Comcast Merger Chances Stall As Regulators Realize Comcast Meddled In Hulu Management, Ignored NBC Deal Conditions

Legal Issues

from the you-made-your-bed dept

Wed, Apr 22nd 2015 9:24am — Karl Bode

Reports have started to emerge that regulators at the Justice Department may block Comcast's proposed $45 billion acquisition of Time Warner Cable, with DOJ attorneys crossing the t's and dotting the i's before recommending a deal rejection. Comcast is apparently meeting with the DOJ this week as part of a last-ditch effort to save the deal, though leaks have suggested Comcast may walk away from the deal entirely if the merger conditions are too steep (read: actually have them do much of anything for the public interest), including requiring that Comcast sign off on Title II reclassification and the FCC's new net neutrality rules.

Apparently one of the sticking points for regulators during the review was their realization that Comcast failed to adhere to most of the conditions attached to its 2011 acquisition of NBC Universal. It's worth noting that Comcast volunteered most of the conditions attached to that deal. Even then the cable giant failed to adhere to many of them; such as the requirement that they offer and clearly advertise a 6 Mbps, $50 broadband tier for at least three years. An FCC investigation found that the company made the tier difficult to find and sign up for, so Comcast was fined the inconsequential sum of $800,000 for its behavior.

New leaked reports suggest that the DOJ was particularly ruffled by the fact that Comcast ignored NBC deal conditions related to Hulu, which Comcast acquired as part of the deal. Co-owned with Disney and 21st Century Fox, Comcast was restricted from playing a managerial role in the company for fear it would hinder the service's chances at being a truly disruptive Internet video competitor. But DOJ lawyers apparently found that Comcast largely ignored those restrictions, playing a starring role in scuttling the sale of Hulu, out of fear that it would become a more viable competitor to Comcast's services:

"Yet Comcast’s assurances at the Sun Valley meeting played a significant role in how its co-owners evaluated the sale process, people familiar with the other owners’ thinking said. Comcast told its partners it would help make Hulu the nationwide streaming video platform for the cable TV industry, which would boost the site’s growth and make it a stronger rival to Netflix. That influenced Disney and Fox’s decision to call off the sale when the conference was ending, people familiar with those companies’ thinking said. Among the top bidders for Hulu were Comcast rivals DirecTV and AT&T Inc."

We've long noted how Hulu's owners were so afraid of Hulu being truly disruptive, they've hamstrung the service at every opportunity. As such, it's long been little more than a glorified ad for traditional television, with incomplete catalogs and a preponderance of "clips" presented in such a way as to intentionally drive users back to legacy cable. Comcast's involvement post NBC deal certainly helps explain how, despite some executive decisions, the service remains in that role to this day.

It's notably amusing that Disney and Fox actually believed Comcast when it claimed it actually wanted to build Hulu into a Netflix competitor -- by shackling it to the walled-garden mindset of the cable industry. Just as amusing is that Comcast has tried to claim that Hulu is part of a "fierce competitive landscape" that will keep the company in check should regulators approve its acquisition of Time Warner Cable. In other words, Comcast is arguing that a company it intentionally sabotaged to keep from being competitive is a perfect example of the kind of competition that can keep Comcast honest moving forward.

It's possible regulators may still approve the deal, but it seems increasingly likely that if Comcast wants the deal to go through, they may have to sign off on some conditions that are more than just paper mache simulacrum.

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Filed Under: doj, merger
Companies: comcast, hulu, time warner cable

20 Comments

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Reader Comments

The First Word

“

Just turn the spotlight

If/when the Comcast-Time Warner merger goes through evidence like this will provide the justification to assume their success was due to government corruption.

At that point it might be useful to turn the spotlight from Comcast and onto those government officials who approved the merger.

So go ahead DoJ, FTC and all you other alphabet agency leaders, give Comcast the green light and make yourselves the new target of legal scrutiny.

—Anonymous Coward

”

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Anonymous Coward, 22 Apr 2015 @ 9:28am

"Reports have started to emerge that regulators at the Justice Department may block Comcast's proposed $45 billion acquisition of Time Warner Cable,"

Looks as though Comcast will have to dig deep into their pockets to throw a few lavish parties and shower gifts to the DOJ to get them to rule in their favour!
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Anonymous Coward, 22 Apr 2015 @ 9:41am

Re:
I believe you mean, search the couch cushions for spare change.
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Anonymous Coward, 22 Apr 2015 @ 9:45am

So Comcast will walk away from the deal If the merger conditions are too steep?
Meaning to get the merger they'll have to tell more lies and make more promises that they won't keep?

OMG the merger is a lock
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John Fenderson (profile), 22 Apr 2015 @ 9:51am

Foolish
if Comcast wants the deal to go through, they may have to sign off on some conditions that are more than just paper mache simulacrum.

There's a word for someone who will enter into an agreement with someone who has a history of not adhering to agreements: "mark".
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Anonymous Coward, 22 Apr 2015 @ 9:52am

"We own Hulu"
My fantasy is to sit down every one of those regulators and make them watch the Comcast "We don't give a F***" video at FunnyOrDie. Three times in a row.

It perfectly illustrates why Comcast should not be able to buy TW and why they shouldn't have been able to buy NBC.
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Anonymous Coward, 22 Apr 2015 @ 9:55am

Just turn the spotlight
If/when the Comcast-Time Warner merger goes through evidence like this will provide the justification to assume their success was due to government corruption.

At that point it might be useful to turn the spotlight from Comcast and onto those government officials who approved the merger.

So go ahead DoJ, FTC and all you other alphabet agency leaders, give Comcast the green light and make yourselves the new target of legal scrutiny.
[ link to this | view in thread ]
Anonymous Coward, 22 Apr 2015 @ 10:28am

Re: Just turn the spotlight
I doubt it will happen.
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Anonymous Coward, 22 Apr 2015 @ 10:58am

chicanery and subterfuge
that is all
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Rekrul, 22 Apr 2015 @ 11:02am

Remind me, in the last decade, how many mergers between multi-billion dollar corporations have been blocked? I don't mean mergers that failed to come to fruition, I mean mergers that were outright blocked by a US government agency.
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Anonymous Coward, 22 Apr 2015 @ 11:48am

it will depend more than anything on how much money Comcast throws in the directions necessary. not enough and down it goes. unfortunately the ones that matter most, the customers, will be the last ones thought of as Comcast is interested solely in making sure it gets unprecedented income from the areas it wants, not from what gives greatest customer satisfaction. this deal would be disastrous for everyone except Comcast! they have already done an excellent job of showing how they cannot be trusted in any way, shape or form. getting the go ahead with this will give them the leave to screw up services even more!
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Anonymous Coward, 22 Apr 2015 @ 12:01pm

Another investigation
I'd like to see the DOJ investigate Comcast's Hulu influence in light of all the Netflix peering shennanigans. Hulu and Netflix being direct competitors and all...
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Zonker, 22 Apr 2015 @ 1:41pm

If contract law were to be enforced on Comcast like it is on us mere mortals then their failure to meet their contractual obligations would have nullified their purchase of NBC and barred them from entering into any further acquisitions like Time Warner at all. I'm all for applying the laws on contractual agreements the rest of us have to follow on corporations, because if you are to be considered a "person" under the law you must also be subject to personal liability not exempt from it.

Nullify the sale of NBC to Comcast. No refund. No further acquisitions until and unless they clean up their act.

Oh, but that wouldn't be profitable for politicians that support them in exchange for contributions, guaranteed C-level executive appointments after retirement (getting paid a 7-8 figure salary to play golf with your political friends and make deals for favors all day is such a blast), or if you're cheap then straight up cash and hookers.
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MMICKK, 22 Apr 2015 @ 2:36pm

Re: "We own Hulu"
I agree but would take it further.. They should be either in the content business or the pipeline that delivers to the populace. But not both. If this had never been allowed we wouldn't be seeing these conflict of interest issues. I know, I'm an old geezer living in the past.
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tqk (profile), 22 Apr 2015 @ 4:27pm

Re:
Looks as though Comcast will have to dig deep into their pockets to throw a few lavish parties and shower gifts to the DOJ to get them to rule in their favour!

More like they didn't "dig deep into their pockets to throw a few lavish parties and shower gifts to the DOJ", so now they lose.

Yeah, I'm cynical. Sue me.
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tqk (profile), 22 Apr 2015 @ 4:42pm

Re:
Oh, but that wouldn't be profitable for politicians that support them in exchange for contributions, guaranteed C-level executive appointments after retirement ...

Have you noticed, politicos don't offer performance guarantees? Chris Dodd lambasted them for this a couple of years ago. The money continues to flow, so I guess they've decided to throw him a bone to keep it coming.

Poor Chris Dodd. I mean, he has no control over congresscritters. Why's this his fault? Boo hoo, weep, weep, weep.
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Spaceman Spiff (profile), 22 Apr 2015 @ 9:19pm

What?
What? Comcast going back on its word? Lying to get its way? Why, that could never happen, could it? :rolleyes:
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Jeremy Lyman (profile), 23 Apr 2015 @ 9:26am

COME ON
Comcast was fined the inconsequential sum of $800,000 for its behavior.
This ain't rocket science, brain surgery or Hollywood accounting. You need to fine them more than they make with an infraction. I'd pay an $800 fine on stealing $1000 all day every day.
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tqk (profile), 23 Apr 2015 @ 9:46am

Re: COME ON
Yeah, and I wish some kind soul would step up and hand me the "inconsequential sum of $800,000."

"A million here, a million there; pretty soon you're talking about real money." Jeebus.
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John Fenderson (profile), 23 Apr 2015 @ 10:42am

Re: Re: COME ON
In all fairness, how much money is worth is heavily dependent on how much you have. If all you have is $100, then $10 is a lot of money. If you have $1 billion, then $10 is essentially nothing.
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Jeremy Lyman (profile), 23 Apr 2015 @ 10:54am

Yes, the scales are way off for personal vs corporate fines. That's why we're billing mothers $150,000 for sharing an mp3.

Let's get some perspective. Comcast made $6,816,000,000 in 2013; an $800,000 fine is 0.01174% which would translate to $6.09 if you were an American raking in the median $51,915 in 2013. Or you were a poor millionaire at the bottom of the 99% percentile it'd be $61.53 of your annual $525,000. I've had Comcast Bills that are lower...(ba dum tss) And that was just their revenue, we're off by a factor of ten from gross income apples to apples.

Or how about this specific infraction, not 'advertising' reasonable internet-only packages. Every time I looked it was around $20 more for Internet without TV; and I actually looked. It obviously didn't effect all their customers, but again the scale is tremendous. Lets call the overcharge $10 (half my observed $20) a month for three years. If 2,200 customers were over charged $360, this fine actually dinged Comcast $8,000. What are the odds more than .01% of Comcast's 22,000,000 subscribers wanted to buy Naked Internet? You bet you ass Comcast's accountants know, but we never will because they just tossed the watchdogs a nickle to stop looking.
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