TWX/T, Mounting Political Pressure From Regulators

VogelHood Group believes that a merger between AT&T and Time Warner will be challenged by at least one regulator. A merger of this nature requires regulatory approval from both the Department of Justice (DoJ) Antitrust Division and the Federal Communications Commission (FCC). The DoJ is the lesser hurdle of the merger due to the vertical nature of the deal.

VogelHood’s MERGERANX™ model indicates that the merger will withstand DoJ’s scrutiny. The real challenge for this deal is the FCC, which will examine the deal to see if it is in the public interest. We do not see a scenario where the FCC approves this deal.

The next Administration, which we believe will likely be a Clinton Administration, will appoint the FCC Chairman and DoJ Assistant Attorney General (AAG) that will oversee the majority of the merger’s review. Clinton, who has already expressed concerns, will continue to face pressures from Sen. Bernie Sanders (I-VT) and his supporters to ensure that this deal is blocked. Upon news of the deal, Sanders urged regulators to “kill” the deal. We believe that Clinton appointees to the FCC will make opposition to this merger a priority in order to shield Clinton from political scrutiny from the left wing of the Democratic Party.

Opposition to this deal is not a partisan issue. Donald Trump’s strongly worded speech against the deal will not be forgotten by conservatives in the months ahead. His media consolidation argument appeals to far right and mainstream conservatives alike. We believe that Republican in Congress will feel pressure from their constituents to oppose the deal, which they will pass along to Republican FCC commissioners.

Several members of Congress, including the Chair and Ranking Member of the Senate Antitrust Subcommittee have also weighed in. In a deal of lesser proportions, this would be notable, but given that this deal is already in the radar of the next President, their involvement at this stage is less meaningful. We expect Congress to hold oversight hearings on the deal, which will lead to media coverage that will rally opponents against the merger.

Screen Shot 2016-08-10 at 3.35.18 PMKristin Smith
Managing Director, Head of Research, VogelHood Group

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