Antitrust experts said that America Online Inc.'s proposed $163-billion purchase of Time Warner Inc. appears likely to clear antitrust agencies, but
consumer groups said they opposed the merger.
The companies announced Monday that America Online Inc. the
top Internet service provider, will buy Time Warner Inc, the
world's largest media company, in a stock transaction.
Experts said the takeover will likely not cause serious
"It does not appear there are antitrust issues that would
provide a significant impediment to this transaction," said
Steven Salop, a professor of antitrust law at Georgetown
University Law School.
Antitrust lawyer Marc Schildkraut, of Howrey & Simon in
Washington, agreed that the merger would probably pass muster
after a close examination.
"They will be looking at the same kinds of things they
looked at when Time Warner acquired CNN," Schildkraut said.
That merger announced in 1995 and approved in 1997
raised questions about vertical integration. The Federal Trade
Commission was concerned that the new company could raise the
prices for programming because it would both produce programmes
and distribute them through the country's second largest cable
In this merger, AOL would be in a position to distribute
content produced by what is now Time Warner.
At this point, the Justice Department and Federal Trade
Commission have yet to sort out which agency will be reviewing
Whichever agency does handle it will hear from certain
consumer groups, which do not like the deal.
The consumer groups are concerned about the possibly
interlocking ties between AOL, Time Warner and No. 1 cable
operator and long distance giant AT&T; Corp.. Time Warner is the
No. 2 cable operator.
AT&T; is seeking to acquire Media One Group Inc., which owns
25 percent of a joint venture called Time Warner Entertainment
which holds the bulk of Time Warner's assets, including over 11
million cable television subscribers. Time Warner owns the
remaining 75 percent of the venture.
If AT&T;'s deal is approved and AOL and Time Warner merge,
AT&T; would own 25 percent of a venture that holds a substantial
portion of AOL Time Warner's cable assets.
Time Warner and Media One also jointly own a high-speed
Internet access service called Road Runner. AT&T; owns the
largest stake in the only other major cable ISP, Excite AtHome
Consumer groups also fear that the interest of AOL, which
has more than 21 million subscribers who dial up on telephones
to get on the Web, will suddenly change because it would
suddenly have a behemoth cable company of its own to sell
high-speed Internet access.
Until now, AOL has been fighting to gain access to high-speed
Internet access systems provided through cable. Cable companies
have insisted that they have the sole right to provide Internet
service to their customers and can exclude AOL.
"AOL has been the hammer for opening up the broadband
networks and this would change that," said James Love, who
heads the Consumer Project on Technology in Washington. He said
that AOL has had the resources to engage in "hand-to-hand
combat" at city councils to require access.
"Right now they're the outsider trying to get in. With the
merger, they're the insider," Love said.
But Howard Morse, a former Federal Trade Commission official
now with the Washington law firm of Drinker, Biddle & Reath,
expressed doubt that such views would cut muster with the
"I think it's one thing to talk about market power," Morse
said. "It's a different thing to talk about political power."
Antitrust agencies examine whether mergers may give one
company too much power in the marketplace. If the agencies find
that a combined company would gain the power to significantly
raise prices in a marketplace, they reject the merger.