Congress Rushes to Scrutinize AT&T/Time Warner Deal Amid Presidential Chatter

A Republican Senate aide said Subcommittee Chairman Mike Lee, R-Utah, and ranking member Amy Klobuchar, D-Minn., wanted to hold the AT&T/Time Warner hearing next month during the lame-duck session because otherwise they may have to wait three months. Senate staffers requested briefings from the companies and they're expected to be done on a bipartisan basis, the aide said. The aide told us no date is set and the company CEOs haven't been formally invited. Lee and Klobuchar have “carefully examined consolidation in these industries to ensure that existing market leaders do not block or co-opt new options for receiving video content or exercise disproportionate control over the video content market” and “will continue to carefully review and investigate any consolidation,” they said in a statement. The deal “raises significant antitrust concerns,” Klobuchar tweeted. She posted a Twitter message saying the combination of assets -- telecom service and TV and film production and programming -- could be a “bitter" pill.

“This is the biggest deal of the year, combining one of the nation’s largest telecommunications providers with a media and entertainment giant," said Senate Judiciary Committee Chairman Chuck Grassley, R-Iowa, pledging "robust" oversight to come. “This proposed massive consolidation of distribution and content raises potentially serious questions about competition, consumer choice, and privacy across the media, cable TV, wireless and broadband industries,” said ranking member Patrick Leahy, D-Vt., Monday, urging a Judiciary hearing "without delay," given potential consumer impact.

“We’ve seen a wave of consolidation across the telecommunications and media marketplace over the past several years, which is why a careful and thorough review by the antitrust authorities of the deal announced by AT&T and Time Warner is necessary,” said House Communications Subcommittee ranking member Anna Eshoo, D-Calif., in a statement Monday. “Congressional hearings are an important part of the review process because they allow for public discussion of the benefits and drawbacks of a proposed merger. As we learn more details about this transaction over the coming weeks, I look forward to working with my colleagues on the Energy and Commerce Committee to make sure consumers and competition are protected.”

In recent years the GOP-led Commerce Committees haven't held hearings on major deals in the telecom and media space, but such hearings have happened before. The House Commerce Committee held a hearing on Comcast’s successful purchase of NBCUniversal in 2010, when Democrats still held chamber control. Senate and House Judiciary Committee lawmakers held hearings on Comcast’s unsuccessful buy of TWC and AT&T’s successful purchase of DirecTV. No hearing was held on Charter Communications’ successful acquisition of TWC and Bright House Networks. Congress lacks any power over the deals’ approval but lawmakers are seen as highly influential and subject to lobbying from the companies, often sending letters to federal regulators.

Leadership of the House Judiciary Antitrust Subcommittee didn’t comment Monday about timelines for a possible House hearing on the deal, nor did spokespeople for House Judiciary Committee Chairman Bob Goodlatte, R-Va. The House Judiciary Committee is reviewing the deal, which may include a hearing, an aide said. Senate and House Commerce committee leadership didn’t comment on next steps for scrutiny. “We will pay close attention as the relative agencies do their appropriate reviews as required by law," House Communications Subcommittee Chairman Greg Walden, R-Ore., told us in a statement.

'Strong Headwinds'

“The swift reaction over the weekend indicates that Congress' role will be significant,” predicted New America Open Technology Institute policy counsel Josh Stager. “A Senate hearing was announced within hours of the merger's announcement. To move that quickly, especially on a weekend when Congress is out, is rare. We’re seeing so much skepticism from the [presidential] campaigns and from the Hill because this deal raises so many red flags. But it's also a reflection of the growing concern about monopoly power throughout the economy, and a renewed interest in antitrust enforcement from both parties. A deal this large, and at this political moment, will face strong headwinds regardless of who controls Congress next year.”

“Big media mergers obviously get a lot of scrutiny on the Hill, as well they should,” said antitrust lawyer Allen Grunes of the Konkurrenz Group, who fought against Comcast/TWC. “Media has a pervasive impact on U.S. opinion formation. That impacts everything from voter turnout to voter impressions of a candidate, not to mention the amount of money candidates have to spend on advertising and how that money is spent. So it is totally appropriate for elected officials to care a lot, regardless of party. Big media mergers can also get some extra scrutiny at the antitrust agencies because they may implicate the ‘marketplace of ideas.’ But that extra scrutiny tends to be on top of, not in lieu of, the normal antitrust analysis.”

AT&T is seen as a lobbying heavyweight, doling out significant money on Washington priorities. Its Q3 spending was $4.11 million, up from $2.9 million a year ago (see 1610210052). Time Warner also is seen to carry weight in Washington, spending $719,000 on lobbying in Q3. AT&T broke the $4-million spending mark in all three quarters of 2016. Its 2015 spending for four quarters was $14.86 million, and 2016 spending is already up to $12.66 million, before Q4. AT&T's lobbying spending was $14.02 million in 2014. On top of AT&T’s own lobbying, which involves 17 registered in-house lobbyists, 25 lobbying firms filed disclosure forms on behalf of AT&T for the Q3 deadline last week.

Presidential Politics

Trump slammed the deal Saturday, and a senior Trump economic aide doubled down Sunday: “AT&T, the original and abusive ‘Ma Bell’ telephone monopoly, is now trying to buy Time Warner and thus the wildly anti-Trump CNN. Donald Trump would never approve such a deal because it concentrates too much power in the hands of the too and powerful few.”

Democratic vice presidential nominee Tim Kaine, a senator representing Virginia, said Sunday on NBC’s Meet the Press that he shares the “concerns and questions” of Sen. Al Franken, D-Minn., a high-profile consolidation critic. “Generally pro-competition and less concentration, I think, is generally helpful, especially in the media,” Kaine said. Democratic presidential nominee Hillary Clinton hasn't formally weighed in, but a Clinton spokeswoman confirmed to us Monday the campaign position that “a lot of information” needs to come out “before any conclusion should be reached” on the deal's merits, urging close scrutiny by regulators. Clinton’s antitrust stance is seen as atypically strong in a way that creates expectations for her administration, in part influenced by the progressive wing of the Democratic party encompassing Sanders and Sen. Elizabeth Warren, D-Mass. (see 1607290051). “The administration should kill the Time Warner/AT&T merger,” Sanders tweeted Sunday. “This deal would mean higher prices and fewer choices for the American people.” If Sanders and Trump “agree on anything, then clearly this merger is a bad idea,” tweeted former Commissioner Michael Copps, now with Common Cause. He hopes Clinton “will oppose ridiculous AT&T/Time Warner consolidation, putting both major candidates on record against it,” he said.

Franken fired off letters to Attorney General Loretta Lynch and FCC Chairman Tom Wheeler, though the FCC's role isn't yet clear. “I have serious reservations about the $85.4 billion deal, which would give one of the nation’s largest telecommunications providers control over a wide array of content,” Franken wrote Monday. “A deal of this magnitude could have a lasting effect on the quality and affordability of programming available to consumers across America. And I’m skeptical of any further consolidation in the media and telecommunications industries that could lead to higher prices, fewer choices, and even worse service for Americans.” The combined company would contain HBO, CNN and Warner Bros. and have “both the incentive and ability to use its platform to harm consumers and competitors alike.” He acknowledged behavioral conditions that AT&T CEO Randall Stephenson says could address concerns, but Franken has “serious doubts about the enforceability and reliability of such conditions as a remedy for anticompetitive behavior,” he told the regulators. AT&T “quickly hiked prices after acquiring DIRECTV last year,” Franken said. “There have also been accusations that AT&T has failed to meet commitments it made to meet broadband deployment goals when it combined BellSouth, Cingular Wireless, and the legacy AT&T long distance company to form the current company over a decade ago.”

Sen. Richard Blumenthal, D-Conn., called the deal “one of the largest” in recent years: “Such a massive consolidation in this industry requires rigorous evaluation and serious scrutiny.” Sen. Ed Markey, D-Mass., released a statement Saturday urging scrutiny and saying the deal “underscores the urgency of the FCC approving its broadband privacy rules this Thursday at its Open Meeting.”

“We look forward to discussing the many benefits of this transaction with our regulators," said AT&T General Counsel David McAtee. "In the modern history of the media and the Internet, the U.S. government has always approved vertical mergers like ours, because they benefit consumers, strengthen competition, and, in our case, encourage innovation and investment.”