Time Warner, Turner Seek Merger Plan

Federal regulators and attorneys for Time Warner Inc. and Turner Broadcasting System Inc. are negotiating a plan that would allow the $7.5-billion merger to proceed--with strings attached.

There’s no decision yet on what those conditions will be, but negotiators said this week they hope to reach an accord soon to assuage the Federal Trade Commission’s concerns that competition would be hurt by the deal, which would create the world’s largest media and entertainment company.

Among the proposals is an agreement that the companies not discriminate against competitors and abide by safeguards to protect competition, said one attorney, speaking on condition of anonymity. Such stipulations are common orders by regulators when clearing big mergers.

People on both sides of the negotiations say the lengthy talks could wind up by the end of the month, permitting Time Warner and Turner to complete the deal by early fall. The FTC has the power to sue to block the merger.

Lower-level staff officials at the FTC have recommended that the agency’s five commissioners sue to block the merger outright. But such an action, while still not inconceivable, is diminishing by the day, said people at the FTC and at the companies. FTC officials feel their case would “be a difficult one” to win in court, according to one official.

Ever since it was announced in September, the proposed stock merger has alarmed competitors in the TV business. The combination of Time Warner and Turner portends a giant company with unprecedented power in movie production, cable TV programming and cable system ownership.

Time Warner owns the second-largest collection of cable systems in the nation, the biggest pay-TV movie service (HBO) and one of the biggest movie studios, Warner Bros. Turner owns some of the most popular cable channels, such as CNN, TBS and TNT, and two smaller movie studios.

The antitrust fears have been heightened by the added involvement of Tele-Communications Inc., the nation’s largest cable system owner, which would own 9% of the merged Time Warner-Turner under current terms.

Small cable operators and telephone companies, which hope to offer TV programs over their phone lines, have told the FTC in depositions that Time Warner and TCI might conspire to withhold popular programs from them or could charge exorbitant prices in an effort to render them unable to compete.

Under the conduct remedy approach, the merger partners would pledge to sell programming to all competitors under similar terms and conditions. Their own cable systems would not get preferential treatment.

The relatively narrow range of issues under discussion indicates that Time Warner is moving closer to receiving permission to buy Turner without having to shed major assets--a goal of Gerald Levin, Time Warner’s chief executive, who originally proposed the deal to TBS Chairman Ted Turner.