Franken Grills Varney On Comcast-NBCU-Like Mergers

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Sen. Al  Franken (D-Minn.) took aim at the Comcast/NBCU merger in a Senate Antitrust Subcommittee hearing Wednesday on antitrust enforcement and a top Justice official promised the department would not rely on any stakeholders' promises when vetting a merger.

During his questioning of assistant attorney general for antitrust Christine Varney, Franken focused entirely on that
merger and what he said was his "inherent distrust of NBC and Comcast's promises."

Franken said he could not stress enough that "it matters who runs our media companies," which he said influence how people looked at and understood the world. "So, it is a problem when the same company produces the programs and runs the pipes that bring us those programs," he said, adding: " at least it is to me."

Franken repeated his concerns about the percentage of in-house productions on network schedules since the deep-sixing of the financial interest and syndication rules in the early 1990's, and raised the specter of NBCU raising prices for NBC cable channels to Comcast and other MSOs since the price increase to Comcast would be "from one pocket to another.'

Franken said that NBC had assured Congress when arguing against fin-syn rules that their exit would not result in
networks filling their schedules with their own programming. He asked Varney if she was aware of what had happened to NBC's schedule in the wave of that decision, and she had a ready answer. "They relatively promptly favored their own programming," she said. "That's exactly right," he answered.

Varney said she could not comment on Justice's investigation of the Comcast/NBCU proposed joint venture, but when Franken said he did not trust the promises made by Comcast and NBCU, Varney assured him the deparment did not operate on the honor system.

"Let me assure you Senator that we don't rely on promises," she said. "If a transaction is anticompetitive and violates the prohibition on substantially lessening competition we will block it. We will go to court and we will block it." She said she understood Franken's concerns about the merger, which she ehrself was not discussing specifically, to fall into two categories: "your concerned about the vertical integration that Comcast owning the pipes is going to favor its own programming and discriminate against other programming, and you are concerned about the overlap in both instances."

Varney said Franken was right that Comcast/NBCU was a "vertical integration with horizontal overlap" and that Justice would use "all the existing tools" to understand what the competitive marketplace will look like after the transaction. "And should we have the evidence that guides us to the conclusion that this is a transaction that will meet the standards set by the courts and set by the law, we will challenge it."

But she added  that if the parties examined Justice's concerns, "we would explore how those concerns would be
addressed." But if that happened, those would not be promises, but enforceable conditions. She went on to say that
anyone violating those conditions could be liable for up to a $10,000 fine per occurrence. She said occurrence is defined very narrowly so that there could be a "massive number of occurrences."

On the issue of cable bills and possible programming cost increases, Varney had a ready answer. She said Justice
would attempt to determine, in any merger, whether there would be a "nontransitory" price increase that would be
actionable under antitrust laws. "If you find that evidence, that is certainly something you would consider when you
try to determine whether or not you block the merger."

Sen. Arlen Specter (D-Pa.) weighed in in support of Comcast, which he pointed out was a major constituent of his with the cable company headquartered in Philadelphia. He said he knew the Robertses for decades (founder Ralph and chairman Brian) and said they were good corporate citizens who had been fair and equitable in their dealings and he was sure they would not be raising prices anticompetitively. He pointed out that Franken was talking in hypotheticals and theoreticals, and suggested Justice would vet such event.

But Varney also pointed out that a Franken hypothetical about Verizon or AT&T buying a network has actually already happened with a series of consolidations in the drug wholesaling industry.

Sen. Herb Kohl (D-Wis,) who has called for conditions on the Comcast/NBCU deal and registered his concerns in a
letter to Federal Communications Commission chairman Julius Genachowski, did not weigh in on the deal during the hearing, which dealt with a range of issues from the price of milk to the cost of heart medication for infants.

But Kohl did bring up the issue of the fading fortunes of newspapers and journalism in general.

Federal Trade Commission Jon Leibowitz said he did not favor antitrust exemptions, but put in a plug for a news cooperative in Chicago among former Tribune staffers, saying he was dismayed to find that the online operation did not qualify for help from the Small Business Administration.

The hearing touched on some other communications issues in addition to Comcast/NBCU. Sen. Orrin Hatch (R-Utah) noted that the Justice Department was looking into BCS Championship series alliance: "I believe that the BCS system is patently anticompetitive and said there were questions about whether it was legal under the antitrust laws."

Hatch said he had been criticized for focusing on college sports because it was a trivial matter. When he asked whether Justice was treating the issue seriously, Varney said she views sports, whether college or pro, as a big business.  She pointed out that baseball is the only enterprise that enjoys antitrust immunity. "We will investigate, thoroughly pursue and bring the appropriate action against any enterprise, sporting or otherwise."

Leibowitz, a former staff director for the Antitrust Subcommittee, pointed out that when Kohl took over the subcommittee in 1997, one of their first hearings was on the BCS alliance. "At that time, it seemed to us that it was a bunch of large competitors who got together and excluded some of the little guys." He said he understood that the rules had changed somewhat since then, in part from prodding from the subcommittee. "Not much," said Hatch.

Sen. Charles Schumer (D-NY) raised the issue of social network collection, sharing and protection, or lack of it, of users data. Leibowitz said the FTC was looking at the issue and would be putting out guidelines. Schumer pointed out that those were not enforceable, but Leibowitz said the commission also has authority to go after unfair or deceptive acts and practices and said he "would not hesitate to use this."

Leibowitz said that that consumers' consent should always be gotten before online info is shared with third parties.
The hearing also briefly touched on early termination fees, briefly in part because Leibowitz pointed out that the
cell phone issue was a common carrier one over which the FTC had no jurisdiction, though he said FCC efforts in that area would be consumer-friendly.