Antitrust Claims Against Comcast Have Even Less Merit Than in 2011

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Perspectives from FSF Scholars

November 29, 2018

Revisiting the Comcast/NBCU Merger:

Antitrust Claims Have Even Less Merit Than in 2011

Theodore Bolema

[Below is the Introduction and Summary to this latest FSF Perspectives . A PDF version of the complete Perspectives , with footnotes, is here .]

Introduction and Summary

The American Cable Association (ACA), the trade association that represents cable systems that compete with Comcast, is calling on the U.S. Department of Justice (DOJ) to "immediately open an investigation" into the 2011 acquisition of NBC Universal (NBCU) by Comcast. ACA claims that "the vertically integrated Comcast-NBCU poses a much greater threat to competition in markets across the country than the AT&T-Time Warner combination (AT&T-TW) that was just consummated." DOJ, along with the Federal Communications Commission, did in fact investigate and challenge the Comcast/NBCU transaction in 2011, and the merger was allowed to proceed subject to a series of behavioral restrictions imposed by the FCC. These behavioral restrictions expired at the end of 2017.

These complaints about Comcast by ACA are not new. Over a year ago, ACA alleged that the Comcast/NBCU merger forced its members to pay prices for NBCU programming that had to be passed on as higher fees to final customers, and the AT&T/Time Warner merger will do the same. Of course, the American Cable Association members sometimes are competitors of Comcast as well as AT&T’s DirecTV and other programming distributors like Hulu, so even though these claims allege potential harm to consumers, antitrust analysis as a general rule requires that competitor complaints be viewed skeptically.

But even to the extent the complaints about Comcast using NBCU for an anticompetitive advantage are not self-serving competitor complaints, a new DOJ investigation of the Comcast/NBCU transaction faces several significant problems that make any new legal challenge to the Comcast/NBCU combination unlikely to succeed.

Changes in the market give Comcast even less leverage over its rivals than it may have had in 2011. These changes were evident as early as 2014, when Comcast attempted to use The Weather Channel, one of the NBCU channels, for leverage over DirecTV. Rather than give in to Comcast’s demands, DirecTV dropped the channel and replaced it with other weather content until Comcast folded and agreed to the lower rate DirecTV wanted. Comcast’s failure to raise the price of an NBCU channel only three years after the NBCU acquisition is an example of how concerns about vertically-integrated programming and distribution companies using the purported leverage from channels they control for anticompetitive purposes has been overblown in cases brought by DOJ.

Importantly, the market has become even more innovative and dynamic in other ways since the 2011 Comcast/NBCU merger. Consumers have more choices than ever before for receiving programming content and are now far more willing to "cut the cord" and choose various Internet platforms for receiving information and entertainment. There is a strong trend toward making the most valuable programming content available in many different ways. For example, HBO channels can be purchased as a premium service from cable and satellite providers, as well as through the online SlingTV and Hulu services. The HBO Now app is currently pre-loaded on all Apple TVs for users of iPhones and iPads, and similar apps can be uploaded to Android, Amazon Fire, and Kindle devices.

Indeed, web giants Facebook, Amazon, and Google are major purveyors of online video content. As Mark Cuban recently declared:

"The idea that TV is the dominant content delivery mechanism no longer is valid. Instead, we fill our time by consuming content from Facebook, Instagram, Snapchat, Messenger, WhatsApp and slowly from Virtual Reality companies like Occulus Rift. Combined, these apps reach more than 1.5 billion users a month. They can deliver any kind of content, in any manner the consumer would like to receive it, be it message, video, VR, post, ad, you name it, to populations around the world in a manner that dwarfs TV."

In short, anticompetitive strategies that might have worked in the past – perhaps even the recent past – will not be as profitable today, due to the increase in consumer choices and the likely losses of subscribers to other distribution platforms. For several years now, traditional multichannel video distributors like Comcast have witnessed declines in their subscriber numbers.

And DOJ’s options for relief are limited by the positions it took during the AT&T/Time Warner merger and by statements made by the current Assistant Attorney General expressing strong skepticism about the value and efficacy of behavioral relief of the type imposed by the FCC in 2011. Were DOJ to pursue antitrust relief from Comcast, it will have a difficult time explaining why it is taking a position that is hard to reconcile with another recent position involving vertical integration of programming producers and distributors.

President Trump has also tweeted, evidently supportively, about ACA’s accusation that Comcast is violating antitrust laws. While the President is not calling on DOJ to investigate Comcast, if DOJ were to initiate an investigation of Comcast, this tweet might lend credence to claims that it is acting under pressure from President Trump. AT&T and Time Warner earlier had alleged that DOJ’s review of their transaction was unduly influenced by the President’s political considerations. While there is no actual evidence that DOJ's decisions regarding the AT&T/Time Warner litigation were motivated by improper political considerations, the President’s comments regarding Comcast puts DOJ in a similar awkward position if it decides to pursue an investigation of Comcast today.

Most significantly, strong market evidence points to DOJ having a much weaker case against a Comcast/NBCU combination today than it had in 2011. DOJ has no compelling reason to revisit this 2011 transaction, and can avoid further questions about its investigations into programming distribution being politically motivated by deploying its investigative resources elsewhere.

* Theodore Bolema is a member of the Free State Foundation’s Board of Academic Advisors and Executive Director of the Institute for the Study of Economic Growth at Wichita State University.

Read the complete Perspectives, with footnotes, here .

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