Speaker 1: Here listening to Bloomberg Law. I'm June Grosso. H T
Speaker 1: and T is trying to become one of the world's
Speaker 1: biggest media companies by buying Time Warner, which owns CNN, HBO,
Speaker 1: and Warner Brothers. Billion dollar wager by A, T and T,
Speaker 1: the largest deal announced globally this year, is controversial and political.
Speaker 1: President elect Trump vowed to block the transaction, calling it
Speaker 1: poison to democracy in October. Our guest is Jennifer Ree,
Speaker 1: senior litigation analyst for Bloomberg Intelligence. Jen this deal is huge,
Speaker 1: and there's been criticism that it puts too much power
Speaker 1: into the hands of one company. Is that something that
Speaker 1: the regulators are going to be looking at, you know,
Speaker 1: not precisely. No, And that's certainly the atmospherics and the
Speaker 1: reaction that we've seen. There's been quite a need jerk
Speaker 1: reaction to this deal. But at the end of the day,
Speaker 1: with the interest regulators do is ask whether the combination
Speaker 1: of two companies could have the effect harmon market down
Speaker 1: the road once they're merged by raising prices, reducing innovation,
Speaker 1: reducing choice, And they do that by asking do they
Speaker 1: directly compete a horizontal deal combining you know, the products
Speaker 1: and services that they both provide um and in that
Speaker 1: way raise the prices because they're the only provider of
Speaker 1: that product or service or are they in the same
Speaker 1: chain of distribution at different levels vertically related and could
Speaker 1: that cause harm in this deal is a deal where
Speaker 1: the two companies do not compete, they are vertically related,
Speaker 1: but it will get carefully scrutinized, I assume because it
Speaker 1: is just so big. What are some of the possible
Speaker 1: antitrust concerns, Well, it will definitely get carefully scrutinized because
Speaker 1: vertical deals, although they're not considered as problematic as horizontal deals,
Speaker 1: can causing any trust issues. And so, for instance, a
Speaker 1: very similar deal, which is when Comcast enter the joint
Speaker 1: venture with NBC Universal, was carefully scrutinized and the antitrust
Speaker 1: regulators both from the Justice Department and the FCC determined
Speaker 1: that there could be harms that needed to be remedied.
Speaker 1: So they forced the emerged company to sign onto a
Speaker 1: consent order to agree to all sorts of provisions. And
Speaker 1: they'll do the same thing here because the relationships are
Speaker 1: complicated when you get into this vertical relationship and there
Speaker 1: can be a foreclosure effect. I mentioned a few moments
Speaker 1: ago that Trump, during his election bid, in fact, I
Speaker 1: think it was October twenty two, just about the time
Speaker 1: the deal was announced, said he's vehemently opposed to the
Speaker 1: deal and basically said he's going to stop it. Can
Speaker 1: the president stop the deal? He cannot. Now it's created
Speaker 1: an interesting dynamic dynamic for sure, to have a Republican
Speaker 1: president make a comment like that. Um, the president does
Speaker 1: not have the authority to stop to merging companies from closing.
Speaker 1: They only a court order can do that. So even
Speaker 1: the Justice Department and Federal Trade Commission don't have the
Speaker 1: authority to do that. They have to ask a court
Speaker 1: to block the deal, and that would be the same
Speaker 1: for a T and T. Now where he has authority
Speaker 1: is that he will be able to appoint when he's president,
Speaker 1: new officials in charge of anti trust at the Department
Speaker 1: of Justice as well as at the FTC. This is
Speaker 1: a d o J matter, and those officials, you know,
Speaker 1: are going to be expected to carry out his agenda.
Speaker 1: But the way it's looking is pretty good for the
Speaker 1: deal because what's been bandied about in the news is
Speaker 1: Josh Wright as the person who's helping him with transition,
Speaker 1: who might even be appointed the Assistant Attorney General in
Speaker 1: charge of anti trust here. And he is well known
Speaker 1: to be very conservative, to be business friendly, and to
Speaker 1: take a very pragmatic and economics based approach to deals.
Speaker 1: I would be enormously surprised if he was behind seeking
Speaker 1: a court order to block this deal. To talk in
Speaker 1: very broad generalities here, describe what the Republican approach normally
Speaker 1: is to anti trust as opposed to the Democratic approach. Well,
Speaker 1: the Republican approach has traditionally been much just a lighter hand,
Speaker 1: more business friendly. So in other words, UM, thinking about
Speaker 1: the efficiencies that are created in the deal and asking
Speaker 1: if we have concerns, how can we remedy those concerns.
Speaker 1: Enter a consent order where where you know that alleviator concerns,
Speaker 1: rather than going to court and trying to stop a
Speaker 1: deal it could have some good effects. Um. And then
Speaker 1: Democrat the Democrats, the direction it's been going in the
Speaker 1: last few years has been really interesting because more and
Speaker 1: more they seem to be going the direction of well,
Speaker 1: big is bad. We we don't like the deal and
Speaker 1: we think it could have a bad effect. So so
Speaker 1: let's sort of work backward and you know, define markets
Speaker 1: and say they have a problem these markets that that
Speaker 1: will ultimately have a bad effect. And and you know,
Speaker 1: again Josh Wright is very pragmatic and believes that economics
Speaker 1: should be applied. And when you apply economics to a
Speaker 1: vertical deal usually you see that it's pro competitive. What
Speaker 1: deals are pending right now that are being considered by
Speaker 1: the Justice Department and may have will there be a
Speaker 1: change if if someone else comes in in the way
Speaker 1: they're being viewed, Well, there there could be. It depends
Speaker 1: on timing because it will take some time to get
Speaker 1: the new officials in. But you have pending right now,
Speaker 1: of course Alaska Air and Virgin America UM, that's still
Speaker 1: as I understand, I believe you know, working on negotiating
Speaker 1: remedies for their deal. You have two deals that are
Speaker 1: in court right now, an attempting to acquire Humanita and
Speaker 1: Anthem attempting to acquire Signal. Now that's an interesting situation
Speaker 1: because it's in front of judges, so not necessarily affected
Speaker 1: by this change in the d o J. But you
Speaker 1: may have We know that ETNA has been trying to
Speaker 1: settle and if you have somebody knew who steps in
Speaker 1: and this isn't resolved yet in court. There may be
Speaker 1: a willingness by the d o J to to come
Speaker 1: in and try to settle that matter rather than going
Speaker 1: through with the court hearing. Going back to this merger
Speaker 1: between Time Warner and A T and T, it's unclear,
Speaker 1: it seems whether the deal will be subject to f
Speaker 1: c C review. Tell us a little bit about that. Well,
Speaker 1: on the f c C side, they the FCC would
Speaker 1: only have the authority if if FCC controlled licenses are transferred,
Speaker 1: and that's what gives them authority, And it's just unclear.
Speaker 1: You know, they do have some FCC licenses, but it's
Speaker 1: unclear whether they're trying to get rid of those licenses
Speaker 1: so that they don't they aren't in front of the FCC,
Speaker 1: which has a broader standard than the Justice Department does
Speaker 1: in terms of trying to stop or oppose a deal.
Speaker 1: You've been on many times because we love to have you,
Speaker 1: because it's it's like having a professor tell us in
Speaker 1: simple terms about anti trust. So let's just sort of
Speaker 1: sum up in a way what's been happening with antitrust
Speaker 1: under President Obama. Well, certainly it's become much more aggressive.
Speaker 1: And the interesting thing is that we overall you're more
Speaker 1: aggressive and a lot more enforcement. But if you dig
Speaker 1: in and you look at the statistics in terms of
Speaker 1: the deals that get filed before the agency and then
Speaker 1: get investigated, you know, they collect documents, they take depositions.
Speaker 1: That percentage hasn't really changed over the last ten or
Speaker 1: fifteen years. It's it's between you three point five three
Speaker 1: and about four and a half percent. Kind of goes
Speaker 1: back and forth. What we've seen though, the differences a
Speaker 1: greater willingness in the last few years to actually litigate,
Speaker 1: to actually go to trial. You know, back when I
Speaker 1: was practicing, sometimes the attorneys would in a way you
Speaker 1: want to play chicken with the regulators, because they'd offer,
Speaker 1: we'll sell these assets and that should resolve your concerns.
Speaker 1: And the regulator would say, well, hey, that's not quite
Speaker 1: good enough, and the lawyers would say, you know, that's
Speaker 1: what we're offering. We think this fixes the concerns. If
Speaker 1: you don't like it to us, take us to court,
Speaker 1: and the regulators would back off. And that's the way
Speaker 1: once upon a time it was. Doesn't happen anymore. Now
Speaker 1: They don't back off. And how long will a deal
Speaker 1: like this take to go through all the various hurdle
Speaker 1: might might to a T and T and time order
Speaker 1: have to give up a few things. Well, I do
Speaker 1: think they'll absolutely have to sign a consent order. I
Speaker 1: don't believe they'll actually have to divest anything, but I
Speaker 1: do think they'll have to sign on to what we
Speaker 1: call behavioral conditions, where they promise not to discriminate, let's say,
Speaker 1: against other distributors of programming content, or they promise not
Speaker 1: to discriminate against competitor content content companies such as NBC
Speaker 1: U and Comcast UM. I think it will take a
Speaker 1: long time, and I actually think it's probably, you know,
Speaker 1: in their benefit to drag it a little bit here
Speaker 1: and wait until the new administration officials are in there
Speaker 1: and they're the ones that dig into this deal. I
Speaker 1: I do, these things, you know, take a long time.