April 5, 2018
U.S. District Court Judge Richard Leon April 4 questioned witnesses for the government in the AT&T/Time Warner antitrust trial probing questions about negotiations involving programing distribution.
At the center of the government’s regulatory concern is the contention that a combined AT&T/Time Warner, whose assets include DirecTV, AT&T U-verse, Turner (TNT, CNN, TBS), HBO, Warner Bros., could unfairly leverage content access to pay-TV distributors in favor of its own distribution channels.
With Tom Montemagno, EVP, programing acquisition at Charter Communications, on the stand for the government, Leon asked details about Turner’s revised arbitration rules to pay-TV operators – updated after the DOJ filed the lawsuit – guaranteeing against blackouts and content disruption to consumers in the event of an impasse in license negotiations.
Specifically, Turner’s so-called “blind” arbitration rules enable each side to make an offer with the arbitrator deciding which offer to accept. Distributors such as Charter have expressed concern that a combined AT&T/Time Warner would have an unfair advantage in arbitration since it is party to fiscal information on both sides of the issue.
Under questioning by Leon, Montemagno agreed that a more transparent “mutually beneficial, mutually fair” process would be better for all parties involved.
The matter is significant, reports CNN, as it is reminiscent to 2011 when Leon presided over the antitrust settlement agreement between the DOJ and Comcast, which was acquiring NBC Universal.
In that case, which Leon ruled in favor of Comcast, the judge ordered the cable giant and government to collect data on arbitration cases involving digital distribution services such as Netflix, Hulu and Amazon Prime Video.
“Since neither the court nor the parties has a crystal ball to forecast how this final judgment [Comcast/NBC Universal] … will actually function, I believe that certain additional steps are necessary,” Leon wrote in a memo accompanying his order, according to CNN.
Leon’s skepticism about the arbitration process suggests the judge could either allow the AT&T/Time Warner acquisition to close without conditions, or rule against it unless additional guidelines are put in place. There is no jury in this case.