1 00:00:03,560 --> 00:00:07,240 Speaker 1: Here listening to Bloomberg Law. I'm June Grosso. H T 2 00:00:07,400 --> 00:00:09,400 Speaker 1: and T is trying to become one of the world's 3 00:00:09,400 --> 00:00:14,400 Speaker 1: biggest media companies by buying Time Warner, which owns CNN, HBO, 4 00:00:14,600 --> 00:00:19,079 Speaker 1: and Warner Brothers. Billion dollar wager by A, T and T, 5 00:00:19,360 --> 00:00:23,400 Speaker 1: the largest deal announced globally this year, is controversial and political. 6 00:00:24,160 --> 00:00:28,320 Speaker 1: President elect Trump vowed to block the transaction, calling it 7 00:00:28,480 --> 00:00:32,960 Speaker 1: poison to democracy in October. Our guest is Jennifer Ree, 8 00:00:32,960 --> 00:00:40,360 Speaker 1: senior litigation analyst for Bloomberg Intelligence. Jen this deal is huge, 9 00:00:40,760 --> 00:00:44,080 Speaker 1: and there's been criticism that it puts too much power 10 00:00:44,240 --> 00:00:48,479 Speaker 1: into the hands of one company. Is that something that 11 00:00:48,840 --> 00:00:51,519 Speaker 1: the regulators are going to be looking at, you know, 12 00:00:51,600 --> 00:00:54,720 Speaker 1: not precisely. No, And that's certainly the atmospherics and the 13 00:00:54,760 --> 00:00:57,200 Speaker 1: reaction that we've seen. There's been quite a need jerk 14 00:00:57,200 --> 00:00:59,040 Speaker 1: reaction to this deal. But at the end of the day, 15 00:00:59,280 --> 00:01:03,040 Speaker 1: with the interest regulators do is ask whether the combination 16 00:01:03,160 --> 00:01:06,280 Speaker 1: of two companies could have the effect harmon market down 17 00:01:06,280 --> 00:01:10,119 Speaker 1: the road once they're merged by raising prices, reducing innovation, 18 00:01:10,240 --> 00:01:13,240 Speaker 1: reducing choice, And they do that by asking do they 19 00:01:13,319 --> 00:01:17,120 Speaker 1: directly compete a horizontal deal combining you know, the products 20 00:01:17,120 --> 00:01:21,080 Speaker 1: and services that they both provide um and in that 21 00:01:21,120 --> 00:01:23,280 Speaker 1: way raise the prices because they're the only provider of 22 00:01:23,280 --> 00:01:26,720 Speaker 1: that product or service or are they in the same 23 00:01:26,959 --> 00:01:30,320 Speaker 1: chain of distribution at different levels vertically related and could 24 00:01:30,400 --> 00:01:32,679 Speaker 1: that cause harm in this deal is a deal where 25 00:01:32,720 --> 00:01:35,680 Speaker 1: the two companies do not compete, they are vertically related, 26 00:01:37,400 --> 00:01:42,000 Speaker 1: but it will get carefully scrutinized, I assume because it 27 00:01:42,120 --> 00:01:46,120 Speaker 1: is just so big. What are some of the possible 28 00:01:46,160 --> 00:01:50,160 Speaker 1: antitrust concerns, Well, it will definitely get carefully scrutinized because 29 00:01:50,280 --> 00:01:54,560 Speaker 1: vertical deals, although they're not considered as problematic as horizontal deals, 30 00:01:54,840 --> 00:01:57,520 Speaker 1: can causing any trust issues. And so, for instance, a 31 00:01:57,600 --> 00:02:00,600 Speaker 1: very similar deal, which is when Comcast enter the joint 32 00:02:00,680 --> 00:02:04,920 Speaker 1: venture with NBC Universal, was carefully scrutinized and the antitrust 33 00:02:05,040 --> 00:02:08,840 Speaker 1: regulators both from the Justice Department and the FCC determined 34 00:02:08,880 --> 00:02:11,520 Speaker 1: that there could be harms that needed to be remedied. 35 00:02:11,520 --> 00:02:15,000 Speaker 1: So they forced the emerged company to sign onto a 36 00:02:15,040 --> 00:02:17,880 Speaker 1: consent order to agree to all sorts of provisions. And 37 00:02:17,919 --> 00:02:20,200 Speaker 1: they'll do the same thing here because the relationships are 38 00:02:20,200 --> 00:02:23,440 Speaker 1: complicated when you get into this vertical relationship and there 39 00:02:23,480 --> 00:02:28,320 Speaker 1: can be a foreclosure effect. I mentioned a few moments 40 00:02:28,360 --> 00:02:33,680 Speaker 1: ago that Trump, during his election bid, in fact, I 41 00:02:33,680 --> 00:02:36,440 Speaker 1: think it was October twenty two, just about the time 42 00:02:36,480 --> 00:02:40,600 Speaker 1: the deal was announced, said he's vehemently opposed to the 43 00:02:40,639 --> 00:02:44,720 Speaker 1: deal and basically said he's going to stop it. Can 44 00:02:44,760 --> 00:02:49,600 Speaker 1: the president stop the deal? He cannot. Now it's created 45 00:02:49,639 --> 00:02:52,600 Speaker 1: an interesting dynamic dynamic for sure, to have a Republican 46 00:02:52,639 --> 00:02:55,840 Speaker 1: president make a comment like that. Um, the president does 47 00:02:55,880 --> 00:02:58,959 Speaker 1: not have the authority to stop to merging companies from closing. 48 00:02:59,040 --> 00:03:01,960 Speaker 1: They only a court order can do that. So even 49 00:03:02,000 --> 00:03:04,720 Speaker 1: the Justice Department and Federal Trade Commission don't have the 50 00:03:04,760 --> 00:03:06,760 Speaker 1: authority to do that. They have to ask a court 51 00:03:07,040 --> 00:03:08,960 Speaker 1: to block the deal, and that would be the same 52 00:03:09,000 --> 00:03:11,959 Speaker 1: for a T and T. Now where he has authority 53 00:03:12,080 --> 00:03:14,359 Speaker 1: is that he will be able to appoint when he's president, 54 00:03:14,760 --> 00:03:17,600 Speaker 1: new officials in charge of anti trust at the Department 55 00:03:17,600 --> 00:03:19,760 Speaker 1: of Justice as well as at the FTC. This is 56 00:03:19,760 --> 00:03:22,600 Speaker 1: a d o J matter, and those officials, you know, 57 00:03:22,639 --> 00:03:24,760 Speaker 1: are going to be expected to carry out his agenda. 58 00:03:25,160 --> 00:03:27,640 Speaker 1: But the way it's looking is pretty good for the 59 00:03:27,680 --> 00:03:30,040 Speaker 1: deal because what's been bandied about in the news is 60 00:03:30,160 --> 00:03:33,200 Speaker 1: Josh Wright as the person who's helping him with transition, 61 00:03:33,200 --> 00:03:36,160 Speaker 1: who might even be appointed the Assistant Attorney General in 62 00:03:36,240 --> 00:03:38,080 Speaker 1: charge of anti trust here. And he is well known 63 00:03:38,120 --> 00:03:40,960 Speaker 1: to be very conservative, to be business friendly, and to 64 00:03:41,000 --> 00:03:44,160 Speaker 1: take a very pragmatic and economics based approach to deals. 65 00:03:44,360 --> 00:03:47,720 Speaker 1: I would be enormously surprised if he was behind seeking 66 00:03:47,720 --> 00:03:50,560 Speaker 1: a court order to block this deal. To talk in 67 00:03:51,080 --> 00:03:58,280 Speaker 1: very broad generalities here, describe what the Republican approach normally 68 00:03:58,360 --> 00:04:02,200 Speaker 1: is to anti trust as opposed to the Democratic approach. Well, 69 00:04:02,200 --> 00:04:06,280 Speaker 1: the Republican approach has traditionally been much just a lighter hand, 70 00:04:06,680 --> 00:04:09,840 Speaker 1: more business friendly. So in other words, UM, thinking about 71 00:04:09,880 --> 00:04:12,520 Speaker 1: the efficiencies that are created in the deal and asking 72 00:04:12,960 --> 00:04:15,920 Speaker 1: if we have concerns, how can we remedy those concerns. 73 00:04:16,360 --> 00:04:19,800 Speaker 1: Enter a consent order where where you know that alleviator concerns, 74 00:04:19,880 --> 00:04:22,320 Speaker 1: rather than going to court and trying to stop a 75 00:04:22,360 --> 00:04:25,920 Speaker 1: deal it could have some good effects. Um. And then 76 00:04:25,960 --> 00:04:28,400 Speaker 1: Democrat the Democrats, the direction it's been going in the 77 00:04:28,480 --> 00:04:32,160 Speaker 1: last few years has been really interesting because more and 78 00:04:32,200 --> 00:04:35,680 Speaker 1: more they seem to be going the direction of well, 79 00:04:35,720 --> 00:04:38,560 Speaker 1: big is bad. We we don't like the deal and 80 00:04:38,600 --> 00:04:40,760 Speaker 1: we think it could have a bad effect. So so 81 00:04:40,839 --> 00:04:44,840 Speaker 1: let's sort of work backward and you know, define markets 82 00:04:44,880 --> 00:04:46,720 Speaker 1: and say they have a problem these markets that that 83 00:04:46,760 --> 00:04:50,039 Speaker 1: will ultimately have a bad effect. And and you know, 84 00:04:50,080 --> 00:04:53,480 Speaker 1: again Josh Wright is very pragmatic and believes that economics 85 00:04:53,480 --> 00:04:55,720 Speaker 1: should be applied. And when you apply economics to a 86 00:04:55,760 --> 00:05:00,120 Speaker 1: vertical deal usually you see that it's pro competitive. What 87 00:05:00,279 --> 00:05:04,480 Speaker 1: deals are pending right now that are being considered by 88 00:05:04,480 --> 00:05:09,760 Speaker 1: the Justice Department and may have will there be a 89 00:05:09,880 --> 00:05:13,039 Speaker 1: change if if someone else comes in in the way 90 00:05:13,080 --> 00:05:16,200 Speaker 1: they're being viewed, Well, there there could be. It depends 91 00:05:16,200 --> 00:05:18,640 Speaker 1: on timing because it will take some time to get 92 00:05:18,680 --> 00:05:20,920 Speaker 1: the new officials in. But you have pending right now, 93 00:05:20,960 --> 00:05:26,040 Speaker 1: of course Alaska Air and Virgin America UM, that's still 94 00:05:26,080 --> 00:05:28,440 Speaker 1: as I understand, I believe you know, working on negotiating 95 00:05:28,440 --> 00:05:32,320 Speaker 1: remedies for their deal. You have two deals that are 96 00:05:32,400 --> 00:05:35,680 Speaker 1: in court right now, an attempting to acquire Humanita and 97 00:05:35,760 --> 00:05:39,160 Speaker 1: Anthem attempting to acquire Signal. Now that's an interesting situation 98 00:05:39,160 --> 00:05:42,680 Speaker 1: because it's in front of judges, so not necessarily affected 99 00:05:42,720 --> 00:05:45,360 Speaker 1: by this change in the d o J. But you 100 00:05:45,400 --> 00:05:47,560 Speaker 1: may have We know that ETNA has been trying to 101 00:05:47,560 --> 00:05:50,120 Speaker 1: settle and if you have somebody knew who steps in 102 00:05:50,120 --> 00:05:52,640 Speaker 1: and this isn't resolved yet in court. There may be 103 00:05:53,240 --> 00:05:55,280 Speaker 1: a willingness by the d o J to to come 104 00:05:55,279 --> 00:05:57,400 Speaker 1: in and try to settle that matter rather than going 105 00:05:57,440 --> 00:06:01,680 Speaker 1: through with the court hearing. Going back to this merger 106 00:06:02,040 --> 00:06:07,160 Speaker 1: between Time Warner and A T and T, it's unclear, 107 00:06:07,200 --> 00:06:09,640 Speaker 1: it seems whether the deal will be subject to f 108 00:06:09,800 --> 00:06:13,640 Speaker 1: c C review. Tell us a little bit about that. Well, 109 00:06:13,680 --> 00:06:16,200 Speaker 1: on the f c C side, they the FCC would 110 00:06:16,240 --> 00:06:20,000 Speaker 1: only have the authority if if FCC controlled licenses are transferred, 111 00:06:20,240 --> 00:06:22,640 Speaker 1: and that's what gives them authority, And it's just unclear. 112 00:06:23,080 --> 00:06:25,640 Speaker 1: You know, they do have some FCC licenses, but it's 113 00:06:25,680 --> 00:06:28,039 Speaker 1: unclear whether they're trying to get rid of those licenses 114 00:06:28,320 --> 00:06:30,560 Speaker 1: so that they don't they aren't in front of the FCC, 115 00:06:30,720 --> 00:06:33,800 Speaker 1: which has a broader standard than the Justice Department does 116 00:06:33,839 --> 00:06:35,880 Speaker 1: in terms of trying to stop or oppose a deal. 117 00:06:37,600 --> 00:06:40,120 Speaker 1: You've been on many times because we love to have you, 118 00:06:40,160 --> 00:06:43,240 Speaker 1: because it's it's like having a professor tell us in 119 00:06:43,320 --> 00:06:47,680 Speaker 1: simple terms about anti trust. So let's just sort of 120 00:06:47,960 --> 00:06:51,440 Speaker 1: sum up in a way what's been happening with antitrust 121 00:06:51,839 --> 00:06:57,080 Speaker 1: under President Obama. Well, certainly it's become much more aggressive. 122 00:06:57,279 --> 00:07:00,760 Speaker 1: And the interesting thing is that we overall you're more 123 00:07:00,760 --> 00:07:03,000 Speaker 1: aggressive and a lot more enforcement. But if you dig 124 00:07:03,000 --> 00:07:05,279 Speaker 1: in and you look at the statistics in terms of 125 00:07:05,279 --> 00:07:07,600 Speaker 1: the deals that get filed before the agency and then 126 00:07:07,640 --> 00:07:11,360 Speaker 1: get investigated, you know, they collect documents, they take depositions. 127 00:07:11,400 --> 00:07:14,400 Speaker 1: That percentage hasn't really changed over the last ten or 128 00:07:14,440 --> 00:07:17,880 Speaker 1: fifteen years. It's it's between you three point five three 129 00:07:17,880 --> 00:07:19,960 Speaker 1: and about four and a half percent. Kind of goes 130 00:07:20,000 --> 00:07:22,840 Speaker 1: back and forth. What we've seen though, the differences a 131 00:07:22,920 --> 00:07:26,360 Speaker 1: greater willingness in the last few years to actually litigate, 132 00:07:26,400 --> 00:07:28,880 Speaker 1: to actually go to trial. You know, back when I 133 00:07:28,960 --> 00:07:32,160 Speaker 1: was practicing, sometimes the attorneys would in a way you 134 00:07:32,200 --> 00:07:34,679 Speaker 1: want to play chicken with the regulators, because they'd offer, 135 00:07:35,240 --> 00:07:38,280 Speaker 1: we'll sell these assets and that should resolve your concerns. 136 00:07:38,600 --> 00:07:40,680 Speaker 1: And the regulator would say, well, hey, that's not quite 137 00:07:40,680 --> 00:07:42,880 Speaker 1: good enough, and the lawyers would say, you know, that's 138 00:07:42,880 --> 00:07:45,400 Speaker 1: what we're offering. We think this fixes the concerns. If 139 00:07:45,440 --> 00:07:47,400 Speaker 1: you don't like it to us, take us to court, 140 00:07:47,840 --> 00:07:50,480 Speaker 1: and the regulators would back off. And that's the way 141 00:07:50,640 --> 00:07:53,760 Speaker 1: once upon a time it was. Doesn't happen anymore. Now 142 00:07:53,800 --> 00:07:56,840 Speaker 1: They don't back off. And how long will a deal 143 00:07:56,920 --> 00:07:59,960 Speaker 1: like this take to go through all the various hurdle 144 00:08:00,880 --> 00:08:03,440 Speaker 1: might might to a T and T and time order 145 00:08:03,520 --> 00:08:06,040 Speaker 1: have to give up a few things. Well, I do 146 00:08:06,120 --> 00:08:08,920 Speaker 1: think they'll absolutely have to sign a consent order. I 147 00:08:08,960 --> 00:08:11,680 Speaker 1: don't believe they'll actually have to divest anything, but I 148 00:08:11,720 --> 00:08:13,200 Speaker 1: do think they'll have to sign on to what we 149 00:08:13,280 --> 00:08:17,240 Speaker 1: call behavioral conditions, where they promise not to discriminate, let's say, 150 00:08:17,240 --> 00:08:21,000 Speaker 1: against other distributors of programming content, or they promise not 151 00:08:21,040 --> 00:08:25,400 Speaker 1: to discriminate against competitor content content companies such as NBC 152 00:08:25,560 --> 00:08:27,800 Speaker 1: U and Comcast UM. I think it will take a 153 00:08:27,800 --> 00:08:30,960 Speaker 1: long time, and I actually think it's probably, you know, 154 00:08:31,000 --> 00:08:32,800 Speaker 1: in their benefit to drag it a little bit here 155 00:08:32,840 --> 00:08:35,400 Speaker 1: and wait until the new administration officials are in there 156 00:08:35,720 --> 00:08:37,800 Speaker 1: and they're the ones that dig into this deal. I 157 00:08:38,000 --> 00:08:40,160 Speaker 1: I do, these things, you know, take a long time.