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Last month, AT&T announced plans to acquire Time Warner for over $85 billion. The merger, if allowed, would give birth to a massive new telecom and media Goliath, combining one of the nation's biggest content creators with one of its biggest content distributors.
But, like all mergers, AT&T and Time Warner will have to survive the scrutiny of antitrust authorities at the Department of Justice and the Federal Trade Commission first. And, because Time Warner is a media company, the deal could come under scrutiny from the Federal Communications Commission, an agency Bloomberg describes as "a graveyard for mergers."
Time Warner's media holdings include everything from HBO to Warner Bros. to CNN to the Cartoon Network. A review by Bloomberg found that Time Warner has dozens of FCC licenses that would trigger FCC review of the planned merger.
The merger would be reviewed by the federal government, FCC licenses or not, but FCC could increase the likelihood that the merger will not be successful, since FCC merger review is considered particularly difficult, even "Kafkaesque," killing mergers by delaying them until they're no longer viable.
A new Trump administration probably won't mean a friendly environment for the AT&T-Time Warner merger, either. On the campaign trail, President-elect Donald Trump promised to block the deal, saying, "It's too much concentration of power in the hands of too few." That statement, as the Wall Street Journal notes, is in contrast with his pledge to deregulate the telecom industry, leaving many to wonder what position the administration will actually take.
FCC review is triggered if Time Warner transfers its licenses as part of the acquisition. To avoid that, the company could simply offload its licenses. Bloomberg presents one possible scenario:
In theory, Time Warner could sell its dishes to an unaffiliated third party and enter into a contract with them for the same services -- but in that case, the buyer would need to ask the FCC for a license to provide services in the same location over the same airwaves, said Andrew Jay Schwartzman, senior counselor at the Georgetown University Law Center in Washington.
It's possible the FCC would accept the application without a fuss, Schwartzman said. But, he said, FCC officials also might say, "Wait a minute! We're not stupid -- you are evading this review."
But AT&T does see offloading those licenses as the most likely strategy to advancing the merger, it seems. The company presented that as a probable approach last week, according to RBC analyst Jonathan Atkin. Again, evading FCC review would be at the heart of that strategy.
"The major difference between an FCC and DOJ review is that a DOJ review provides AT&T legal recourse while the FCC, if it chooses not to support the deal, can defer the issue to an administrative law judge, a process that can last upwards of three years, usually resulting in the dissolution of the deal," Atkin says. With the FCC out of the picture, the merger is more likely to take 12 to 14 months to complete.
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