The American Antitrust Institute (AAI) today called on competition enforcers to block the proposed merger of Comcast and Time Warner Cable (TWC). The AAI believes the deal raises potentially serious problems for competition and consumers.
In the new white paper Rolling Up Video Distribution in the U.S.: Why the Comcast-Time Warner Cable Merger Should Be Blocked, AAI Vice President and economist Diana Moss analyzes key competitive problems raised by the merger. The white paper also explains why Comcast-TWC’s efficiencies claims are not defensible and makes the case for why grafting the remedies from the Comcast-NBC Universal merger onto Comcast-TWC would spare neither competition nor consumers from harm.
“We have focused on specific competitive problems, including how a merged Comcast-TWC could exercise buyer market power against content and middle-market service providers and potentially exclude rivals in content and video distribution markets,” said Moss. The white paper sketches a troubling landscape against which the proposed deal would occur, including high levels of consumer dissatisfaction with Comcast and TWC and a history of swaps that have enabled large cable TV and broadband ISPs to divide markets and solidify their dominance.
The AAI analysis is critical of what it calls a weak efficiencies “defense” presented by Comcast-TWC. “It doesn’t pass the cost-benefit test,” said AAI’s President Bert Foer. “Based on our analysis, the potential competitive problems raised by the merger are not overcome by significant merger-specific cost savings or consumer benefits.” AAI emphasizes that the U.S. Department of Justice/Federal Trade Commission merger guidelines set a high hurdle for mergers that are likely to harm competition and produce little or no efficiencies.
“We are looking at this merger through the lens of sea-changes in the landscape of the cable TV and broadband ISP markets,” explained Moss. “Multiple deals are on deck, including AT&T-DirecTV, which pose unusual burdens and challenges for the resources of the U.S. Department of Justice and Federal Communications Commission.” The Comcast-TWC deal also comes at a critical time when telecommunications regulators are grappling with open Internet principles. More powerful merged companies with economic and political clout could shape those outcomes. “The AAI suggests merger enforcers adopt a ‘step back’ or a ‘go slow‘ policy in light of rapid and significant consolidation in the cable TV-broadband ISP space,” said Moss.
The AAI has previously opined on the limits of behavioral remedies involving mergers, as well as why prohibitions and requirements on the conduct of merged firms are difficult to monitor and enforce. “Merged companies have incentives to develop ‘workarounds’ to avoid or minimize the remedies,” explained Moss. “We don’t think the merger is fixable, given what would need to be done on the remedies side to ensure that competition and consumers are not harmed.”