Oral Argument in Transactions' Confidential Documents Case Closely Watched

Oral argument Friday in the U.S. Court of Appeals for the D.C. Circuit between content companies and the FCC over the release of confidential contract information in the FCC review of the Comcast/Time Warner Cable and AT&T/DirecTV deals isn’t expected to swing those deal proceedings’ results, said analysts and attorneys in interviews Thursday. Oral argument is of interest to investors and others following the transaction, though. There’s “some interest among investors in what the case means" for the deals, said Guggenheim Partners analyst Paul Gallant. “The case probably won’t drive the yes/no decision on the deals.”

Those in favor of the deals may be more concerned about a middle result of remanding the matter to the FCC rather than a win or loss, said communications attorneys connected with the proceeding. A remand of the FCC protective order at the heart of the case would lead to an uncertain timeline while the commission worked out its next move, while either a win or a loss would provide a clear path for the deal reviews to continue, the attorneys said.

The court case shouldn’t have any bearing on the commission’s review process for the deals since the FCC has had access to the programming and retransmission contract information in question from the beginning, said Covington Burling attorney Mace Rosenstein, who represents petitioners CBS, Scripps, Time Warner, 21st Century Fox and Univision. The content companies have argued that making their contract information available -- even under special protective measures -- would jeopardize their future negotiations and is unnecessary to the deals' review process. They also take issue with a Media Bureau revision of the confidentiality order that would allow the FCC to overrule content company objections to certain individuals reviewing their confidential information without court review.

The FCC didn't comment on how a decision in the case would affect the transactions review process. It has said that allowing access to the contracts -- called video programming confidential information (VPCI) -- is necessary to provide commenters in the merger proceedings with a full understanding of the deals' competitive impacts and provide a complete record. Dish Network, all the combining companies, and the American Cable Association have entered the case as intervenors in support of the FCC, while NAB has intervened in support of the content companies.

The case is likely to go one of three ways, said attorneys connected to the merger proceedings. If the court finds that the FCC protective orders were in the right, then attorneys who have filed for access to confidential information will be allowed access to the VPCI, and the deals' proceedings will continue. That’s a likely possibility, because appeals courts tend to defer to federal agencies, said Andrew Schwartzman, senior counselor at Georgetown University's Institute for Public Representation. Schwartzman, an opponent of the Comcast/TWC deal, has advocated for the VPCI to be released. The content companies are unlikely to appeal the case in that instance, said an attorney connected with the merger proceedings.

The reverse outcome would be a total victory for the content companies, in which case the transaction reviews would continue as they have been, with only FCC officials having access to the VPCI, said an attorney connected with the merger proceedings. Schwartzman said such a decision could possibly give opponents of the deals additional ground to appeal their approval. The third outcome, in which part or all of the protective order is remanded to the FCC, could possibly draw out the deals' review process, attorneys said -- or at least inject uncertainty about the next step.

Oral argument in the case is set for 10 minutes on each side, the shortest amount allowed, several attorneys noted. Though some attorneys with experience before the D.C. Circuit said this length is used for most cases and doesn’t signify much about its view of the matter, others said it can be seen to indicate a lack of interest in what the sides have to say. Since the three-judge panel would be expected to gather as much information as possible to lay the groundwork for overturning the FCC’s decision, the short oral argument can be seen as a sign the judges aren’t expecting to do so, Schwartzman said. “It’s a lot easier to write an opinion affirming the commission than overturning the commission.” But attorneys said the 10-minute time limit won't be strictly enforced. After oral argument, it's expected to be several weeks before a decision in the matter is released, said attorneys.