Ftc Clears Time Warner Deal Regulators Permit Merger With Turner, But Impose Conditions To Preserve Competition

A $7.5 billion deal combining Time Warner and Turner Broadcasting into the world’s largest media firm can proceed - with strings attached - under an agreement Wednesday between the government and the companies.

Federal regulators had closely scrutinized Time Warner’s proposal to buy Turner Broadcasting, worried it could deprive Americans of variety in the cable TV shows they watch or cause cable prices to rise.

The Federal Trade Commission’s five commissioners will consider the tentative agreement Friday, said spokeswoman Victoria Streitfeld. Approval is expected, clearing the biggest regulatory hurdle to a deal announced last September. But it’s unclear when the final vote will occur, Streitfeld said.

Under the agreement, “the deal can go through and the public interest will be protected,” said William Baer, director of the FTC’s Bureau of Competition.

The deal as originally structured had “serious potential to raise prices to consumers, and to limit their choices by giving Time Warner control over 40 percent of all programming,” Baer said.

Regulators were particularly concerned about the role of Tele-Communications Inc., the nation’s largest cable company, which now owns 21 percent of Turner but planned to reduce its stake to roughly 9 percent of the merged company.

That’s because Time Warner and TCI cable systems together serve 46 percent of the nation’s 62 million cable TV customers. As cable system owners, they decide what networks to carry and, therefore, what’s available for customers to watch.

Regulators worried that Time Warner and TCI could use that power to keep competing cable channels off their systems and to protect their own programming, which includes HBO and CNN.

And, regulators worried the merged Time Warner-Turner would use its clout to stifle the development of new cable channels.

To remedy such concerns, the agreement would:

Limit the financial interest TCI can take in Time Warner. If held by TCI, its non-voting stake would be capped at 9.2 percent. If TCI forms a separate company to hold the stock, the non-voting stake can rise to 14.9 percent.

Limit TCI to five-year contracts to carry Turner and Time Warner programming at favorable rates, rather than the unprecedented 20-year contracts in the original deal.

Give Time Warner up to five years to carry a competing all-news channel to CNN on its cable systems. That could include news channels by Fox or the new Microsoft-NBC venture, MSNBC.

Forbid Time Warner from discriminating against competitors, including by charging competing cable distributors higher prices for programming.

Prohibit the merged company from bundling the most popular Time Warner and Turner programs - like HBO with CNN or TBS into a package to be sold to cable systems.