National Regulation

Free State Decries 'Regulation By Condition' On Comcast/NBCU Merger

8/23/2010 1:14 PM Eastern

The Free State Foundation argues that groups trying to block the Comcast/NBCU merger are repeating their "misguided" arguments against the ultimately failed AOL/Time Warner merger that the group's senior scholar Richard Epstein says were based on perceived "inexorable and inevitable" social harms that never materialized.

Epstein and the foundation took aim at petitions to deny the deal filed by the Consumer Federation of America, Consumers Union, Free Press and the Media Access Project, arguing they were rooted in a "regulation by condition" approach that was both inappropriate and unjustified.

Epstein said that the groups had failed to come up with a public-interest framework for evaluating whether any merger would pass and that their definition of the relevant economic market fails to take into account marketplace changes resulting from "technological innovation and consumer demand."

He also argued that they don't take into account the ability of marketplace competition as a governor on the combined company. "[T]hey assume that the only strategies that matter are those adopted by Comcast and NBCU," said Epstein. "In any complex market, however, the gains that these two players can obtain are limited by the powerful counterstrategies that are available to other market participants, including suppliers, customers and competitors," he said.

Epstein averred that it would be better for the FCC to allow the deal to go through, then monitor it for any improper conduct that would result in actual consumer harm. He added that it is not necessary to share Comcast and NBCU's "rhapsodic" view of the deal to approve it, only to conclude that the case for imposing a laundry list of conditions has not been made.

And while Epstein said that it was "perfectly appropriate" for the FCC to condition a merger on divestitures of certain assets "in certain submarkets where the surviving firm might acquire undue market power," he argued that it should not use its power to require conditions to impose regulations that should be applied, "if at all," to a whole industry and only after the requisite notice and comment.

The FCC closed its comment window on the deal Aug. 19, the date of reply for comments on petitions to deny the merger. The FCC is in day 87 of its informal 180-day shot clock for vetting the deal. If the agency met that deadline it would mean a decision by the end of November.