By Shalini Ramachandran And Joe Flint
Federal Communications Commission staff recommended that the
regulatory agency designate Comcast Corp.'s proposed acquisition of
Time Warner Cable Inc. for a hearing, according to people familiar
with the matter, a significant setback for the companies' merger
plans.
The staff reached a conclusion that the best option for the FCC
is to issue a "hearing designation order." In effect, that would
put the merger in the hands of an administrative law judge, and
would be seen as a strong sign the FCC doesn't believe the deal is
in the public interest.
Comcast and Time Warner Cable may still have an opportunity to
weigh in on the matter before the proceeding moves forward, one of
the people said.
A hearing could be a drawn-out process, and some regulatory
experts describe the procedure as a deal-killer, though Comcast
would be entitled to make its case for the tie-up.
Comcast executives on Wednesday met with officials at the FCC
and the Justice Department, as those regulators' reviews of the
proposed $45.2 billion merger enters its final stages.
A Comcast spokeswoman declined to comment. In a written
statement, the company confirmed it met with FCC and Justice
Department officials but said, "we do not believe it is appropriate
to share the content of those meetings publicly."
Regulatory scrutiny of the deal has intensified in recent weeks.
The government is concerned about the influence the combined cable
behemoth would have in the broadband and pay-television markets.
The deal would create a company with control over roughly 30% of
the pay-TV market and 57% of the market for broadband Internet
service, which the FCC now defines as speeds 25 megabits per second
and higher.
The Justice Department meeting with Comcast on Wednesday was a
chance for both sides to air their views and begin discussing
whether there are any concessions the cable companies could offer
that would ease the regulators' worries.
Justice officials are said to be wary of attempting to address
the agency's concerns through "behavioral remedies," or pledges by
Comcast that it will conduct business in a certain way.
But there might not be a lot of scope for more "structural"
conditions on the deal. Comcast and Time Warner Cable already have
deals with Charter Communications Inc. to sell or spin off systems
serving 3.9 million customers if the merger goes through.
The use of hearing designation orders is rare, but the procedure
doesn't bode well for mergers. In 2011, AT&T Inc. and T-Mobile
USA dropped a planned $39 billion merger after the Justice
Department filed an antitrust lawsuit to block the deal and the FCC
issued a hearing designation order on the deal.
Brent Kendall contributed to this article.
Write to Shalini Ramachandran at shalini.ramachandran@wsj.com
and Joe Flint at joe.flint@wsj.com
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