Following Stay Request, Content Companies Ask FCC to Review Bureau Order on OVD Contract Disclosure
Six of the largest media companies asked the FCC to review a Media Bureau order that gives Comcast access to confidential distribution agreements between content owners and online video distributors (OVDs). CBS, News Corp., Sony Pictures Entertainment, Time Warner, Viacom and Disney told the FCC that the bureau’s order suffered from procedural flaws, violated FCC precedent and federal law and was an arbitrary and capricious decision. The application for review filed Thursday (http://xrl.us/bn9eii) was preceded by a stay request last month. The order clarified the so-called “Benchmark Condition” of the FCC’s order approving Comcast’s takeover of NBCUniversal which gave OVDs the right to license Comcast-NBCU (C-NBCU) programming if they have reached a similar deal with an industry peer.
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The content companies are worried the order gives Comcast a leg up on competitors as the market for online video distribution of TV and movies continues to develop, they said in the filing. The bureau’s order clarified that Comcast’s outside attorneys and consultants could access an OVD’s distribution agreements with other media companies before beginning negotiations. Previously, such disclosures had been restricted to an arbitration process available to OVDs should standard negotiations lead to an impasse. “It is now clear the provision governing production of peer contracts in the merger decision itself is unacceptable and should be removed,” they said in a footnote to the application for review. “The Content Companies reserve their right to argue that even an arbitrator in this context would lack authority to abrogate the confidentiality provisions of private contracts,” especially third parties who aren’t participating in the arbitration, it said.
Giving Comcast-NBCU access to third-party online distribution deals would give the company an advantage both on its distribution and programming businesses, the content companies said. “Unlike its competitors, C-NBCU will have perfect information and therefore an ability to avoid accepting less than its competitors” when licensing content to OVDs, it said. As a result, content companies named as “peer” programmers in the merger order might be reluctant to license their content to smaller and upstart OVDs, they said.
Despite FCC efforts to protect confidential information through protective orders, “federal courts have emphasized that once a person sees information, there is a high risk of inadvertent use,” the content companies said. “This is just as true for C-NBCU’s outside counsel and experts -- who may act for Comcast in many different negotiating settings and who may subsequently become decision-making C-NBCU employees.”