Time Warner (NYSE: TWX) and America Online (NYSE: AOL) encountered another obstacle to their proposed merger this week when the Walt Disney Co. (NYSE: DIS) called for the release of confidential documents the companies filed with the U.S. Federal Communications Commission (FCC).
In letters filed with the FCC on Tuesday, Disney requested disclosure of documents that reportedly address the business opportunities available to AOL and Time Warner if the merger takes place.
Disney asserted that it is not seeking information that would give it an advantage over Time Warner or AOL. Rather, the Mouse said it hopes to ascertain whether the merging companies will keep their promise not to discriminate against competing content providers.
Time Warner and AOL have publicly promised to the FCC that AOL Time Warner would not discriminate against competitors. The companies have also said that if the AOL Time Warner did discriminate, it would lose customers to other media companies that provide open access to content.
However, Disney is concerned that the promises made are not binding.
Disney is not the only party concerned about promise-keeping and the effects of the merger. Several members of the U.S. Senate have asked the Federal Trade Commission (FTC) and the FCC to make sure that the proposed merger does not disfavor competitors seeking carriage on the AOL Internet portal.
Last week, Senator Jesse Helms (R-North Carolina) called for careful scrutiny to ensure that AOL Time Warner lives up to its promise of open access.
Trust vs. Antitrust
Not all legal observers agree that AOL Time Warner should be under such heavy attack prior to the actual merger.
Said PricewaterhouseCoopers attorney Anthony Burges, “AOL and Time Warner have provided assurances that they will not engage in anti-competitive behavior. Until their business practices demonstrate that these assurances are false, the government should not interfere in the proposed merger.”
While currently not interfering, the government is investigating. The FCC is looking into whether the transfer of Time Warner’s broadcast licenses to AOL serves the public interest, and has requested several plans, documents and agreements from the two companies.
Questions in the Air
In an agency panel hearing about the license transfer held last month, FCC Chairman William E. Kennard said: “Ultimately, this merger could ordain the essential nature of America’s broadband services.”
He added that the FCC will address whether AOL Time Warner will deliver on promises, including accelerated broadband deployment, more innovative services and continued commitment to multiple broadband platforms.
The FCC is also investigating the question of whether AOL Time Warner would impair the competitive, consumer-driven evolution of new technologies and stymie growth in such new markets as interactive television and instant messaging (IM).
Disney, whose ABC network was temporarily taken of the air in some markets by Time Warner last May, has stated that it wants the approximately $130 billion (US$) merger blocked or limited by strict conditions.
Those restrictions could include requiring the merged company to separate its distribution operations from programming and content development.