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FTC Provides Senate Testimony on Sports Programming and Cable Distribution

Doyle, Barlow & Mazard PLLC

The Federal Trade Commission’s Bureau of Economics Director Michael Salinger testified on December 7 before the U.S. Senate Committee on the Judiciary about the FTC’s January 2006 closure of its investigation into the proposed acquisition by Comcast Corporation and Time Warner Cable Inc. (“TWC”) of the cable assets of Adephia Communications Corporation (“Adelphia”).
Salinger explained the work of the agency that went into the investigation, how the transaction was structured, and why the Commission decided to close the case without taking antitrust enforcement action. In the course of the investigation, according to the testimony, the FTC staff gathered significant evidence on the workings of sports programming markets, as well as each of the relevant geographic markets affected by the transaction. In each of these markets, the staff reviewed whether TWC or Comcast would be able to enter into exclusionary sports programming contracts, whether such contracts would be a viable strategy from the perspective of the sports team itself, and whether exclusive contracts would be profitable for TWC or Comcast.

“After careful consideration, the staff concluded for various reasons that the evidence did not indicate that the proposed transaction was likely to make exclusive contracts profitable for either Comcast or TWC in the geographic markets impacted by the transaction,” the testimony continued.

Even if the staff had found that the transaction likely would have led to additional exclusionary conduct in sports broadcasting, the testimony stated, that fact alone would have been insufficient to conclude the transaction would violate Section 7 of the Clayton Act. For a transaction to violate Section 7, it would have to create a likely risk of substantial harm to competition. The Commission majority concluded that the investigation did not produce such evidence.

The testimony continued by stating that in certain industries, specialized regulatory agencies, in addition to the antitrust enforcement authorities, may review mergers. In the communications industry, that jurisdiction is with the Federal Communications Commission (FCC), which may, at times, prohibit a transaction under a broad “public interest” standard. In this case, however, FCC also investigated the transaction, finding “the potential public interest harms . . . are outweighed by the public interest benefits.” The testimony concluded by noting that while the Comcast/TWC/Adelphia merger is now completed, this “does not mean that [the FTC] cannot or will not intervene in these markets in the future,” and that the types of exclusionary conduct by cable companies that would cause consumer harm, “would be directly actionable under Sections 1 and 2 of the Sherman Act.”

Authored by

Robert W. Doyle, Jr.

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