Court backs broadcasters, clears way for FCC review of AT&T-DirecTV merger

Appeals court ruling removes a barrier in the FCC's review of the AT&T-DirecTV merger

The pace of the Federal Communications Commission's review of AT&T's proposed takeover of satellite television giant DirecTV should soon accelerate.

On Friday, the U.S. Court of Appeals for the D.C. Circuit issued a long-anticipated ruling in a dispute between the FCC and TV programmers, including CBS Corp., 21st Century Fox, Walt Disney Co. and Viacom Inc.

The testy dispute did not delve into whether the FCC should allow two huge media mergers to go forward. Rather, the programmers' case became something of a sideshow, complicating the government's processing of information that it had sought in its merger reviews.

In a win for broadcasters who sued the FCC last fall, the appeals court on Friday ruled that the FCC's demand that CBS, Disney, Fox and the other programmers reveal sensitive contract information to third parties was flawed.

The FCC had sought the information as part of its review of two media mergers announced last year: AT&T's application to acquire DirecTV and Comcast Corp.'s now scuttled bid for Time Warner Cable.

"We are delighted the court sided with broadcast networks and the National Assn. of Broadcasters in protecting highly confidential information from being widely disseminated during merger reviews," NAB spokesman Dennis Wharton said in a statement.

An FCC spokesman said: "We are studying the opinion now, and considering the options available to the commission." 

Even though the FCC set up a mechanism to protect confidential business information from being widely disseminated, broadcasters worried that their rivals were taking advantage of the situation to gain easy access to sensitive details about affiliate fees and other contract points.

"It's unfortunate that this decision could put hurdles in the way of outside parties who are trying to make the case against the AT&T-DirecTV or any other merger," the consumer rights group Public Knowledge said in a statement.

FCC Commissioner Ajit Pai, one of two Republicans on the commission, released a statement Friday applauding the court ruling.

"Throughout this dispute, the commission failed to explain why it was necessary to disclose these sensitive documents to third parties," Pai said. "This is a good case study of how bad process leads to bad outcomes."

In March, the FCC stopped its review clock on the two merger deals while it waited for the court to resolve the dispute with the broadcasters.

The AT&T-DirecTV deal clock was stopped at Day 170, which means that just 10 days would remain in the review period when the clock eventually is restarted.

The FCC on Friday declined to say when the clock on the deal might begin ticking again.

To be sure, the clock is more of a guideline than a firm mandate that the FCC finish its merger review within the 180-day window.

Since last month, when the Comcast-Time Warner Cable deal collapsed due to pressure from the FCC and the Department of Justice, the focus has shifted to the $49-billion AT&T-DirecTV deal.

Although observers believe the government ultimately will approve the sale of DirecTV, based in El Segundo, within the next few weeks, opposition has been building.

Streaming service Netflix and the Writers Guild of America, West, this month argued that the merger would not be in the public interest. Both urged the government to require conditions if it approves the combination.

AT&T executives, in a recent earnings call, said they expected considerably higher cost savings from the merger than originally forecast. Last year, AT&T said it would generate $1.6 billion in savings from the combination, but the company now says savings and cost reductions should top $2.5 billion.

Twitter: @MegJamesLAT

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