Mergers And Anti-Trust Essay, Research Paper
The Federal Commerce Commission conditionally approved AT&T’s acquisition of cable company MediaOne. The Department of Justice’s Anti-trust division conducted it’s own separate anti-trust merger review and proposed a consent decree with AT&T which requires the merged firm to divest it’s interest in the cable broadband ISP Road Runner and to obtain Department of Justice approval before entering certain types of broadband arrangements with Time Warner and America Online. This merger is in compliance with the Federal Commerce Commission 30% horizontal ownership rule. This rule prohibits a single cable company from serving more than thirty percent of the nations multi-channel video programming distribution. Subscribers who are served by primarily cable television and direct TV. Without this rule the merger would have served 41.8% of the nations subscribers.
A separate statement was issued by the Federal Commerce Commission’s Chairman William Kennard. He stated, “ Within six months after closing its merger with MediaOne, AT&T must take an irrevocable election among three divestiture options in order to reduce their horizontal subscribers to 30%.” These are the three choices: 1. Divest their interest in Time Warner Entertainment. 2. Insulate their ownership interests in Time Warner Entertainment by ending involvement in Time Warner Entertainment video programming activities, which entails selling AT&T ‘s programming interests. 3. Divest their interests in other cable systems serving approximately 11.8% of cable and satellite subscribers nationwide, 9.7 million subscribers which is more than half of AT&T’s current subscribers.
For the consumer the merger will mean a real choice and lower price in local phone service, faster Internet access and better cable TV. In contrast several consumer groups have opposed the merger as structured arguing that it will result in too much concentration on broadband Internet services. Some feel that the Federal Commerce Commission has disregarded critical facts, its own rules and legal standards to help one giant cable monopoly expand over the cable television and broadband Internet markets. Others state that instead of using it’s merger authority to protect the public against an expanding monopoly the commission has allowed AT&T to extend the reach of it’s cable and broadband internet service monopolies and extend the time in which it can abuse consumers and harm potential competitors. The Federal Commerce Commission emphasized that it will scrutinize broadband developments closely and will review it’s policies if competition fails to grow as expected, especially if the merged firm fails o fulfill it’s commitment to open it’s cable systems or otherwise threatens the openness of diversity of the internet.
United States law looks to possible anti-trust effects as a result of mergers. First, a merger may diminish competition by reducing the number of firms selling in the relevant market so that they can more successfully engage in coordinated interaction that injures consumers. Second, a merger may create a firm with sufficient market share that it can
Unilaterally lessen completion by raising price or curtailing output without fear that other firms can defeat its market maneuvers.
Article 85 and 86 of the Treaty of Rome form the basis of EU competition policy. Article 85 Addresses horizontal arrangements while Article 86 regulates the abuse of power in vertical relationships. The primary goal of completion policy in the EU is not to protect competition as in the U.S. The primary goal policy is reflected in the purpose of the Treaty of Rome to integrate the European Community. It is hoped that the competition policy and the integrations of the European Community will benefit the consumer by making products available at the lowest possible costs and manufactures by giving them access to a much larger market.
The European Commission examines cases from three sources: notification of an agreement from interested parties, complaints from third parties, and by it’s own investigation and initiative. In 1998, 404 cases came before the EC; 65% of the cases were notifications, 26% came from complaints, and the remaining 9% were brought under the Commission’s own initiative. As in U.S. anti-trust law, complaints brought by third parties ranged from instances of small companies seeking protection to large companies seeking to bog down competitors in the unproductive labor of dealing with bureaucratic investigations. IF the EU after investigation decides to take action, it can either (1) issue a recommendation to an infringing company, or (2) initiate formal proceedings.