David Evans, Nov 11, 2015
Earlier this year, Comcast abandoned its proposed merger with Time Warner Cable in the face of opposition by the U.S. Department of Justice and the Federal Communications Commission. This article briefly discusses the economic analysis presented and points the reader to interesting material in the filings that may have relevance to other mergers and antitrust cases.
During the roughly fourteen months, between the announcement of the merger on February 13, 2014 and its collapse on April 24, 2015, economists working for Comcast, and economists working for several companies that opposed the merger, presented significant theoretical and empirical evidence to the agencies. They debated whether the merger would substantially lessen competition or tend to create a monopoly (the standard for the Justice Department) or cause public harm (the standard for the FCC).
Until the end, the media accounts of the merger focused on Comcast’s claim that the merger was innocuous because Comcast and Time Warner claimed they didnot operate in the same local markets and therefore didnot compete. If that were the economic crux of the matter the merger review process would not have taken so long. They really don’t compete for cable households. Like other American cable companies providing services for households they seldom operate in the same market as another cable company. In fact, most American households face a choice between one cable company and one telecom company.
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