Smaller cable operators have pitched a U.S. district court on a hybrid structural/behavioral remedy that could make the AT&T-Time Warner merger palatable to them.
That is according to a brief from the American Cable Association, RCN Telecom, Grande Communications Networks, and WaveDivision Holdings filed Monday (May 14) with the U.S. District Court for the District of Columbia.
That court is currently deciding whether to block or condition the proposed merger after the Justice Department filed suit to block the deal unless AT&T spins off Turner programming assets.
The Justice Department had asserted that without spinoffs of Turner programming networks, the merger would mean substantially less competition and thus higher prices for consumers.
The companies argued that to make their case, the government had to prove that the merger "will likely (not potentially or possibly) lessen competition substantially, in a video marketplace that is experiencing revolutionary, unstoppable transformation and growth in competition at all levels."
The petitioners are not taking either side in their amicus brief, though they say they are assuming, as does Justice, that the deal as structured violates antitrust laws by "enabling the merged entity to raise prices for its programming to ACA members in excess of those that would occur in a competitive market."
They argue that the case divides along all-or-nothing positions while their's is a "middle ground," and that the court has more flexibility than DOJ or AT&T-Time Warner suggest to strike such a compromise.
Justice says that if the court concludes the deal violates antitrust laws, it can only consider DOJ's structural remedies to fix it, while Turner has offered up behavioral conditions of outside arbitration and standstill agreements for any program access complaints.
ACA and company say both are wrong, that the Turner remedy is underwhelming, and that the court can fashion a remedy that employs a behavioral remedy in addition to or in lieu of structural conditions.
That remedy would be to apply the arbitration and standstill agreements to all programming of the post-merged company, including Time Warner's HBO, tweak the arbitration process, ensure the use of bargaining agents and fee-shifting, prevent retaliation against rivals' subs, and permit the remedy itself to be tweaked or extended.
"Tailoring the remedy to the facts of this case can permit the transaction to go forward with the benefits anticipated by Defendants, while preventing the merged entity from inflicting anti-competitive harm," they told the court.
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