FREE ESSAY ON MERGERS AND ANTI-TRUST

MERGERS AND ANTI-TRUST

MERGERS
The Federal Commerce Commission conditionally approved AT&T's acquisition of cable
company MediaOne. The Department of Justice's Anti-trust division conducted it's own
separate anti-trust merger review and proposed a consent decree with AT&T which requires
the merged firm to divest it's interest in the cable broadband ISP Road Runner and to
obtain Department of Justice approval before entering certain types of broadband
arrangements with Time Warner and America Online. This merger is in compliance with the
Federal Commerce Commission 30% horizontal ownership rule. This rule prohibits a single
cable company from serving more than thirty percent of the nations multi-channel video
programming distribution. Subscribers who are served by primarily cable television and
direct TV. Without this rule the merger would have served 41.8% of the nations
subscribers.
A separate statement was issued by the Federal Commerce Commission's Chairman William
Kennard. He stated, " Within six months after closing its merger with MediaOne, AT&T must
take an irrevocable election among three divestiture options in order to reduce their
horizontal subscribers to 30%." These are the three choices: 1. Divest their interest in
Time Warner Entertainment. 2. Insulate their ownership interests in Time Warner
Entertainment by ending involvement in Time Warner Entertainment video programming
activities, which entails selling AT&T 's programming interests. 3. Divest their
interests in other cable systems serving approximately 11.8% of cable and satellite
subscribers nationwide, 9.7 million subscribers which is more than half of AT&T's current
subscribers. 
For the consumer the merger will mean a real choice and lower price in local phone
service, faster Internet access and better cable TV. In contrast several consumer groups
have opposed the merger as structured arguing that it will result in too much
concentration on broadband Internet services. Some feel that the Federal Commerce
Commission has disregarded critical facts, its own rules and legal standards to help one
giant cable monopoly expand over the cable television and broadband Internet markets.
Others state that instead of using it's merger authority to protect the public against an
expanding monopoly the commission has allowed AT&T to extend the reach of it's cable and
broadband internet service monopolies and extend the time in which it can abuse consumers
and harm potential competitors. The Federal Commerce Commission emphasized that it will
scrutinize broadband developments closely and will review it's policies if competition
fails to grow as expected, especially if the merged firm fails o fulfill it's commitment
to open it's cable systems or otherwise threatens the openness of diversity of the
internet. 
United States law looks to possible anti-trust effects as a result of mergers. First, a
merger may diminish competition by reducing the number of firms selling in the relevant
market so that they can more successfully engage in coordinated interaction that injures
consumers. Second, a merger may create a firm with sufficient market share that it can 
Unilaterally lessen completion by raising price or curtailing output without fear that
other firms can defeat its market maneuvers. 
Article 85 and 86 of the Treaty of Rome form the basis of EU competition policy. Article
85 Addresses horizontal arrangements while Article 86 regulates the abuse of power in
vertical relationships. The primary goal of completion policy in the EU is not to protect
competition as in the U.S. The primary goal policy is reflected in the purpose of the
Treaty of Rome to integrate the European Community. It is hoped that the competition
policy and the integrations of the European Community will benefit the consumer by making
products available at the lowest possible costs and manufactures by giving them access to
a much larger market. 
The European Commission examines cases from three sources: notification of an agreement
from interested parties, complaints from third parties, and by it's own investigation and
initiative. In 1998, 404 cases came before the EC; 65% of the cases were notifications,
26% came from complaints, and the remaining 9% were brought under the Commission's own
initiative. As in U.S. anti-trust law, complaints brought by third parties ranged from
instances of small companies seeking protection to large companies seeking to bog down
competitors in the unproductive labor of dealing with bureaucratic investigations. IF the
EU after investigation decides to take action, it can either (1) issue a recommendation
to an infringing company, or (2) initiate formal proceedings. 
Sources: http://www.antitrust.org
http://www.techlawjournal.com