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Franken Grills Justice Official on Comcast-NBCU

Sen. Al Franken (D-Minn.) took aim at the Comcast-NBC Universal merger in a Senate Antitrust Subcommittee hearing June 9 on antitrust enforcement, as a top Justice Dept. official promised that the department would not rely on any stakeholders' promises when vetting a merger.
During his questioning of Christine Varney, assistant attorney general for antitrust, 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 its 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 proposed joint venture, but when Franken said he did not trust the promises made by Comcast and NBCU, Varney assured him the department 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."
Varney said she understood Franken's concerns about the merger, which she herself was not discussing specifically, to fall into two categories: "you're 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."
She 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 also said that if the parties addressed Justice's concerns, "we would explore how those concerns would be addressed." And if that happened, those would not be promises, but enforceable conditions.
Varney went on to say that anyone violating those conditions could be liable for up to a $10,000 fine per occurrence, a term she said 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.) offered support of Comcast, which he pointed out was a major constituent of his (the operator is based in his state). He said the company had been good actors, that he knew founder Ralph Roberts and chairman Brian Roberts for decades 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.
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.