Tuesday, June 24, 2014

Ranking Member Conyers Statement at Hearing on the Proposed Merger of AT&T and DIRECTV

(WASHINGTON) – This morning, the U.S. House Judiciary Subcommittee on Regulatory Reform, Commercial and Antitrust Law held a hearing on, “The Proposed Merger of AT&T and DIRECTV.” During his opening remarks, Judiciary Committee Ranking Member John Conyers, Jr. (D-Mich.) delivered the following statement:

U.S Representative
John Conyers, Jr.
“Today, we consider the proposed merger of AT&T, the Nation’s second-largest seller of high-speed Internet and wireless telephone services, with DirecTV, the Nation’s second-largest paid television provider. While neither we nor the competition enforcement agencies should pre-judge this deal, there are several concerns that I want the witnesses to address today.

“To begin with, this transaction raises the concern that there may be too much and too rapid consolidation in the telecommunications industry, especially when viewed in the light of other recently announced or rumored deals. I fear that the trend toward greater consolidation in this industry may ultimately benefit large corporations and their shareholders at the expense of consumers. While I fully appreciate that the goal of antitrust law is to protect competition and not competitors per se, this ongoing wave of consolidation will, without question, result in fewer firms and may harm consumers by limiting choices and raising prices. After all, it is the very threat of losing business in the face of high prices or low quality products and services that drives competitive business practices. The preeminent purpose of antitrust law is to protect consumers by ensuring that no one firm achieves market power such that it no longer risks losing business because it can force consumers to pay higher prices or accept lower quality goods and services in the absence of a competitive marketplace. I hope that the Justice Department and the Federal Communications Commission will carefully consider the overall impact of industry consolidation as they review the merits of this particular transaction.

“One rationale in favor of the merger - that it would create a stronger competitor to large cable companies - may, in fact, spur further consolidation in the telecommunications industry. I do not doubt that the merged AT&T-DirecTV entity could be large enough to effectively compete against large cable companies, but what is to stop competitors from using the same argument to justify further consolidation? After all, cable companies could point to the merged AT&T-DirecTV to justify further consolidation among themselves, which, in turn, could justify further consolidation by competitors to cable companies. As a result, we could have a ‘race to the bottom’ whereby large companies seek more and more mergers and acquisitions in response to mergers and acquisitions by other companies, ultimately leaving fewer choices for all consumers.

“Turning to the specifics of the proposed transaction, I am concerned about the loss of a competitor for paid television services in many of the largest markets. As a national satellite-television provider, DirecTV is a competitor to AT&T’s U-Verse video service in the 22 states where U-Verse is offered. And, U-Verse currently competes with DirecTV in 10 of the 20 largest metropolitan markets for paid television. The loss of a paid television competitor in those markets where AT&T and DirecTV directly compete with each other would reduce consumer choice and could have the potential to raise prices. Although AT&T has committed to continuing to offer DirecTV as a standalone option for three years after the acquisition, there are no guarantees that consumers will continue to have a such an option after that time. The burden remains on AT&T to show that this merger will not harm consumers.

“We should also consider whether smaller video providers, in the aftermath of the sheer size of a combined AT&T-DirecTV, could face increased content prices, potentially driving some of them out of business. In addition to being a video distributor, DirecTV is a video programmer that owns three regional sports networks and has interests in some national networks. Small competing video distributors fear that the size of a combined AT&T-DirecTV – as both a seller and a buyer of programming – could harm smaller competitors in two ways. First, a vertically integrated AT&T-DirecTV could discriminate against rival distributors by withholding or charging higher prices for its own programming. Second, such a combined entity would be a large enough distributor to command discounts from other programmers, potentially forcing smaller distributors to pay higher prices for content to make up the difference.

“Finally, we must consider whether imposing behavioral remedies would, in practice,  be effective. As a condition for approval of the Comcast-NBC Universal transaction, the FCC and the Justice Department required Comcast-NBCU to take affirmative steps to foster competition – including voluntary compliance with net neutrality protections –  as well as steps to benefit the public interest. AT&T has indicated that it will voluntarily commit to similar types of commitments to its proposed acquisition of DirecTV. Some observers, however, are concerned that the behavioral remedies imposed in the Comcast-NBC transaction were ineffective and difficult to enforce. Accordingly, we should consider whether such commitments should be strengthened and made more enforceable to better protect the public interest in this case.

“I look forward to having a fruitful discussion of these issues so that all stakeholders, particularly consumers and the enforcement agencies, are better informed about this significant transaction.”

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