WEBVTT - Rie on AT&T and Time Warner (Audio) 0:00:03.560 --> 0:00:07.240 Here listening to Bloomberg Law. I'm June Grosso. H T 0:00:07.400 --> 0:00:09.400 and T is trying to become one of the world's 0:00:09.400 --> 0:00:14.400 biggest media companies by buying Time Warner, which owns CNN, HBO, 0:00:14.600 --> 0:00:19.079 and Warner Brothers. Billion dollar wager by A, T and T, 0:00:19.360 --> 0:00:23.400 the largest deal announced globally this year, is controversial and political. 0:00:24.160 --> 0:00:28.320 President elect Trump vowed to block the transaction, calling it 0:00:28.480 --> 0:00:32.960 poison to democracy in October. Our guest is Jennifer Ree, 0:00:32.960 --> 0:00:40.360 senior litigation analyst for Bloomberg Intelligence. Jen this deal is huge, 0:00:40.760 --> 0:00:44.080 and there's been criticism that it puts too much power 0:00:44.240 --> 0:00:48.479 into the hands of one company. Is that something that 0:00:48.840 --> 0:00:51.519 the regulators are going to be looking at, you know, 0:00:51.600 --> 0:00:54.720 not precisely. No, And that's certainly the atmospherics and the 0:00:54.760 --> 0:00:57.200 reaction that we've seen. There's been quite a need jerk 0:00:57.200 --> 0:00:59.040 reaction to this deal. But at the end of the day, 0:00:59.280 --> 0:01:03.040 with the interest regulators do is ask whether the combination 0:01:03.160 --> 0:01:06.280 of two companies could have the effect harmon market down 0:01:06.280 --> 0:01:10.119 the road once they're merged by raising prices, reducing innovation, 0:01:10.240 --> 0:01:13.240 reducing choice, And they do that by asking do they 0:01:13.319 --> 0:01:17.120 directly compete a horizontal deal combining you know, the products 0:01:17.120 --> 0:01:21.080 and services that they both provide um and in that 0:01:21.120 --> 0:01:23.280 way raise the prices because they're the only provider of 0:01:23.280 --> 0:01:26.720 that product or service or are they in the same 0:01:26.959 --> 0:01:30.320 chain of distribution at different levels vertically related and could 0:01:30.400 --> 0:01:32.679 that cause harm in this deal is a deal where 0:01:32.720 --> 0:01:35.680 the two companies do not compete, they are vertically related, 0:01:37.400 --> 0:01:42.000 but it will get carefully scrutinized, I assume because it 0:01:42.120 --> 0:01:46.120 is just so big. What are some of the possible 0:01:46.160 --> 0:01:50.160 antitrust concerns, Well, it will definitely get carefully scrutinized because 0:01:50.280 --> 0:01:54.560 vertical deals, although they're not considered as problematic as horizontal deals, 0:01:54.840 --> 0:01:57.520 can causing any trust issues. And so, for instance, a 0:01:57.600 --> 0:02:00.600 very similar deal, which is when Comcast enter the joint 0:02:00.680 --> 0:02:04.920 venture with NBC Universal, was carefully scrutinized and the antitrust 0:02:05.040 --> 0:02:08.840 regulators both from the Justice Department and the FCC determined 0:02:08.880 --> 0:02:11.520 that there could be harms that needed to be remedied. 0:02:11.520 --> 0:02:15.000 So they forced the emerged company to sign onto a 0:02:15.040 --> 0:02:17.880 consent order to agree to all sorts of provisions. And 0:02:17.919 --> 0:02:20.200 they'll do the same thing here because the relationships are 0:02:20.200 --> 0:02:23.440 complicated when you get into this vertical relationship and there 0:02:23.480 --> 0:02:28.320 can be a foreclosure effect. I mentioned a few moments 0:02:28.360 --> 0:02:33.680 ago that Trump, during his election bid, in fact, I 0:02:33.680 --> 0:02:36.440 think it was October twenty two, just about the time 0:02:36.480 --> 0:02:40.600 the deal was announced, said he's vehemently opposed to the 0:02:40.639 --> 0:02:44.720 deal and basically said he's going to stop it. Can 0:02:44.760 --> 0:02:49.600 the president stop the deal? He cannot. Now it's created 0:02:49.639 --> 0:02:52.600 an interesting dynamic dynamic for sure, to have a Republican 0:02:52.639 --> 0:02:55.840 president make a comment like that. Um, the president does 0:02:55.880 --> 0:02:58.959 not have the authority to stop to merging companies from closing. 0:02:59.040 --> 0:03:01.960 They only a court order can do that. So even 0:03:02.000 --> 0:03:04.720 the Justice Department and Federal Trade Commission don't have the 0:03:04.760 --> 0:03:06.760 authority to do that. They have to ask a court 0:03:07.040 --> 0:03:08.960 to block the deal, and that would be the same 0:03:09.000 --> 0:03:11.959 for a T and T. Now where he has authority 0:03:12.080 --> 0:03:14.359 is that he will be able to appoint when he's president, 0:03:14.760 --> 0:03:17.600 new officials in charge of anti trust at the Department 0:03:17.600 --> 0:03:19.760 of Justice as well as at the FTC. This is 0:03:19.760 --> 0:03:22.600 a d o J matter, and those officials, you know, 0:03:22.639 --> 0:03:24.760 are going to be expected to carry out his agenda. 0:03:25.160 --> 0:03:27.640 But the way it's looking is pretty good for the 0:03:27.680 --> 0:03:30.040 deal because what's been bandied about in the news is 0:03:30.160 --> 0:03:33.200 Josh Wright as the person who's helping him with transition, 0:03:33.200 --> 0:03:36.160 who might even be appointed the Assistant Attorney General in 0:03:36.240 --> 0:03:38.080 charge of anti trust here. And he is well known 0:03:38.120 --> 0:03:40.960 to be very conservative, to be business friendly, and to 0:03:41.000 --> 0:03:44.160 take a very pragmatic and economics based approach to deals. 0:03:44.360 --> 0:03:47.720 I would be enormously surprised if he was behind seeking 0:03:47.720 --> 0:03:50.560 a court order to block this deal. To talk in 0:03:51.080 --> 0:03:58.280 very broad generalities here, describe what the Republican approach normally 0:03:58.360 --> 0:04:02.200 is to anti trust as opposed to the Democratic approach. Well, 0:04:02.200 --> 0:04:06.280 the Republican approach has traditionally been much just a lighter hand, 0:04:06.680 --> 0:04:09.840 more business friendly. So in other words, UM, thinking about 0:04:09.880 --> 0:04:12.520 the efficiencies that are created in the deal and asking 0:04:12.960 --> 0:04:15.920 if we have concerns, how can we remedy those concerns. 0:04:16.360 --> 0:04:19.800 Enter a consent order where where you know that alleviator concerns, 0:04:19.880 --> 0:04:22.320 rather than going to court and trying to stop a 0:04:22.360 --> 0:04:25.920 deal it could have some good effects. Um. And then 0:04:25.960 --> 0:04:28.400 Democrat the Democrats, the direction it's been going in the 0:04:28.480 --> 0:04:32.160 last few years has been really interesting because more and 0:04:32.200 --> 0:04:35.680 more they seem to be going the direction of well, 0:04:35.720 --> 0:04:38.560 big is bad. We we don't like the deal and 0:04:38.600 --> 0:04:40.760 we think it could have a bad effect. So so 0:04:40.839 --> 0:04:44.840 let's sort of work backward and you know, define markets 0:04:44.880 --> 0:04:46.720 and say they have a problem these markets that that 0:04:46.760 --> 0:04:50.039 will ultimately have a bad effect. And and you know, 0:04:50.080 --> 0:04:53.480 again Josh Wright is very pragmatic and believes that economics 0:04:53.480 --> 0:04:55.720 should be applied. And when you apply economics to a 0:04:55.760 --> 0:05:00.120 vertical deal usually you see that it's pro competitive. What 0:05:00.279 --> 0:05:04.480 deals are pending right now that are being considered by 0:05:04.480 --> 0:05:09.760 the Justice Department and may have will there be a 0:05:09.880 --> 0:05:13.039 change if if someone else comes in in the way 0:05:13.080 --> 0:05:16.200 they're being viewed, Well, there there could be. It depends 0:05:16.200 --> 0:05:18.640 on timing because it will take some time to get 0:05:18.680 --> 0:05:20.920 the new officials in. But you have pending right now, 0:05:20.960 --> 0:05:26.040 of course Alaska Air and Virgin America UM, that's still 0:05:26.080 --> 0:05:28.440 as I understand, I believe you know, working on negotiating 0:05:28.440 --> 0:05:32.320 remedies for their deal. You have two deals that are 0:05:32.400 --> 0:05:35.680 in court right now, an attempting to acquire Humanita and 0:05:35.760 --> 0:05:39.160 Anthem attempting to acquire Signal. Now that's an interesting situation 0:05:39.160 --> 0:05:42.680 because it's in front of judges, so not necessarily affected 0:05:42.720 --> 0:05:45.360 by this change in the d o J. But you 0:05:45.400 --> 0:05:47.560 may have We know that ETNA has been trying to 0:05:47.560 --> 0:05:50.120 settle and if you have somebody knew who steps in 0:05:50.120 --> 0:05:52.640 and this isn't resolved yet in court. There may be 0:05:53.240 --> 0:05:55.280 a willingness by the d o J to to come 0:05:55.279 --> 0:05:57.400 in and try to settle that matter rather than going 0:05:57.440 --> 0:06:01.680 through with the court hearing. Going back to this merger 0:06:02.040 --> 0:06:07.160 between Time Warner and A T and T, it's unclear, 0:06:07.200 --> 0:06:09.640 it seems whether the deal will be subject to f 0:06:09.800 --> 0:06:13.640 c C review. Tell us a little bit about that. Well, 0:06:13.680 --> 0:06:16.200 on the f c C side, they the FCC would 0:06:16.240 --> 0:06:20.000 only have the authority if if FCC controlled licenses are transferred, 0:06:20.240 --> 0:06:22.640 and that's what gives them authority, And it's just unclear. 0:06:23.080 --> 0:06:25.640 You know, they do have some FCC licenses, but it's 0:06:25.680 --> 0:06:28.039 unclear whether they're trying to get rid of those licenses 0:06:28.320 --> 0:06:30.560 so that they don't they aren't in front of the FCC, 0:06:30.720 --> 0:06:33.800 which has a broader standard than the Justice Department does 0:06:33.839 --> 0:06:35.880 in terms of trying to stop or oppose a deal. 0:06:37.600 --> 0:06:40.120 You've been on many times because we love to have you, 0:06:40.160 --> 0:06:43.240 because it's it's like having a professor tell us in 0:06:43.320 --> 0:06:47.680 simple terms about anti trust. So let's just sort of 0:06:47.960 --> 0:06:51.440 sum up in a way what's been happening with antitrust 0:06:51.839 --> 0:06:57.080 under President Obama. Well, certainly it's become much more aggressive. 0:06:57.279 --> 0:07:00.760 And the interesting thing is that we overall you're more 0:07:00.760 --> 0:07:03.000 aggressive and a lot more enforcement. But if you dig 0:07:03.000 --> 0:07:05.279 in and you look at the statistics in terms of 0:07:05.279 --> 0:07:07.600 the deals that get filed before the agency and then 0:07:07.640 --> 0:07:11.360 get investigated, you know, they collect documents, they take depositions. 0:07:11.400 --> 0:07:14.400 That percentage hasn't really changed over the last ten or 0:07:14.440 --> 0:07:17.880 fifteen years. It's it's between you three point five three 0:07:17.880 --> 0:07:19.960 and about four and a half percent. Kind of goes 0:07:20.000 --> 0:07:22.840 back and forth. What we've seen though, the differences a 0:07:22.920 --> 0:07:26.360 greater willingness in the last few years to actually litigate, 0:07:26.400 --> 0:07:28.880 to actually go to trial. You know, back when I 0:07:28.960 --> 0:07:32.160 was practicing, sometimes the attorneys would in a way you 0:07:32.200 --> 0:07:34.679 want to play chicken with the regulators, because they'd offer, 0:07:35.240 --> 0:07:38.280 we'll sell these assets and that should resolve your concerns. 0:07:38.600 --> 0:07:40.680 And the regulator would say, well, hey, that's not quite 0:07:40.680 --> 0:07:42.880 good enough, and the lawyers would say, you know, that's 0:07:42.880 --> 0:07:45.400 what we're offering. We think this fixes the concerns. If 0:07:45.440 --> 0:07:47.400 you don't like it to us, take us to court, 0:07:47.840 --> 0:07:50.480 and the regulators would back off. And that's the way 0:07:50.640 --> 0:07:53.760 once upon a time it was. Doesn't happen anymore. Now 0:07:53.800 --> 0:07:56.840 They don't back off. And how long will a deal 0:07:56.920 --> 0:07:59.960 like this take to go through all the various hurdle 0:08:00.880 --> 0:08:03.440 might might to a T and T and time order 0:08:03.520 --> 0:08:06.040 have to give up a few things. Well, I do 0:08:06.120 --> 0:08:08.920 think they'll absolutely have to sign a consent order. I 0:08:08.960 --> 0:08:11.680 don't believe they'll actually have to divest anything, but I 0:08:11.720 --> 0:08:13.200 do think they'll have to sign on to what we 0:08:13.280 --> 0:08:17.240 call behavioral conditions, where they promise not to discriminate, let's say, 0:08:17.240 --> 0:08:21.000 against other distributors of programming content, or they promise not 0:08:21.040 --> 0:08:25.400 to discriminate against competitor content content companies such as NBC 0:08:25.560 --> 0:08:27.800 U and Comcast UM. I think it will take a 0:08:27.800 --> 0:08:30.960 long time, and I actually think it's probably, you know, 0:08:31.000 --> 0:08:32.800 in their benefit to drag it a little bit here 0:08:32.840 --> 0:08:35.400 and wait until the new administration officials are in there 0:08:35.720 --> 0:08:37.800 and they're the ones that dig into this deal. I 0:08:38.000 --> 0:08:40.160 I do, these things, you know, take a long time.