Free State Decries 'Regulation By Condition'

The Free State Foundation argues that groups trying to block
the Comcast/NBCU merger are repeating their "misguided" arguments
against the ultimately failed AOL/Time Warner merger that Free State senior
scholar Richard Epstein says were based on perceived "inexorable and
inevitable" social harms that never materialized.

Epstein and the foundation took aim at petitions to deny the
deal filed by the Consumer Federation of America, Consumers Union, Free Press
and the Media Access Project, arguing they were rooted in a "regulation by
condition" approach that was both inappropriate and unjustified.

Epstein said that the groups had failed to come up with a
public interest framework for evaluating whether any merger would pass and that
their definition of the relevant economic market fails to take into account
marketplace changes resulting from "technological innovation and consumer
demand."

He also argued that they don't take into account the ability
of marketplace competition as a governor on the combined company. "[T]hey
assume that the only strategies that matter are those adopted by Comcast and
NBCU," says Epstein. "In any complex market, however, the gains that
these two players can obtain are limited by the powerful counterstrategies that
are available to other market participants, including suppliers, customers and
competitors," he said.

Epstein argues that it would be better for the FCC to allow
the deal to go through, then monitor it for any improper conduct that would result
in actual consumer harm, adding that it is not necessary to share Comcast
and NBCU's "rhapsodic" view of the deal to approve it, only to conclude
that the case for imposing a laundry list of conditions has not been
made. 

And while Epstein said that it was "perfectly
appropriate" for the FCC to condition a merger on divestitures of certain assets
"in certain submarkets where the surviving firm might acquire undue market
power," he argued that it should not use its power to require conditions
to impose regulations that should be applied, "if at all," to a whole
industry and only after the requisite notice and comment.

The FCC closed its comment window on the deal Aug. 19, the
date of reply for comments on petitions to deny the merger. The FCC is in day
87 of its informal 180-day shot clock for vetting the deal. If the FCC met that
deadline it would mean a decision by the end of November.

John Eggerton

Contributing editor John Eggerton has been an editor and/or writer on media regulation, legislation and policy for over four decades, including covering the FCC, FTC, Congress, the major media trade associations, and the federal courts. In addition to Multichannel News and Broadcasting + Cable, his work has appeared in Radio World, TV Technology, TV Fax, This Week in Consumer Electronics, Variety and the Encyclopedia Britannica.