The proposal by Comcast, generally considered to be one of the world’s largest mass-media companies, to purchase Time Warner Cable has generated a considerable amount of controversy. The offer is, on the most basic level, not that different from any other proposed merger or acquisition, but given the size and influence of the two companies, the deal involves far more issues and far more complications. Comcast must show that the deal will not hurt competition in the market and will be in the public’s interest. While most small businesses will probably never have to contend with this many issues, the Comcast/Time Warner deal demonstrates that combining two or more businesses can involve much more than just buying up stock and assuming leases.
Comcast provides residential and commercial cable television and internet service in at least forty U.S. states, while Time Warner is in twenty-nine U.S. states. Both companies provide service in New York and New Jersey. Comcast announced in mid-February 2014 that it had reached an agreement to purchase Time Warner for $45.2 billion in stock, with Time Warner’s shareholders receiving 2.875 Comcast shares for each Time Warner share. Comcast previously purchased the media company NBCUniversal, which owns the NBC television networks, the Universal Pictures film studio, and other properties, in 2011, so it has recent experience with the regulatory processes involved in a large acquisition. The deal with Time Warner would make it, beyond a doubt, the largest media company in the world.
The federal government must approve the deal before it can move forward under federal antitrust laws, which prevent monopolies and anti-competitive practices, and communications regulations that protect the public’s interest in public airwaves and other infrastructure. The Department of Justice (DOJ) has jurisdiction over antitrust issues, and has quite recently pursued Comcast for alleged anti-competitive practices. It filed suit against the company during the merger with NBCUniversal, accusing it of using unlawful practices to limit competition by online video providers like Netflix and Hulu. The company entered into an agreement with the DOJ requiring it to provide services that allow other companies to compete in the online video market. The DOJ may conduct a similar review regarding the impact of the proposed Time Warner deal.
While the DOJ is empowered to investigate possible antitrust violations, it cannot actually prevent the Time Warner deal from going forward. All it can do is pursue enforcement actions through the court system. The Federal Communications Commission (FCC), which regulates the use of public airwaves and other broadcast media, does have the power to stop the deal, in a sense, by denying the transfer of Time Warner’s licenses. It must make a determination as to whether the merger would be in the public’s interest, a rather broad question that looks at factors like the effect on the cost and availability of services to consumers. Comcast had to submit an application to the FCC regarding its acquisition of NBCUniversal in 2010, which was approved in 2011.
The business attorneys at Samuel C. Berger, PC offer fixed-fee packages of legal services to New York and New Jersey businesses and entrepreneurs. We represent businesses in a wide range of legal issues with the goal of helping our clients grow and prosper. Contact us today online or at (212) 380-8117 to speak to a member of our legal team.
More Blog Posts:
The Basics of Mergers and Acquisitions for New Jersey and New York Small Businesses, New York & New Jersey Business Lawyer Blog, June 7, 2013
Three Issues to Consider When Buying a New York or New Jersey Business, New York & New Jersey Business Lawyer Blog, September 14, 2012
New York Tax Court Rules that Business is Liable for Full Sales Tax Bill after Transfer of Business Assets, New York & New Jersey Business Lawyer Blog, August 30, 2012
Photo credit: By Jeff Ogden (W163) [CC-BY-SA-3.0 or Public domain], via Wikimedia Commons.