Hearing Designation Order Would Kill Comcast/TWC, Attorneys Say

FCC eighth-floor staffers were briefed Wednesday on Comcast's planned buy of Time Warner Cable by the agency’s transaction review team, agency officials said. The briefing took place on the same day as a Comcast meeting with the Department of Justice, and several industry officials have said the transaction review is seen as winding down (see 1504200049).

Though the purpose of the meeting isn’t known, one former FCC official knowledgeable about the proceedings told us it was likely an early briefing on the possible options available to the commission, rather than a presentation of a specific recommendation from the transaction review team. If the review team and Chairman Tom Wheeler have decided to block the deal, they will do so by drafting an order designating the transaction for a hearing before an administrative law judge, said industry officials who have been involved in mergers before the FCC. The hearing designation order (HDO) would declare that the record doesn’t support a finding that the deal is in the public interest, and lay out concerns about the combination, the industry officials said. An HDO effectively blocked the AT&T/T-Mobile merger attempt in 2011, and the companies gave up on that deal. Comcast and FCC spokeswomen declined to comment.

An HDO almost certainly would mean the end of Comcast/TWC, said Fletcher Heald transaction attorney Thomas Dougherty and Georgetown Law Institute for Public Representation Senior Counselor Andrew Schwartzman. Dougherty said such a designation would likely end the transaction because the hearing process would likely take at least another year. By then, the economic factors that drove the deal would no longer be the same, he told us. It took only days for AT&T and T-Mobile to abandon their transaction after it was designated for hearing, Schwartzman said.

One reason the commission is perceived as leaning toward blocking the transaction is the relative lack of discussion about placing conditions on the acquisition throughout the process, opponents have said. An ex-FCC official with knowledge of the proceeding said Wednesday that companies with a stake in the combination were at the commission to discuss possible conditions that would make Comcast/TWC palatable.

It’s unlikely that the FCC would act before DOJ, said former DOJ antitrust official and University of Colorado Law School Dean Philip Weiser. There’s “a healthy measure” of cooperation between the agencies on the deal review, said a former FCC official with knowledge of the proceeding. Since DOJ hasn’t announced its plans on the deal, it's unlikely the FCC will do so, industry officials said.

Though the FCC could wait for DOJ, it might not need to wait for a decision from the U.S. Court of Appeals for the D.C. Circuit, communications industry attorneys following the transaction said. The Comcast/TWC review shot clock is stopped at Day 165 pending a decision in CBS et al v. FCC, which concerns contract data related to the deal. If the FCC wins that case and seeks to approve the deal, it would likely have to delay a decision to allow third parties access to the video programming confidential information (VPCI) at the heart of the case. Approving the takeover without sharing that data would leave the commission open to a court challenge, Schwartzman said. If the commission chooses to block the deal by designating it for a hearing, the groups that had sought access to the VPCI -- most of which oppose Comcast/TWC -- would be unlikely to complain about not being able to access the information, Schwartzman said.