DDC 7 March 2017).
75 Complaint: US v. AMC Entertainment Holdings Inc and Carmike Cinemas Inc, No. 16-2475 (DDC 7 March 2017).
76 Mem Op & Order, AT&T Inc, 15 FCC Rcd 94, Paragraphs 7, 9 (FCC 24 July 2015).
77 id. Paragraphs 4, 8.
78 See Final Judgment: US v. Gray Television Inc, No. 15-2232 (DDC 3 March 2016).
79 See Competitive Impact Statement at 1, US v. Gray Television Inc, No. 15-2232 (DDC 22 December 2015).
81 See id. at 4.
82 id. at 5.
83 See id. at 1–2.
84 See US v. Disney and Twenty-First Century Fox Inc, Complaint (27 June 2018).
85 See 'The Walt Disney Company Required to Divest Twenty-Two Regional Sports Networks in Order to Complete Acquisition of Certain Assets From Twenty-First Century Fox: Proposed Settlement Preserves Cable Sports Programming Competition', DOJ Press Release (27 June 2018).
86 'Sinclair Closes Purchase of Fox Regional Sports Networks From Disney', Dave McNary, Variety, 23 August 2019, https://variety.com/2019/tv/news/sinclair-closes-purchase-fox-regional-sports-networksdisney-1203312211/.
87 See Final Judgment: US v. Entercom Commc'ns Corp, No. 15-01119 (RC) (DDC 5 October 2015).
88 See Competitive Impact Statement at 5–6, US v. Entercom Commc'ns Corp, No. 15-01119 (RC) (DDC 14 July 2015).
89 See id. at 6.
90 See id. at 7.
91 See Final Judgment, footnote 87, at 3–7.
92 US v. Entercom Communications Corp and CBS Corporation, Competitive Impact Statement, 1 November 2017.
93 id. at 7.
94 US v. Entercom Communications Corp and CBS Corporation, Final Judgment, 31 January 2018.
95 See Order Granting Application for a Temporary Restraining Order at 2, US v. Tribune Publishing Company, No. 16-01822 (CD Cal 18 March 2016).
96 See id.
97 See id. at 5–7.
98 See id.
99 See id. at 8.
100 See id.
101 See id.
102 See, e.g., Lina M Khan, 'Amazon's Antitrust Paradox', 126 Yale L.J. 710 (January 2017).