What song does an 800-pound canary sing? Anything it wants to. That appeared to be the concern of some senators who doubt that EchoStar Communications Corp.'s proposed $26 billion merger with Hughes Electronics, parent company of DirecTV, can pass antitrust muster.
"It doesn't take a rocket scientist to be highly skeptical of a merger that reduces competition in an industry and creates a monopoly in rural America," Sen. Herb Kohl (D-Wis.), chairman of the Senate Antitrust Subcommittee, told EchoStar CEO Charlie Ergen and DirecTV Chairman Eddy Hartenstein at a hearing on Wednesday.
Several senators pointed out that many rural areas are not passed by cable and not reached by broadcast signals, making satellite TV rural consumers' only choice. EchoStar's proposed merger with DirecTV would eliminate competition in some rural markets between two multichannel providers: DirecTV and EchoStar. That fact alone violates the Clayton Act, antitrust law's guiding principle, and will make it hard for the Department of Justice to approve the merger, said Sen. Mike DeWine (R-Ohio), the subcommittee's ranking member. The Clayton Act proscribes agreements between businesses to control the supply of a product or service.
Nonetheless, Kohl asked Ergen and Hartenstein if they would be willing to accept a six-point checklist that was "legally binding," likely in the form of a consent decree. Both said yes.
Kohl wants the new company to agree to deliver local programming into all 210 TV markets within a specified time frame; comply with full local TV-carriage requirements; agree to a national pricing scheme for all consumers; unroll a competitive broadband service; offer high-definition and interactive TV; and provide customers, for free, any new equipment the merger may require them to have.
Kohl also suggested that these requirements be "overseen and enforced by a Special Master," much like the deal that was agreed to by AOL and Time Warner when they merged.
"It doesn't get any better than to condition the merger on something you already do and you already are willing to continue to do because it makes good business sense for you," Ergen told reporters after the hearing.
"That's why we're so willing to agree to be bound by consent decree or by whatever other mechanisms the FCC or the Department of Justice would assign," Hartenstein said.
Even though a merged EchoStar/DirecTV plans to offer local TV signals in all 210 markets, EchoStar plans to ask the U.S. Supreme Court this week to take up its challenge of a law requiring satellite-TV companies to carry every local TV station in every market they serve. Ergen said, "We didn't abandon our principles for the merger."
For its part, DirecTV has not yet decided whether it will join EchoStar's appeal of last December's Fourth Circuit Court of Appeals decision, which went against the satellite-TV provider.