From: Martin John ATR To: Tobey, Mark Subject: July 6 2017 News Clips Date: Thursday, July 6, 2017 3:56:05 PM Attachments: July 6 2017 News Team, Attached are news clips from this past week. Best, John Warner News Clips 7/6/17 ?oatents Adding Dozens of Local Strations to Internet TV App 2 White House Reportedly Discussing Time Warner-AT&T Merger as ?Potential Point of Leverage' Over CNN 3 TV networks hide bad ratings with typos, report says 5 AMC tests an ad-free channel on Comcast for Viewers who hate commercials 7 CenturyLink launches $45 OTT service in beta 9 Adding Dozens of Local Stations to Internet TV App Fortune, 06/30/201 7 is adding dozens of local broadcast channels to its Internet delivered DirecTV Now video service as the cable landscape increasingly evolves to try and attract cord cutters. Only some subscribers to DirecTV Now, which starts at $35 a month for about 60 channels, can watch their local broadcast stations to keep up with metro news and other local offerings. Starting next week, the service will add 30 more ABC local affiliates in cities including Atlanta, Dallas, and Boston. Four more NBC stations and the Fox affiliate in Juneau, Alaska, will also become available. After the additions, DirecTV says its local offerings will cover 70% of all households. The local line up is double what DirecTV had when it launched back in November and will be tripled by the'end of August, according to Daniel York, chief content officer. "We will keep the momentum going, and have plans to keep the number of local channels growing on DirecTV Now," York said in a statement. and others including Google's YouTube TV and Dish Network's Sling TV have been able to offer dozens of traditional cable channels to customers who want to forgo the usual set top box set up and get video over the Internet. But adding local channels has proven more challenging, as many are owned by broadcasting companies that see the new services as competition. The number of people cutting the cord and dropping traditional cable TV, or never subscribing in the first place, is growing rapidly. DirecTV Now, which reportedly attracted over 300,000 subscribers in its first two months, is aimed at convincing cord cutters to pay for TV again. Still, has to strike a careful balance in promoting Internet video, as it's also the largest pay TV provider in the country, with its DirecTV satellite offering and U-Verse wired cable service. But those ranks have been shrinking: it lost a net 233,000 pay TV subscribers in the first quarter. http://fortunecom/ZOi White House Reportedly Discussing Time WarneruATSrT Merger as ?Potential Point of Leverage? Over CNN Mediaite, 07/06/201 7 In recent days, President Donald Trump has ramped up his long?running feud with CNN. While the president had taken aim at the network during the campaign and had even begun referring to them as ?fake news" before taking office, his attacks on the outlet have taken a nastier turn of late in the wake of retraction of a story that led to the resignations of three journalists. With Trump taking it to a new level by tweeting out a video featuring him wrestling a figure with a CNN logo for a head, the New York Times gosted a story about how the network is coping with being in the crosshairs of the mostpowerful person in the world. While the piece featured some great quotes Chris Cuomo likening CNN to ?Thunderdome? takes the cake and insights, perhaps the most eye?opening revelation involved how the White House might be willing to interfere in a business deal involving CNN due to the president?s feeling towards the network. White House advisers have discussed atpotential point of leverage over their adversary, a senior administration official said: a pending merger between parent company, Time Warner, and Trump?s Justice Department will decide whether toapprove the merger, say there is little to stopthe deal from moving forward, the-president?s animus toward CNN remains a wild card. It had recently been reported that might be looking to ?neutralize? CNN President Jeff Zucker as part of the merger, with options ranging from tiring him to kicking him upstairs to a corporate executive job with no real input at CNN. Zucker declined to comment on the merger to the NYT but said it has not affected his decision-making. TV networks hide bad ratings with typos, reportsays CNET, 07/06/2017 If I mistakenly write Nitely News,? you can probably still tell what program I'm talking about. Nielsen's automated system can't, however, and a report Thursday in The Wall Street Journal details how networks are taking advantage of that fact to disguise airings that underperform with viewers. It's described as a common practice in the world of TV ratings, where programs with higher ratings can charge advertisers more to run commercials. When an episode performs poorly with viewers, the networks often intentionally misspell the show title in their report to Nielsen, according to the Journal. This fools the system into separating that airing out as a different show and keeping it from affecting the correctly?spelled show?s average overall rating. The report says the practice was initially used sparingly -- for instance, when a broadcast would go up against a major sporting event. But it has now grown fairly common, with NBC misspelling the title of News" 14 times since the current TV season began last fall. At one point, that reportedly included an entire week of broadcasts. Competitors ABC and CBS allegedly followed suit, with ABC reportedly submitting "erd News Tonite" on seven occasions over the same time period. CBS reportedly misspelled the name of its evening newscast as Evening Nws" a total of 12 times. (CBS is the parent cOmpany of CNET.) The Journal says gamesmanship occurs with regards to scripted programming, too. This, the WSJ says, lets networks separate reruns out from first-run episodes and boost a show's overall ratings. Such a practice might be largely for the sake of marketing, with networks typically looking to boast publicly about show performance however possible. Still, it seems odd that Nielsen would allow them to do so with any sort of regularity, given that it ultimately calls the accuracy of its numbers into question. Nielsen issued the following statement to CNET: "With participation and input from clients, Nielsen maintains a rigorous set of policy guidelines for how network clients can and should receive program and commercial ratings credit for their programming. Nielsen takes these Policy Guidelines very seriously and if we ?nd a network working in contrast to this agreed-upon policy, we address the issue in a direct fashion as a way to maintain fairness and balance over all of our clients and the industry as a whole. We have many touch points with clients throughout the season to ensure guidelines are being adhered to ABC, NBC and CBS didn't immediately respond to requests for comment. An NBC spokesperson told The Wall Street Journal that the retitlings were "standard industry practice." AMC tests an admfree channel on Comcast for viewers who hate Commercials The Chicago Tribune, 06/30/20] 7 Advertising-supported TV is taking another step to becoming ?The Walking Dead.? Networks 1110., the cable programming company that is home to the zombie apocalypse drama, on Thursday became the first major ad?supported network to offer a commercial?free version through a traditional television distributor. But the offer comes with a catch: the ad~free AMC Premiere channel is available only to Comcast cable subscribers and it costs an additional $4.99 a month on top of the fees Comcast already charges for its lineup of channels. The move is the latest example of the television industry scrambling to ?nd different ways to market their channels. AMC Premiere is an acknowledgment of the disruption brought on by streaming giants Net?ix, Hulu and Amazon that have conditioned Viewers to expect commercial~free TV content. ?This appears to be an experimental move to see what the demand is for such a channel, and what the appropriate price point should be,? said Derek Baine, a senior analyst at consulting firm SNL Kagan. ?And there is a big niche of AMC fans; many of their shows have large and loyal audiences.? New episodes of such AMC series as ?The Walking Dead,? ?Into the Badiands? and ?Better Call Saul? will be available to subscribers of AMC Premiere at the same time the episodes are shown live, with ads, on the traditional AMC channel. Charlie Collier, president of AMC, SundanceTV and AMC Studios, said in an interview that the on- demand, commercial~free service is not meant to be a replacement for the AMC channel. ?It?s not for everybody,? Collier said. ?It?s for those who want the choice and the upgrade opportunity.? Other programmers have tested commercial-free options. Hulu, which is owned by NBCUniversal, Walt Disney Co. and let Century ox, launched nearly a decade ago with inushow commercials. Hulu eventually rolled out a premium advertising-free option for $11.99 a month, $4 more than the ad? supported service. CBS Corp. introduced its CBS All Access channel directly to consumers nearly three years ago and last summer introduced an advertising?free option for $9.99 a month. (The CBS All Access channel with commercials sells for $5.99 a month and also offers exclusive programs like ?The Good Fight? and an upcoming ?Star Trek? series that aren?t available on TV.) ?They found that there was a demand for ad?free programming at a certain price point,? said Baine, the analyst. AMC, however, appears to be the ?rst network to partner with a traditional pay-TV operator, in this case Comcast, to launch an ad-free option. One industry insider said AMC was probably working with Comcast because many carriage agreements restrict cabie programmers from marketing their channels directly to consumers or a la carte to a competing service, such as Amazon Prime. Baine said AMC might ?nd that only the most ardent fans will pay an additional $4.99 a month for the ad-free option. - ?It?s a lot of money to'pay for one channel,? he said. ?But AMC might be looking for the sweet spot.? Philadelphia-based Comcast, the nation?s largest cabie TV provider with nearly 20 million subscribers, is in discussions with other cable programmers to offer similar services, said Matt Strauss, Comcast?s executive vice president and general manager, video and entertainment services. ?There are a handful of networks of the caliber of AMC that lend themselves to this premium experience, and those are on our shortlist,? Strauss said in a telephone interview. He acknowledged that companies must respond to changes in consumption patterns. ?Viewing habits are continuing to change,? Strauss said._ ?People are becoming more accustomed to watching what they want when they want it.? Collier said he believes that AMC Premiere will ?super serve? fans of its shows by providing additional content not shown on the ad?supported channel. The long?term plan is to expand AMC Premiere beyond Comcast to customers of other cable and sateliite providers that carry AMC. It eventually may be offered to ?over~the-top? streaming services like Hulu that provide video content to cord-cutters. ?We continue to believe that a curated service targeted to superfans content is a compeiling potential revenue-generative opportunity,? Guggenheim Securities media analyst Michael Morris wrote in a report. ?Given the significant amount of high?quality scripted content available to consumers, it is important for branded networks to build stronger engagement with their fans.? For AMC, it is a way to gauge viewer appetite for an ad-free product ?with limited risk,? Morris said. Other cable companies said they are watching the move. ?We are aiways interested in exploring content arrangements that create more ?exibility and improve the viewing experience,? said Todd Smith, a spokesman for Cox Communications, which serves Rolling Hills Estates and south Orange County. ?At the same time, we have to ensure that any new deals don't add unnecessary additional cost to our broader customer base.? AMC Networks stock closed Thursday at $53.26 a share, down 1.39%, or 75 cents. OTT service. inbeta Fierce Cable, 06/30/2017 Centurytink has launched its anticipated virtual service in beta. Per the live-streamed service?s product page, the base tier will run $45 a month and include almost 50 networks, including four iterations of ESPN, History Channel, Food Network, Viceland and HGTV. The page tists NBC and ABC as available networks, but it?s unclear how infiltrated CenturyLink is in terms of local network affiliates. The Fox Broadcast Network and CBS don?t appear to be part of the initial mix. Neither do their associated cable networks. Viacom, Time Warner inc. and AMC Networks channels also seem to be left out of the base tier. Additional sports channels like Outside Television and belN Sports can be added with a $iO~a- month ?Sports Extra? package. Add-ens of smaller networks are also available for entertainment, Latino-targeted entertainment and cabie news, among other programming themes. The skinny bundle is discounted $5 for CenturyLink broadband subscribers. Features include a cloud DVR that can store up to 50 hours of HD programming. News of the CenturyLink beta comes as Chartetr confirmed testing of an lP-based skinny bundte. While Spectrum Stream is an lP?based video service delivered within Charters footprint over managed network, CenturyLink Stream is a full?fledged, nationally distributed virtual MVPD service, competing head~on with Sling TV, DirecTV Now, Hulu Live, YouTube TV, Sony PlayStation Vue and FuboTV. Initially, CenturyLink Stream is supported on Roku OTT devices, as well as i053 and Android mobile devices. it?s also playable on the CenturyLink player, a $90 Android~powered device manufactured by LG Electronics. executives have indicated previously that the introduction of Stream doesn?t bode well for the telco's existing IPTV video product, Prism. ?With over?the~top product, we don?t have to make a truck roll,? said CenturyLink CEO Glenn Post at an investor event in February. ?We have much wider availability due to lower bandwidth requirements of over-the-top. We have network-based storage for DVR. We?ll have local channels to help distinguish that product. And our trial is getting really strong reviews right now. But we have really deemphasized the Prism product because of the margin issue.? From: Cerin To: Hughes, Jared gee, Evan Subject: Playbook, Delrahim QFRS and Hearing Transcript Date: Friday, July 7, 2017 11:58:03 AM Attachments: Delrahim Responses to QFRs,pdf CQ Hearing A'iT-Time Warner 7 Dec 2016 (002mm Excerpt from Playbook? at about the middle CHECK -- parent's $853 deal at little risk from Trump," by Steven Overly and Margaret Harding lVchill: "President Donald Trump has only limited tools for venting his often?expressed fury at CNN, even as his administration weighs whetherto approve bid to purchase the network's parent company, Time Warner. ChietTrump strategist Steve Bannon has pushed the idea of oncking the merger, a White House official told on Thursday, after months in which the president has accused the news network of airing 'fake' and 'dishonest' coverage of his administration. But the official added that Bannon hasn?t mentioned the matter in recent days and that it does not appear to be at the top of his agenda. "And many industry observers say Trump's Justice Department has no obvious antitrust arguments for blocking $85 billion deal, which would give the telecom and wireless giant control of an entertainment conglomerate whose holdings include CNN, HBO and the Warner Bros. movie studio. 'Just because you don't like CNN doesn?t mean you can block a merger,? said Rich Greenfield, a media and tech analyst at the investment research ?rm BTIG. 'You still need a legal basis, and calling CNN 'fake news' or doesn?t make the transaction illegal.?II htto://oolitrco/2SUXC7G? Also here is an excerpt from Makan Delrahim's QFR responses to Senate Judiciary Committee. I attached the hearing transcript as well just in case. :2 Last Th?, tidal} agreed. ?its purchase Time for $85 bitiinn. 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As; with any pnten tie] tofu-reunited 1: action, it is {Warfare important to carefully" and cleanly assess the facts tee determine whether there is, on balance, a harm it} era {lowing tram. the nreposed transau?am The vertical mergers most? likely ?3 Will ?1 ?3?05?3 twist-331 enforcers are. timer: Where there is risk that - upstream or campa?tian may he ?fl;lrec}oaed by the transaction. QUESTIONS FOR THE RECORD MAKAN DELRAHIM NOMINEE TO BE ASSISTANT ATTORNEY GENERAL OF THE AN TIT RUST DIVISION QUESTIONS FROM SENATOR GRASSLEY, 1. As you may know, I am very concerned with the rising cost of prescription drugs. The Justice Department has an important role to play in ensuring that drug companies do not engage in antiwcompetitive practices or monopolistic behavior. a. if you are continued to lead the Antitrust Division, What steps will you take to make sure that both brand name and generic drug companies play by the rules? RESPONSE: I agree that the Department of Justice has an important role to play in ensuring that drug companies do not engage in anti?competitive practices, criminal or civil, or monopolistic behavior. If con?rmed, working with our colleagues at the Federal Trade Commission, I will ensure potential antitruSt violations in this industry are investigated and, if any Department of Justice investigation uncovers a violation of the antitrust laws, purSHe?that violation aggressively. 2. lhave additional concerns about increased agribusiness concentration, reduced market opportunities, and fewer competitors in the agriculture sector. I also worry about the potential for inereased antiwcompetitive business practices in agriculture. Right now, there are a number of mergers occurring in the agriculture sector that could completely change the market and impact the agriculture industry and consumers. I believe that the Justice Department?s Antitrust Division needs to dedicate more time and resources to agriculture competition issues. a. If you are con?rmed, can you assure me that agriculture antitrust issues Will be a priority for the Antitrust Division? RESPONSE: The agricultural sector, including farmers, is important to the nation?s economy. I know ?rsthand from my previous service at the Senate and the Department of Justice your commitment and interest in ensuring a vibrant and robust agriculture industry. I agree that the Antitrust Division needs to devote the time and resources necessary to understand the competitive implications of proposed transactions or conduct in agriculture. If con?rmed, I commit to you to make that a priority. 3. Some of my constituents have expressed concerns with armeeting between then President- Elect Trump and Monsanto and Bayer executives about the proposed merger between the two companies. Did anyone involved in your nomination at the White House ask you, at any time, to take a predetermined position on the Monsanto?B ayer merger as a condition of your nomination? I RESPONSE: No. 4. I believe that the Justice Department and the Department of Agriculture, which enforces the Packers and Sto ckyard Act, should collaborate and work together to monitor anti?competitive activity in the agriculture industry. If you are con?rmed, will you commit to foster a closer and more productive relationship with the Department of Agriculture? RESPONSE: If con?rmed, I will take any necessary steps to foster a close and productive relationship with the Department of Agriculture With respect to anticompetitive conduct in the agriculture industry. 5. A March 2017 International Competition Policy Expert Group report, commissioned by the US Chamber of Commerce, raises concerns about Whether foreign competition authorities are using their antitrust laws to bene?t national champions. The report asserts that ?[c]ertain of our major trading partners appear to have used their laws to actually harm competition by US. companies, protecting their own markets from foreign competition, promoting national champions, forcing technology transfers and, in some cases, denying US. companies fundamental due process.? Are you concerned about the use of foreign competition laws to assist national champions and to advance an industrial or trade policy? Do you agree with the ?ndings and of the report? If you are continued, What steps will the Antitrust Division take under your direction to address these challenges and better harmonize/cooperate with other international antitrust authorities? RESPONSE: I ?rmly believe that antitrust laws should not be misused by foreign authorities to defend their national businesses or to try to exclude American businesses from foreign markets. The underlying basis for all antitrust actions, in the United States and elsewhere, should be appropriate legal and economic analysis. I understand that the Antitrust Division communicates this message to the international community in a number of ways. When I was a Deputy Assistant Attorney General at the Antitrust Division, one of my primary responsibilities was representing the Division?s international affairs. In that capacity, I advocated strongly for foreign enforcers to apply sound, competition-based principles in their own enforcement efforts. If I am con?rmed as Assistant Attorney General, I will support the continuation and strengthening of those contacts as well as exploring additional avenues to ensure American businesses and consumers are not harmed by discriminatory antitrust, enforcement by foreign antitrust authorities. 6. I understand that when competition law enforcement concerns are raised with the government, it is the practice of the Justice Department and the Federal Trade Commission to discuss the issues raised and determine which agency will take the lead on investigation of the allegations. How are these assignments of responsibility decided? What is the criteria utilized for these decisions? Do you intend to continue this practice? RESPONSE: The FTC and Department of Justice share certain antitrust jurisdiction over merger and civil nonmerger matters in many, but not all industries. For example airline and telecommunications mergers are subject to the jurisdiction of only the Department of Justice. Over the years the two agencies have developed a clearance process to ensure that only one agency reviews particular transactions or conduct. If I am con?rmed, I will work closely with the Federal Trade Commission to review past divisions of responsibility and ensure that future divisions of responsibility between the agencies are both appropriate and ef?cient. 7. Media, entertainment, information and telecormnunications markets are rapidly evolving, with internet and technology ?rms challenging traditional telecom companies. In your opinion, how should the Justice Department analyze this market? Do traditional merger analysis methods work for mergers that involve converging platforms and technologies? How should the Antitrust Division determine the competitive effects of mergers between different complex, interconnected platforms? RESPONSE: The antitrust laws have been in place for well over 100 years and continue to play a vital role in protecting competition despite how the economy and industries have evolved. I believe those laws are flexible enough to take into account industries that are rapidly evolving and involve converging platforms and technologies. It is incumbent on antitrust enforcers to understand changing and evolving industries, but I believe they can apply traditional analysis to determine Whether antitrust violations exist. I will investigate and vigorously enforce the antitrust laws with respect to online platforms as I would in any industry, based on the economic and analytical tools appropriate to the circumstances and to ensure robust competition and innovation. 8. What is the proper role of the antitrust and consumer protection laws in a high tech, commerce economy? RESPONSE: Antitrust has a vital role to play in the high?tech, e-commerce economy to protect consumers. Actions by ?rms that threaten competition in the high?tech, e- commerce economy, whether by merger or conduct, should be investigated and purSued if the investigation uncovers an antitrust law violation. 9. Could you discuss your general philosophy with respect to the intersection of intellectual property and antitrust? What challenges do you see for the Antitrust Division in this area? RESPONSE: As a registered patent attorney, I have a deep background and interest regarding the intersection of intellectual property and antitrust. Intellectual property rights are a form of property and recognized in the US. Constitution. I feel strongly that an intellectual property owner?s rights need to be respected and protected. It is my view that the intellectual property laws combined with the proper enforcement of antitrust laws together form the basis of our successful innovation policy. At the same time, antitrustenforcers have a legitimate role in ensuring that intellectual property rights are not abused in violation of the antitrust laws. One of challenges I foresee in this area is dealing with international enforcers who may not necessarily place the same value on intellectual property rights abroad that we do in the United States, or that may enforce their antitrust laws in ways that could sti?e innovation. l. QUESTIONS FOR THE RECORD DELRAIHM NOMINEE TO BE ASSISTANT ATTORNEY GENERAL OF THE ANTITRUST DIVISION QUESTIONS FROM SENATOR FEINSTEIN, RANKING MEMBER It?s my understanding that you were the primary lobbyist on behalf of Anthem and advocated in favor of its proposed merger with Cigna. The Justice Department successfully blocked that merger earlier this year. Because the litigation over the merger is still going on, you have pledged to recuse yourself from ?any further involvemen in this matter if you are con?rmed. a. Do you believe your participation in matters related to the Anthem?Cigna merger would present a con?ict of interest? 1). Please describe the steps you will take to recuse yourself ?om this matter. RESPONSE: It is my understanding, according to press reports, that Anthem announced on May 12 that it was abandoning further efforts to complete the contemplated merger with Cigna. Having noted that, should there be any further activity associated with that merger, I will recuse myself from any involvement in this matter to avoid any con?icts of interest or appearance thereof. 2. I understand that the current Acting Assistant Attorney General, Andrew Finch, may also 3. have a con?ict of interest related to the merger because his former law firm represented Cigna. - a. Will you also take steps to ensure that he is recused from participation in matters related to the merger? b. Assuming Mr. Finch is also recused from this matter, who will be the person in the Antitrust Division with primary responsibility for supervising the Anthem Cigna matter? RESPONSE: It is my understanding, according to press reports, that Anthem announced on May 12 that it was abandoning further efforts to complete the contemplated merger with Cigna; I am aWare that Mr. Finch has been and is recused from working on the matter. My understanding is that a career Deputy Assistant Attorney General has the primary responsibility?for supervision of the matter. During a court hearing over whether Cigna could terminate its proposed merger with Anthem, Anthem?s attorney repeatedly suggested that the merger would be cleared under the ?new? Department of Justice in the Trump administration. Speci?cally, he told the court that ?now Vice President Pence was supportive of the transaction as the governor of Indiana? and ?we?re reaching out to DOJ, which is new, by the way. There is a con?rmed Attorney General, Sessions.? The Anthem attorney made these statements even though the previous Attorney General concluded that the merger ?would restrict competition for health insurance products sold in markets across the country and would give tremendous poWer . over the nation?s health insurance industry to just three large companies.? a. Do you believe that these statements were appropriate? b. Do you believe that the Antitrust Division?s approach to determining Whether a merger would have anticompetitive effects should change based on which party is in of?ce? RESPONSE: As I noted at my con?rmation hearing, there should be no political in?uence in antitrust law enforcement decisions. I cannot otherwise speak to any statements that Anthem?s representatives made well after my representation of the company ended. Indeed, I have been recused from any involvement in the matter since joining the Administration. The Antitrust Division?s merger enforcement should be based, in any case, on application of the laws written by Congress to the particular facts and circumstances presented by the merger regardless of the party in of?ce. 4. In March 2017, the International Business Times submitted a Freedom of Information request to the Antitrust Division seeking correspondence between you and members of the Antitrust Division while you were lobbying on behalf of the Anthemeigna merger. DOJ not only denied the requesthOJ refused to confirm Whether any such documents exist. According to DOJ, even acknowledging any such communications without your consent would be ?a clearly tmwarranted invasion of personal privacy.? lbelieve whether you corresponded with the Department of Justice about the Anthem merger and What you said are extremely relevant to our consideration of your nomination. a. Did you correspond with DOJ during the time period you were lobbying on behalf of Anthem? b. Will you agree to waive any privacy interest you might have in any DOJ documents that are relevant to the International Business Times? FOIA request? RESPONSE: To the best of my recollection, my only communications with the federal government with reSpect to this matter were with Congress and I had none with the Department of Justice. The Freedom of Information Act (FOIA) promotes transparency and accountability in the government. If con?rmed, I will strive to ensure that the Antitrust Division complies with all laws and regulations, including FOIA laws. I will respect any decision made by FOIA of?cials with respect to this request under FOIA. 5 . You will oversee the Division within DOJ that is responsible for enforcing our country?s antitrust laws. Many consumers don?t think about antitrust laws. But the enforcement of these laws saves consumers millions, and in some cases even, billions of dollars each year; If con?rmed, What will you do to protect consumers? RESPONSE: If con?rmed, my focus for the Antitrust Division would be on cartel behavior that raises prices or otherwise adversely affects the welfare of consumers; mergers and other forms of consolidation that risk a substantial lessening of competition; and single ?rm or collusive conduct that suppresses the free market competition to which consumers are entitled. In recent years, international regimes have increasingly passed antitrust laws and started enforcement programs; accordingly, I believe that I should also focus on close consultation with competition enforcement of?cials from other jurisdictions in an effort to promote fair, transparent, and consistent application of competition principles for the benefit of American consumers, businesses and workers. 6. Over the last 12 months, We have seen an unprecedented increase in proposed mergers in the agriculture industry. Dow Chemical has proposed a merger with DuPont, Syngenta has proposed a merger with ChemChina, and Monsanto has proposed a merger with Bayer. While any of these mergers alone might not raise signi?cant concerns, the prospect of these three mergers occurring around the same time, raises serious concerns. Will you review these mergers in isolation from each other or will you review them in light of the other pending agriculture mergers? RESPONSE: While it would be inappropriate for me to discuss particular pending mergers, I believe in general that any merger should be evaluated in light of the facts and circumstances, including the likely future composition of the industry. 7. Many proposed mergers and investigations of antiucompetitive behavior have signi?cant impacts on my state and I believe it is important for state law enforcers to havean equal seat at the table with DOJ when that?s the case. I know the Division often coordinates investigations and merger review with the states and lbelieve that is very important. Do you agree, and would you commit to continuing to cooperate with state attorneys general and other relevant state of?cials? RESPONSE: I believe it is bene?cial to both the federal antitrust agencies and the states to cooperate in enforcement actions, including sharing relevant information Where lawful and appropriate. If con?rmed, I Will commit to cooperating in appropriate cases with my state attorney general colleagues. 8. Many online platforms benefit from network effects that make them dominant means for business to connect with consumers, giving them disproportionate power over the evolution of competition and the services available to consumers. Do you have any thoughts on competitive challenges in this area? RESPONSE: The antitrust laws cover unilateral and coordinated conduct in industries throughout the economy, including companies operating on the Internet such as enline platforms. Over time, these laws have proven effective and adaptable to various types of anticompetitive conduct even as industries have evolved and technology has created new markets. If I am con?rmed, the Antitrust Division will investigate and vigorously enforce the antitrust laws with respect to online platforms as I would in any industry, based on the economic and analytical tools appropriate to the circumstances and to ensure robust competition and innovation. 9. 10. 11. In 2011, the Department of Justice sued to block planned acquisition of T~Mobile Since then, T~Mobile has played a criticaily important role in providing more choices and lower prices to consumers. Do you believe DOJ made the correct decision blocking this merger, and why? . RESPONSE: I was not privy to the con?dential information and analytical data the Department had in its possession at that time, and therefore am not in a position to comment. In 2014, Sprint appeared interested in acquiring T?Mobile, but was dissuaded from pursuing the transaction when the idea was met with skepticism by regulators who believed a merger that took the market ?om 4_ national competitors to 3 wasn?t good for competition or consumers. In 2013, the Department of Justice wrote to the FCC expressing concern about the threats to competition in the wireless market, speci?cally the conCentration of valuable lowwband spectrum held by the two largest carriers. a. What is your impression of the state of competition in the wireless market? RESPONSE: I have not recently studied the state of competition in the wireless market and therefore do not have any particular impression regarding its competitiveness at this time. If con?rmed and presented the opportunity, I look forward to studying it. In 2011, approved the Comcast/N C?Universal transaction with several conditions. a. Do you believe those conditions have effectively prevented the harms to consumers and competition they were designed to address? b. Those conditions are set to expire in 2018. Do you believe any of the conditions should remain in place? 0. If not, how has the market changed to make these behavioral remedies d. If DOJ merger conditions are ineffective at addressing the harms to consumers and competition they were meant to stop, at what point should D03 begin to take action to break up the merged ?rm? RESPONSE: I was not privy to the information the Department had in its possession at that time, and therefore am not in a position to comment on whether the decision was correct or not. With respect to the Comcast/NBC Universal transaction, I have not studied the merger action, nor its effects. If confirmed, I look forward to learning about the decree and its effectiveness. It is important for antitrust law enforcers to be con?dent that the remedies they impose will be effective with respect to the competitive problem identified when they take action against a merger. It is likewise important for parties that commit to conditions as part of the merger review to live up to those conditions and for the Department to vigorously ensure compliance. 12. Last fall, agreed to purchase Time Warner for $85 billion. Since then, there have been suggestions that the Warner deal could be a precursor for signi?cant consolidation in the telecom, cable, broadband, and media industries which are already signi?cantly consolidated. As recently as last week, there were rumors that Verizon may look to purchase one of the two largest cable companies, Comcast or Charter, or a major media company like Disney or CBS. a. At What point is there too much consolidation? b. Should merger reviews consider the potential for a transaction to spur a Wave of consolidation that ultimately will prove to be harmful to consumers and competition? 0. Do you believe that vertical mergers should concern antitrust regulators? d. If so, can you explain the harm or the danger that you think vertical mergers can present to consumers and competition? RESPONSE: It would be inappropriate for me to discuss any pending mergers under review by the Antitrust Division. As a general matter, past consolidation is a fact that should be and is relevant in particular merger reviews, but it is hard to make any general statements regarding when a level of consolidation becomes too much. It depends on the facts and circumstances. I think the majority of antitrust scholars recognize that most vertical mergers raise less serious competition concerns than horizontal mergers which bring together ?rms competing directly against one another. One reason is that certain vertical mergers can create ef?ciencies that bene?t consumers in a way that horizontal mergers may not. At the same time, . there are instances where a vertical merger may have anticompetitive effects. As with any potential enforcement action, it is therefore important to carefully and closely assess the facts to determine Whether there is, on balance, a harm to consumers ?owing from the proposed transaction. The vertical mergers most likely to require a close look by government enforcers are those where there is risk that upstream or competition may be foreclosed by the transaction. 13. You currently serve as Deputy Associate Counsel to President Trump. On May 9, 2017, President ?red the Director of the FBI, James Comey. On May 10, 2017, the Washington Post reported the following about Director Comey?s ?ring: ?Within the West Wing, there was little apparent dissent over the president?s decision to fire Carney, according to the accounts of several White House of?cials. McGahn, the White House counsel, and Priebus, the chief of staff, walked Trump through how the dismissal would work, with McGahn?s legal team taking the lead and coordinating with the Justice Departmen a. When did you ?rst hear that Director Comey might not stay in his position for the duration of his term? How did you find out? Who told you, and what reasons did that person give for Director Comey?s removal? Did you discuss it with anyone else? Did you see any documents or emails about Director Comey?s possible or actual removal beforehand? When did you become aware that Director Comey would be removed from his position as FBI Director? g. HOW did you find out? $39.09" H3 h. Who told you and what reasons did that person describe for his removal? i. Did anyone solicit your opinion as to Whether Director Corney should be removed? If so, who? j. Did you tell anyone inside the Executive Of?ce of the President your View as to whether Director Comey should continue as FBI Director? k. Did you tell anyone at the Department of Justice your View as to whether Director Comey should continue as FBI Director? 1. Were you part of Mr. McGahn?s legal team that ?[took] the lead and coordinat[ed] with the Justice regarding Director Comey?s ?ring? RESPONSE: I learned of the dismissal of FBI Director Comey on the evening of May 9, 2017, only through news reports. 14. On May 9, the President ?red FBI Director James Comey. On January 30, the President ?red Acting Attorney General Sally Yates. The President has made very clear that he will ?re individuals who disagree with him or who pursue investigations against his wishes. Kellyanne Conway, one of the President?s advisers, stated on May 11 that President Trump ?expects people who are serving in this Administration to be loyal to the country and to be loyal to the Administration.? Yet if con?rmed, you will be called upon to exercise independence and to serve the American people, not the President. a. How can this Committee have con?dence that you will be independent from the President? 13. What speci?c examples from your background offer evidence that you will not re?exively do what the WhiteHouse wants you to do? 0. Do you believe it is important for the Assistant Attorney General of the Antitrust Division to be, ?rst and foremost, ?loyal to the Administration?? RESPONSE: I believe that it is essential that all investigations conducted by the Antitrust Division are initiated and conducted in a fair, professional, and impartial manner, Without regard to political considerations. Contacts from the President or the White House must comply with Department policies, including a 2009 memorandum by Attorney General Eric Holder. It is important that all antitrust investigations comply with Department policies, and that political considerations do not in?uence the handling of particular cases. During my time in government service and private practice, I have been called on to advise clients on many sensitive matters. To the best of my recollection, I have never been in a-situation Where I have had to compromise my principles due to White House or other political pressure, including, in particular, my previous! service at the Department of Justice. It is important for the Assistant Attorney General for the Antitrust Division to be, first and foremost, loyal to preserving and protecting competition through the sound enforcement of the antitrust laws and, if con?rmed, that will be my loyalty in addition to my loyalty to the Constitution and to my ethical obligations as an officer of the court. 15. Please describe with particularity the process by which these questions were answered. RESPONSE: The answers are my own and re?ect my views. I discussed my answers and consulted with representatives of the Department of ustice as I deemed helpful and appropriate. 10 1. QUESTIONS FOR THE RECORD MAKAN DELRAHIM NOMINEE TO BE ASSISTANT ATTORNEY GENERAL OF THE ANTITRUST DIVISION QUESTIONS FROM SENATOR LEAHY You served as Senator Hatch?s Staff Director on the Judiciary Committee from December 2000 until July 2003. In that role, you hired the staff who hacked into the Democrats? computer system, including Mr. Manuel Miranda. For months during your tenure as Staff Director, Mr. Miranda and others engaged in continuing theft of the Judiciary Democratic staff ?les, including over 4,000 con?dential strategy memoranda. These unconscionable actions were eventually discovered after a number of leaks by Mr. Miranda. While the Sergeant at Arms investigation did not begin until November 2003, as early as February 2003 some of Mr. Miranda?s leaks made it into the media. Since you were Staff Director during this period, I would request that you answer the following questions for the record: a. Did you have any knowledge of the illegal accessing of Democratic computer systems and theft of documents, which took place over the course of several years? b. Did Mr. Miranda ever give you any indication where he sourced his intelligence on Democrats? strategy? If so, when? If not, did you wonder or question how he - accessed such information? 0. Do you feel responsible for the actions of your subordinates on this matter? RESPONSE: I had no knowledge or role in the hacking by Senate Republican Staff of Democratic ?les between 2.001 and 2003. The first I learned of the activity was through public reporting after I had left the Senate Judiciary Committee staff. At that time, I fully cooperated and assisted the Senate Sergeant-at?Arms in the investigation into the conduct. I would also like to note that to the best of my knowledge, Mr. Miranda?s activities accessing the documents occurred while he was on Senator Frist?s staff and not on the Senate Judiciary Committee staff. As a lobbyist for Anthem, you worked to have Anthem?s proposed merger with Cigna approved. Will you recuse yourself from any Justice Department involvement in this matter? RESPONSE: Yes. I would also note that it is my understanding, according to press reports, that Anthem announced on May 12 that it was abandoning further efforts to complete the contemplated merger with Cigna. When a reporter filed a FOIA request with the Antitrust Division for communications between you and the Antitrust Division during your time as a lobbyist, he reportedly received a Glamor response. a. While working for Anthem, did you contact anyone at the Antitrust Division, in particular regarding the proposed merger with Cigna?? b. lfcon?rmed, will you ensure that the Division fully complies with FOIA, including the presumption of openness that was codi?ed last year by the FOIA Improvements Act? 11 RESPONSE: To the best of my recollection, my only communications with federal government with respect to this matter were with Congress and I had none with the Department of Justice. The Freedom of Information Act promotes transparency and accountability in the government. If con?rmed, I will strive to ensure that the Antitrust Division complies with all laws and regulations, including FOIA laws. I will reSpect any decision made by FOIA of?cials with respect to this request under FOIA. 4. Last week, President Trump cited the FBi?s investigation into Russian interference in the 2016 election as a basis for dismissing Director Comey. The Deputy White House Press Secretary said, ?We want this to come to its conclusion . . . And we think that we?ve actually by removing Director Comey, taken steps to make that happen.? President Trump himself admitted that was gonna tire [Comey] regardless of [Mn Rosenstein?s] recommendation. . . . And in fact when I decided to just do it, I said to myself, i said you know, this Russia thing with Trump and Russia is a made up story.? Should those statements and justi?cations for FBI Director Corney?s dismissal raise concerns? RESPONSE: As the nominee for the position of Assistant Attorney General for the Antitrust Division, I believe it is essential that all investigations conducted by the Antitrust Division are initiated and conducted in a fair, professional, and impartial manner, without regard to political considerations. In light of the con?dentiality interests that attach to executive branch and White House decision-making, I am unable to comment further. 5. Is it proper for the President to pressure a law enforcement official to terminate an ongoing investigation into one of the President?s associates? RESPONSE: I believe it is essential that all investigations conducted by the Antitrust Division are initiated and conducted in a fair, professional, and impartial manner, without regard to political considerations. Contacts from the President or the White House must comply with Department policies, including a 2009 memorandum by Attorney General Eric Holder. It is important that all antitrust investigations comply with Department policies, and that political considerations do not in?uence the handling of particular cases. 6. if continued, will you be loyal to the Constitution or to President Trump? Do you believe there is a difference? If so, will you put your obligation to uphold the Constitution above any personal loyalty to President Trump? RESPONSE: If confirmed, [will adhere to my oath of office, which obligates me to Support and defend the Constitution of the United States. 7. If anyone from the White House contacts you about a matter pending before the Antitrust Division, how would you respond? Would such contact violate Justice Department guidelines governing contacts between Department of?cials and the White House? 12 RESPONSE: I believe it is essential that all investigations conducted by the Antitrust Division are initiated and conducted in a fair, professional, and impartial manner, without regard to political considerations. Contacts from the President or the White House must comply with Department policies, including a 2009 memorandum by AttorneynGeneral Eric Holder. It is important that all antitrust investigations comply with Department policies, and that political considerations do not in?uence the handling of particular cases. 8. Several large mergers are pending or were pending before the Justice Department?s Antitrust Division, including Bayer/Monsanto, Anthem/Cigna, and Warner. a. Have you had any communication with anyone in the Trump administration or Trump transition team involving any such matters before the Antitrust Division and, if so, specify the nature of that communication and the identity of any administration or [transition team of?cial you communicated with? RESPONSE: I have discussed my potential recusals with Justice Department and Administration ethics of?cials. I was not asked, nor have I provided, any commitments or assurances regarding any potential enforcement actions or pending matters before the Antitrust Division. In light of the con?dentiality interests that attach to executive branch and White House decision?making, I am unable to comment further. 13 QUESTIONS FOR THE RECORD MAKAN DELRAHIM NOMINEE TO BE ASSISTANT ATTORNEY GENERAL OF THE ANTITRUST DIVISION QUESTIONS FROM SENATOR DURBIN 1. The credit and debit card industries, which handled about six trillion dollars in electronic payments last year, are dominated by the market power of the Visa?MasterCard duopoly. These companies have the power to dictate security standards, ?x interchange fee rates, mandate terms of card acceptance, and sti?e market entry by potential competitors. Do you think the credit and debit card industries deserve careful antitrust scrutiny? RESPONSE: I believe that antitrust enforcers should be keenly aware of industries that affect American consamers in their everyday lives, and the credit and debit card industries are important industries in that regard. Based on my previous experience at the Department of Justice, I know first?hand the Antitrust Division has given and, if confirmed, I pledge it will continue to give careful scrutiny to these industries. 2. What in your View is the benchmark for excessive consolidation in a market? RESPONSE: In the abstract I think it is dif?cult to de?ne such a benchmark given how markets may vary. For example, the amount of concentration that might be of concern in a market with high entry barriers could be signi?cantly less of a'concern in a market with little or no entry barriers. As a general matter, I think one could take guidance from the TC Horizontal Merger Guidelines which refer to a highly concentrated market when the Index exceeds 2500. 3. Do you support presumptions of anticompetitiveness for proposed mergers that exceed a certain level of market concentration? RESPONSE: Yes, such a presumption is contained in the case law and the Horizontal Merger Guidelines. a. Is it appropriate for the President~elect or President to have private meetings with the CEOs of companies that are undergoing merger reviews? RESPONSE: The President or other Federal Government of?cials may have a variety of reasons to discuss issues with industry CEOs, including those Who may have a particular merger under review. It is important to note that there are safeguards in place, as re?ected in the January 27, 2017, White House Counsel Donald McGahn memo entitled ?Communications Restrictions with Personnel at the Department of Justice? and the Attorney General Holder memo dated May 11, 2009. These memos were promulgated to protect cases and investigations from political in?uence. 1 will comply with these memos to ensure the integrity and 14 independence of Antitrust Division investigations. b. Do such meetings create the appearance that the President is involving himself in the merger review process? RESPONSE: The President or other Federal Government of?cials may have a variety of reasons to, discuss issues with industry CEOs, and that might include those who may have a particular merger under review. As noted above, it is important to note that there are safeguards in place, as re?ected in the January 27, 2017, White House Counsel Donald McGahn memo entitled ?Communications Restrictions with Personnel at the Department of Justice? and the Attorney General Holder memo dated May 11, 2009. These memos were promulgated to protect cases and investigations from political in?uence. I will comply with these memos to ensure the integrity and independence of Antitrust Division investigations. 5. Was it appropriate for President-elect Trump to meet with the CEOs of Bayer and Monsanto in private Trump Tower meetings during the transition while those companies had pending mergers under review? RESPONSE: The President or other Federal Government of?cials may have a variety of reasons to discuss issues with industry CEOs, and that might include those who may have a particular merger under review. It is important to note that there are safeguards in place, as re?ected in the January 27, 2017, White House Counsel Donald McGahn memo entitled ?Communications Restrictions with Personnel at the Department of Justice? and the Attorney General . Holder memo dated May 11, 2009. These memos were promulgated to protect cases and investigations from political in?uence. I will comply with these memos to ensure the integrity and independence of Antitrust Division investigations. a. Is it true that you had no knowledge of, and no role in, the hacking by Senate Republican Staff of Democratic files between 2001 and 2003? RESPONSE: I had no knowledge or role in the hacking by Senate Republican Staff of Democratic ?les between 2001 and 2003. The ?rst I learned of the activity was through public reporting after I had left the Senate Judiciary Committee staff. b. What did you do when you learned about your staff?s involvement in this hacking? RESPONSE: I learned of the activities by public sources after I had left the Senate Judiciary Committee staff and was working in the Antitrust Division of the Department-of Justice. At that time, I fully cooperated and assisted the Senate Sergeant?at?Arms in the investigation into the conduct. 15 QUESTIONS FOR THE RECORD MAKAN DELRAHIM NOMINEE TO BE ASSISTANT ATTORNEY GENERAL OF THE AN TITRUST DIVISION QUESTIONS FROM SENATOR WHITEHOUSE 1. For the last 40 years, the White House has imposed a policy restricting the of White House staff to the Department of Justice to avoid political in?uence, or even the appearance of political in?uence, on the Department of ustice? investigative and enforcement functions. On January 27, 2017, White House Counsel Donald McGabn issued a memo Communications Restrictions with Personnel at the Department of Justice to restrict communications between White House staff and DOJ. a. What was your role: if any, in developing that policy? b. Have you given any guidance or training on that policy to other officials in the White House? RESPONSE: I am aware of the White House Counsel?s memo entitled ?Communications Restrictions with Personnel at the Department of Justice.? As you note, this policy includes guidance limiting discussions between the White House and the Department of Justice regarding ongoing or contemplated cases or investigations. The White House Counsel?s Of?ce, through its ethics compliance program, provides training for White House staff. 2. This month, Senators Franken, BluInenthal and I wrote to Don McGahn asking why the White House had not made public a policy governing contacts between the White House and iaw enforcement agencies outside the Department of Justice. a. Is there additional guidance from the White House Counsel?s of?ce akin to the above-referenced January 27, 2017 memo that restricts communications from White House staff to other agencies regarding enforcement activity at other agencies besides If not, why? b. If a written policy has been established, what steps have been taken to disseminate it to relevant federal law enforcement agencies? Have you advised other agencies to institute, or update as the case may be, agency policies related to contacts with the White House that re?ect the January 27th policy? 0. What enforcement mechanisms does the Of?ce of White House Counsel have in place to enforce official policy with respect to White House-law enforcement agency contacts? RESPONSE: In light of the con?dentiality interests that attach to executive branch and White House decision-making, I am unable to comment. 3. Developments since the January 27th memo have also raised questions about whether that memo provides sufficient guidance to prevent inappropriate contacts between the White House and the Department of Justice and what steps, if any, the White House is taking to enforce it. Reports of the following events are of particular concern: l6 a. Efforts by the White House Counsel?s of?ce on or about March 3, 2017, to secure access to what you believed to be an order issued by the Foreign Intelligence Surveillance Court authorizing surveillance related to President Trump and his associates. b. A request by White House Chief of Staff, Reince Priebus, to the FBI on or about February 15, 2017, asking the agency to refute reports that Trump campaign advisers had contact with Russia during the 2016 presidential. campaign. 0. A call from White House Senior Adviser Stephen Miller to the home of Robert Capers, the US. Attorney for the Eastern District of New York, on or about February 3 2017, to dictate how he should defend the Administration?s travel ban. d. A call from President Trump to U. S. Attorney for the Southern District of New York Preet Bharara on or about March 9, 2017, the day before he was asked to resign from his position. Do you believe any of these reported contacts with the White House violate the January 27 policy contacts policy that you helped author? Are you aware whether an investigation 7th Was conducted into whether the contacts violated January 2 policy and what conclusions were made? RESPONSE: I lack suf?cient personal knowledge to express an opinion as to whether the contacts you reference are in compliance with the White House policy. 4. Under what circumstances would it be appropriate for a White House employee to communicate with DOJ about a speci?c pending antitrust enforcement or litigation action? RESPONSE: The White House Counsel?s memo entitled ?Communications Restrictions with Personnel at theDepartment of Justice? provides guidance limiting discussions between the White House and the Department of Justice regarding ongoing or contemplated cases or investigations. As stated in the policy, it was issued to ?ensure the DOJ exercises its investigatory and prosecutorial functions free from the fact or appearance of improper political in?uence.? I believe it is essential that all investigations conducted by the Antitrust Division are initiated and conducted in a fair, professional, and impartial manner, without regard to political considerations. Contacts from the President or the White House must comply with Department policies, including a 2009 memorandum by Attorney General Eric Holder. It is important that all antitrust investigations comply with Department policies, and that political considerations do not in?uence the handling of particular cases. 5. It is so important that exercises its antitrust authority impartially that Congress enacted the Tunney Act, which requires that antitrust consent decrees be subject to public comment and judicial review, and also disclose all contacts between settling defendants and any federal employees. It was passed after disclosure of President Nixon? in?uence on then Deputy Attorney General Richard Kleindienst to (hep DOJ ?s antitrust suits against International Telephone and Telegraph in exchange for campaign donations. a. If, as head of the Antitrust Division, you received an email or phone call from a .17 former colleague in the White House Counsel?s of?ce about a merger or other anti? competitive activity for which your division was either contemplating an investigation or enforcement action or was already engaged in litigation, would you take that call or answer that email? What other steps would you take? b. If, as head of the Antitrust Division, you receive any communications by the White House, or become aware of such communications to DOJ staff, regarding a particular antitrust matter, will you commit to informing this committee of such communications within one week of when the communication is made or attempted? RESPONSE: I believe it is essential that all investigations conducted by the Antitrust Division are initiated and conducted in a fair, professional, and impartial manner, without regard to political considerations. Contacts from the President or the White HouSe must comply with Department policies, including a 2009 memorandum by Attorney General Eric Holder. It is important that all antitrust investigations comply with Department policies, and that political considerations do not in?uence the handling of particular cases. 18 QUESTIONS FOR THE RECORD DELRAHIM NOMINEE TO BE ASSISTANT ATTORNEY GENERAL OF THE ANTITRUST DIVISION QUESTIONS FROM SENATOR KLOBUCHAR 1. Historically, horizontal mergers have draw more attention than vertical acquisitions. More and more, I am hearing concerns about vertical mergers. For example, both independent video content providers and independent video distributors worry that they may be discriminated against if video distributors acquire their own content providers. And farmers have raised concerns that the combination of seed companies with companies focused on genetic traits will result in less innovation. a. Do you believe vertical mergers can be anticompetitive? b. How would you analyze such mergers? RESPONSE: I think the majority of antitrust schoiars recognize that most vertical mergers raise less serious competition concerns than horizontal mergers, which - bring together firms competing directly against one another. One reason is that certain vertical mergers can create ef?ciencies that bene?t consumers in a Way that horizontal mergers may not. At the same time, there are instances where a vertical merger may have anticompetitive effects. As with any potential enforcement action, it is therefore important to carefully and closely assess the facts to determine whether there is, on balance, a harm to consumers ?owing from the proposed transaction. The vertical mergers most likely to require a close look by government enforcers are those-where there is risk that either upstream or competition may be foreclosed by the transaction. 2. The Antitrust Subcommittee took a close look at Anheuser?Bush lnBev?s acquisition of Miller?Coors. We held a hearing, and Senator Lee and jointly raised concerns with the Department of Justice that the merger could limit the ability of independent wholesalers to carry craft beer, which, in turn, could sti?e the growth of craft beer. The Department of Justice eventually reached a settlement with the merging companies with conditions to protect competition, including an independent monitor. a. Can you commit to me that you will make sure the companies abide by those conditions? RESPONSE: It is important to ensure that companies are abiding by the commitments they made in the Division?s consent decrees. I will commit to you to take vigorous steps to ensure that the companies in this transaction abide by the commitments they made. 3. According to some, newspapers face internet platforms with market power. Instead of using that power to increase choices for consumers, the concern is that those platforms may use it to extract a greater share of advertising revenue at the expense of newspapers or other media. I raise this example because a reduction in the quality of the press threatens not just the press, 19 but the vibrancy of our democracy. Some have suggested to me that antitrust enforcement should not be concerned with monopsony issues. What is your view? RESPONSE: I believe that antitrust laws are concerned with and should be concerned with monopsony issues. The antitrust laws cover unilateral and coordinated conduct in industries throughout the economy, including companies operating on the Internet such as online platforms. Over time, these laws have proven effective and adaptable to various types of anticompetitive conduct even as industries have evolved and technology has created new markets. If I am con?rmed, the Antitrust Division will investigate and vigorously enforce the antitrust laws with respect to online platforms as I would in any industry, based on the economic and analytical tools appropriate to the circumstances and to ensme robust competition and innovation 4. Our antitrust laws are rooted in the sound principle that competitive marketplaces form the foundation of a thriving economy. A century later after their passage, the antitrustlaws are as important as ever. But railroads and oil companies have given way to platform technology companies. Oil and steel have given way to ones and zeros. Today, our economy is dominated by a small number of tech companies that serve as platforms for a digital economy. Just as oil companies and railroads provided amazing bene?ts and opened the doors to new markets, they also functioned as gateways with enormous power. The same holds true for dominant technology platforms. a. In your opinion, what should the DOI be doing to ensure that these markets remain open and competitive? RESPONSE: The Department should be evaluating these industries as it evaluates other industries that is protecting them from anticompetitive mergers and anticompetitive conduct that harms consumers. In addition, please refer tomy answer to your previous question which I believe is relevant. 5. i have also spoken about the issue of whether merger conditions work. One issue is that we have little information after the fact. I have proposed requiring parties to provide information after their transaction closes, so that the antitrust agencies can gauge the effectiveness'of remedies in real time. a. Do you have any thoughts on this idea? RESPONSE: I agree with you that having a good analytic understanding of the effectiveness of previous merger enforcement actions would help improve future enforcement. I have not studied this issue, but if con?rmed and presented the opportunity, I look forward to studying it. 20 QUESTIONS FOR THE RECORD MAKAN DELRAHIM NOMINEE TO BE ASSISTANT ATTORNEY GENERAL OF THE AN TITRUST DIVISION QUESTIONS FROM SENATOR FRANKEN 1. In January, after and Time Warner continued that they would structure their proposed acquisition to circumvent FCC review, 12 of my colleagues and I asked the companies to send us the public interest statement that they would have had to send to the FCC. Their response did little to address my concerns and instead was so bold as to state that the deal raises no anticompetitive concerns because it is vertical in nature. Top execs from and Time Warner wrote, ?[the government] typically permits such mergers to proceed, imposes conditions to address any competitive risks, and narrowly tailors those conditions to avoid undermining the mergers? consumer benefits. Yet this merger presents no such risks at all.? We?ve seen the risks before, and we?ve seen how successful merger conditions have been in the past. In the years since the Comcast~NBCUniversal deal was completed a deal that you lobbied for the Combined company has faced complaint after complaint for engaging in anticompetitive behavior and not complying with conditions that the FCC and DOJ imposed on that transaction. a. Mr. Delrahim, without commenting on the pending transaction speci?cally, do you subscribe to the view that vertical mergers aren?t cause. for concern by antitrust regulators? And just because vertical deals have been approved in the past, do you believe that that means that all future vertical transactions should also be approved? b. And to what extent do you think the Antitrust Division should consider the enforceability of behavioral conditions and other remedies when determining whether to challenge a proposal? RESPONSE: As a general matter, while antitrust law traditionally has recognized that horizontal mergers potentially have a more direct effect on competition since they involve direct competitors, in certain circumstances vertical mergers indeed also can raise competitive concerns. I think every transaction should be reviewed based on its particular facts and circumstances. Thus, just because a transaction or particular types of transactions have been approved in the past does not mean that they could not raise competitive concerns in the future. With respect to remedies, as a general matter, I tendio believe structural relief has many advantages over behavioral relief when antitrust law enforcers are considering whether and how to remedy a competitively problematic transaction. Evaluating the enforceability of any behavioral conditions should be an important consideration in determining the appropriateness of such a remedy. 2, I?d like to highlight something you once said with respect to media consolidation. At a 2003 speech before the Recording Artists? Coalition, you said, ?media mergers do get somewhat 21 more public attention than other mergers because media is regarded as important to the functioning of a democracy. As a result, there has also been a fair amount of discussion of whether media deals should get a higher, or at least different, level of antitrust scrutiny.? I agree that any further media consolidation that could impact the free flow of information deserves the highest level of scrutiny. Allowing a select few corporations to pick and choose the content available to everyday Americans would absolutely threaten the basic principles of our democracy. a. Mr. Delrahim, can you tell me what side of the discussion you referenced that you fall on? In other words, setting aside whether media mergers require a different standard, do you agree that the First Amendment and democracy should inform merger analysis in cases of media consolidation? RESPONSE: I agree with you that media consolidation is an important public policy issue. When assessing media mergers the Division is obligated to follow the dictates of Section 7 of the Clayton Act, which provides that mergers that may tend substantially to lessen competition violate the statute. Typically, there is more likely to be antitrust concern about the competitive effects of a proposed merger in markets with a. limited number of competitors. Thus, antitrust enforcement in those markets preserves additional competitors in the market. More competitors in the market often, but does not necessarily, equate with First Amendment values. For example, it likely, but not always, would be the case that Division enforcement under Section 7 of the Clayton Act to preserve competition will have the effect of preserving a diversity of media viewpoints. Also, as more programmers and media outlets compete for advertising and viewers, the likely result will be more diversity of programming choices. Additionally, as media technology improves, the likely resalt will be greater Opportunity for diversity of programming. 3. The Open internet is one of the most competitive marketplaces the world has ever seen, and the Antitrust Division needs someone who understands that net neutrality is the reason why. Because of net neutrality, an email from my constituent in rural Minnesota reaches me as quickly as an email from my bank. Because of net neutrality, the website for my local pizza parlor loads as quickly as the website for a national chain. Because of net neutrality, I can stream videos of my grandchildren just as easily as I can stream a hit TV show. Should Chairman Pei move forward with his plan to undo the Open Internet Order, eyes may turn to the FTC and Antitrust Division to protect competition on the internet. But I don?t think antitrust law alone can adequately protect the open internet. a. Mr. Delrahim, what do you think? What role should the Antitrust Division have in protecting net neutrality? b. Can you tell me then whether you agree that the FCC provides the 1303 with important industry expertise on matters of telecommunications and media . competition? . c. And do you think that the nation?s antitrust laws can address all the objectives of strong net neutrality rules? 22 d. Mr. Delrahirn, during your time lobbying Congress on behalf of Comcast, did you ever lobby on the issue of net neutrality? RESPONSE: To the extent that firms with market power take anticompetitive exclusionary actions to limit competition on the internet, the Antitrust Division can and should use the antitrust laws to protect that competition. It would not be appropriate to utilize the antitrust laws to reach objectives beyond protecting competition. While I have not been at the Antitrust Division for a number of years, during my time there the staffs of the FCC and Antitrust Division often communicated providing each other with insights and expertise. I expect that practice has continued and think it is valuable. With respect to my past representation of Comcast, it did not extend to issues associated with net neutrality nor its merger with UniverSal. 4. In the past, the FCC and have shared jurisdiction over media consolidation deals. This complementary jurisdiction is important because it ensures review by the technological experts at the FCC, who may be better equipped to understand how such a deal will impact Americans? access to affordable and essential telecommunications services. It also enables the FCC to take part in crafting behavioral conditions aimed at remedying harms that the finalized deal might pose to competition and consumers. a. Would you say that?s a fair description of the overlapping jurisdiction? The FCC has also had a critical role in ensuring merging companies are held accountable for the benefits that they argue their deal will bring. For example, in its review of Charter?s proposed acquisition of Time Warner Cabie, the FCC recognized that many of the companies? claimed benefits of the deal w? such as interact speed upgrades and network buildout conunitments were not transaction?speci?c, meaning they were things the companies could already do with or without the merger. So, when the FCC ultimately approved the deal, it ensured that the parties made a commitment to actually follow through on those claimed bene?ts a commitment that is now legally enforceable by the FCC. So let?s quickly talk about and Time Warner. In January, after and Time Warner con?rmed that they would structure their proposed acquisition to circumvent FCC review, 12 of my colleagues and I asked the companies to send us the public interest statement that they would have had to send to the FCC. While the Companies were silent as to whether the deal would actually result in lower prices for consumers, they did discuss a number of consumer bene?ts that they say will arise out of their deal including more relevant advertising and social media sharing opportunities. The companies also suggested that one major bene?t of the acquisition is that it will strengthen their incentives to invest in the deployment of wireless broadband speci?cally 5G. Ultimately, they say, this will promote competition in the broadband industry by allowmg them to compete head-to-head with cable. b. Setting aside whether wireless deployment would in fact be a merger-specific bene?t in the case of proposed acquisition of Time Warner, how would the DOJ without the assistance and enforcement capacity of the FCC hold a telecommunications provider accountable for such a commitment? Or, can you tell 23 me assuming you cannot discuss the pending transaction is it appropriate for the Antitrust Division to consider stated bene?ts of a deal and Whether they outweigh the substantial harms if there is no way to ensure that a combined company actually acts to achieve such bene?ts? RESPONSE: It would not be appropriate to discuss any merger currently pending before the Antitrust Division. Knowing of your keen interest in this area, I would like to note that in evaluating all transactions, it is important for antitrust enforcers to consider both the bene?ts and the harms of the deal, including the important question of Whether, given the merger, the bene?ts alleged would, in fact, be realized and are merger-specific. With respect to shared jurisdiction, in a wide variety of markets the Antitrust Division talks to experts in particular industries to understand the implications of the merger and that can be and has been aCcomplished Without overlapping jurisdiction. . In the past, I?ve expressed concerns about intemet giants that use their positions as dominant platforms to sti?e competition and may be as a result inhibiting the free ?ow of information. In recent years, we?ve heard countless allegations of online intermediaries leveraging their market dominance to the detriment of content creators and innovative startups. And even more recently, we?ve seen how large of a role they play particularly Goo gle and Facebook in shaping Americans? access to the news. a. What would you do to address allegations that these dominant platforms? unilateral behavior is anticompetitive and may ultimately harm the free ?ow of ideas and content? b. In the past; the FTC investigated Google?s behavior in the search and online advertising markets, and it reviewed Apple?s treatment of its competitors in the music streaming market. Can you explain how you believe the FTC and DOJ share authority over these online platforms? And do you think that the agencies? past divisions of responsibility should be maintained going forward? RESPONSE: To the extent that companies with market dominance take anticompetitive actions to sti?e competition, vigorous and timely antitrust enforcement is appropriate. If credible allegations of antitrust law violations are made, such allegations will be investigated if I am con?rmed. The FTC and Department of Justice share certain antitrust jurisdiction over merger and civil nonmerger matters in many, but not all industries. For example airline and telecommunications mergers are subject to the jurisdiction of only the Department of Justice. Over the years the two agencies have developed a clearance process to ensure that only one agency reviews particulartransactions or conduct. If I am con?rmed, I will work closely with the Federal Trade Commission to review past divisions of responsibility and ensure that future divisions of responsibility between the agencies are both appropriate and efficient. 24 l. QUESTIONS FOR THE RECORD MAKAN DELRAHIM NOMINEE TO BE ASSISTANT ATTORNEY GENERAL OF THE ANTITRUST DIVISION QUESTIONS FROM SENATOR COONS I believe that strong intellectual property'protection promotes American innovation. At times, I have been concerned that our antitrust enforcement has not struck the proper balance between promoting competition and incentivizing innovation. What is your view on how these two interests should be balanced? RESPONSE: As a registered patent attorney, I have a deep background and interest regarding the intersection of intellectual property and antitrust. Intellectual property rights are a form'of property and recognized in the US. Constitution. I feel strongly that an intellectual property owner?s rights need to be respected and protected. It is my View that the intellectual property laws combined with the proper enforcement of antitrust laws together form the basis of our successful innovation policy. At the same time, antitrust enforcers have a legitimate role in ensuring that intellectual property rights are not abused in violation of the antitrust laws. In 2015, I wrote then~Attorney General Holder and Assistant Attorney General Baer regarding the request of the Institute of Electrical and Electronics Engineers Standards Association for a Business Review Letter trom the Antitrust Division on patent policy changes that it proposed to adopt for the licensing of standards~essential patents. lwas concerned about the potential impact on the competitiveness of American innovators and the US. economy if the U. S. was seen as endorsing an approach that I believed inappropriately devalued certain patents, and indeed we have seen this Business Review Letter used against US. companies in anti-monopoly investigations around the world. a. What do you believe is the appropriate role of the Antitrust Division in relation to the licensing of standards essential patents? b. How would you ensure that US. regulators take into account potential impacts of their actions on antitrust investigations abroad? RESPONSE: I think it is important for U.S. of?cials to appreciate the potential impacts of their actions domestically and globally. The area of licensing standards? essential patents is one that has recently engendered litigation and commentary. The appropriate role for the Antitrust Division, in my view, is to ensure that a property owner?s rights are respected and protected while, at the same time; ensuring that IP rights are not abused in violation of the antitrust laws. The application of the antitrust laws must not illegitimately sti?e creators or innovation by condemning pro?competitive activities that would maximize incentives for investments or efficiency?maximizing business arrangements. Antitrust enforcers should also strive to eliminate as much as possible the unnecessary uncertainties for innovators and creators in their ability to exploit their intellectual property rights, as those 25 uncertainties can also reduce incentives for innovation. Only when the holders of intellectual preperty rights go beyond the legitimate exercise of these rights should antitrust laws be used to constrain their activities, and only then in a manner that is based on sound economic policies. 3. At times during the campaign, the President made comments about ongoing antitrust reviews that made me concerned that there would not be the same level of political independence we have come to expect in these reviews. a. How will you ensure that decisions with respect to high?pro?le transactions are shielded from undue political in?uence? b. Have you made any assurances to the President, Vice President, or any administration of?cials that you will make determinations in line with the President's desired outcomes? RESPONSE: I believe it is essential that all investigations conducted by the Antitrust Division are initiated and conducted in a fair, professional, and impartial manner, Without regard to political considerations. Contacts from the President or the White House must comply with Department policies, including a 2009 memorandum by Attorney General Eric Holder. It is important that all antitrust investigations comply with Department policies,- and that political considerations do not in?uence the handling of particular cases. 26 QUESTIONS FOR THE RECORD MAKAN DELRAHIM NOMINEE TO BE ASSISTANT ATTORNEY GENERAL OF THE ANTITRUST DIVISION QUESTIONS FROM SENATOR CRAPO For companies to accurately assess the potential regulatory risks to a proposed transaction, it is important that they know they will receive consistent and fair treatment before Whichever Federal agency reviews their transaction. Otherwise, potential regulatory uncertainty may cause companies to decide not to proceed even though the transaction is pro-competitive and would bene?t consumers and the economy through increased investment and job creation. 1. If con?rmed to serve as an Assistant Attorney General, will you ensure that the Antitrust Division at the Department of Justice conducts fair and transparent merger investigations? RESPONSE: Consistent and fair treatment of companies proposing transactions should be a hallmark of law enforcement and; if con?rmed, I will strive to ensure the Antitrust Division achieves that goal in all of its reviews. I agree that regulatory uncertainty has the potential to deter or delay procompetitive transactions. The Antitrust Division has for many decades published Merger Guidelines to help reduce uncertainty for companies seeking to merge and I believe those guidelines provide a useful framework for merger reviews. 2. Will you work to ensure that that the standards and procedures used by the agency to evaluate a transaction are applied consistently? RESPONSE: I agree that the standards and procedures used by an agency should be applied consistently. If con?rmed, I Will pursue such consistency. 27 QUESTIONS FOR THE RECORD MAKAN DELRAHIM NOMINEE TO BE ASSISTANT ATTORNEY GENERAL OF THE ANTITRUST DIVISION QUESTIONS FROM SENATOR BLUMENTHAL Airlines 1. As a result of numerous horizontal mergers, just four airlines control 80 percent of ?ights within the United States. This lack of competition reduces incentives for airlines to be responsive to customer concerns as the now~famous Video of a customer being dragged off a United Airlines ?ight only con?rmed. a. Would you agree that the airline industry is over-concentrated? b. What can antitrust enforcers do abbot it? 0. Do you believe the DOJ should review past decisions if the conclusions about merger?s impact on competition prove to be incorrect? RESPONSE: Competition throughout the economy helps consumers reap the bene?ts of innovative, high~quality products and services at the lowest prices. Competition is particularly important in the airline industry, with so many American consumers traveling by air. In the airline industry, competition can take place in particular citynpair markets, some of which may have signi?cant concentration, While others have multiple competitors, resulting in vigorous competition. Antitrust enforcers need to be vigilant in ensuring competition in the airline industry and fully scrutinize conduct and proposed mergers that diminish competition. I think it is important to understand the effects of past decisions to identify anticompetitive conduct that harms consumers and also to inform future enforcement. Conditions 2. Antitrust regulatorsreviewing a proposed merger have three options: let the merger proceed, sue to block the merger, or allow the merger to proceed under certain conditions. Conditions imposed under the third option may range from requiring the new company to sell some of its assets to imposing speci?c limits on the new company?s behavior. However, market forces or . the limited enforcement bandwidth of antitrust agencies often limits the effectiveness of these behavioral conditions, sometimes leaving consomers to face a more concentrated market that provides worse quality at a higher prices, especially if those conditions are violated with impunity. a. What is your view of how merger conditions should be imposed? b. Can you name a merger for which conditions were not imposed but you believe they should have been? 0. Can you name a merger for which conditions were imposed but you believe they should not have been? 28 d. Can you explain, in general, when you would reject suggested merger conditions and what you would do instead? RESPONSE: As a general matter, I tend to believe structural relief has many advantages over behavioral relief when antitrust law enforcers are considering Whether and how to remedy a competitively problematic transaction. I do not have the information and analytical data the agencies had before them in making individual determinations in past cases and therefore cannot judge the propriety of those decisions or whether conditions should or should not have been imposed on particular past mergers. Each case presents unique facts and circumstances that need to be taken into account in making any particular enforcement decision. As I noted above, I generally favor structural relief, where possible, over long-term behavioral relief. Cooperation with State Attorneys General 3. Historically, State Attorneys General often work with the Department of Justice to enforce both state and federal antitrust laws. a. If you are continued, will you commit to cooperating with State Attorneys General, including sharing relevant information with State Attorneys General should they seek it? b. If I hear from one or more State Attorneys General that they haVe not received a response from your of?ce about an antitrust matter, will you assure me that you will provide a response should I seek one? RESPONSE: I believe it is bene?cial to both the federal antitrust agencies and the states to cooperate in enforcement actions, including sharing relevant information where lawful and appropriate. If con?rmed, I will commit to cooperating in appropriate cases with my state attorney general colleagues. As part of that cooperation, I can assure you that communications from the AntitrustDivision will be timely and responsive to the extent information can be shared consistent with any constraints on sharing such information. Transparency 4. During the presidential campaign, then?candidate Trump objected to proposed merger with Time Warner, arguing that CNN?~which is owned by Time Warner?has been unfair to him. Since President Trump made that statement, he has met with the CEO of Separately, Jared Kushner has reportedly met with top Time Warner executives and complained about news coverage.? a What will you do to ensure that there is no political interference with your work, from the President and his associates or otherwise? b. Will you commit that if President Trump or anybody working on his behalf contacts you about a pending antitrust matter, you will inform the American people of that contact and make its contents of that communication public? '29 RESPONSE: I believe it is essential that all investigations conducted by the Antitrust Division are initiated and conducted in a fair, professional, and impartial manner, without regard to political considerations. Contacts from the President or the White House must comply with Department policies, including a 2009 memorandum by Attorney General Eric Holder. It is important that all antitrust investigations comply with Department policies, and that political considerations do not influence the handling of particular cases. 4. On January 27, 2017, White House Counsel Donald McGalm issued a memo entitled ?Communications Restrictions with Personnel at the Department of Justice.?1 The ?rst section of that memorandum details limitations on discussions between the White House and the Department of Justice regarding ongoing or contemplated cases or investigations a. Are you aware Of this policy? b. Have you undergone any guidance or training on this policy? 0. Do you agree that it would be inappropriate for a White House employee to communicate with the DOJ about a speci?c pending antitrust enforcement or litigation action? d. Do you agree that it would be inappropriate for a White House employee to direct the DOJ not to ?le a lawsuit in a contemplated case or to continue an investigation? e. Are you familiar with any other policies currently in place that limit or otherwise address communications between the White House and all other law enforcement agencies, including those policies that affect active cases, contemplated cases, or investigations? What are those policies? f. Do you agree that imposing limitations on this type of communication between the White House and law enforcement agencies is important for the integrity of our nation?s justice system? RESPONSE: I am aware of the White House Counsel?s memo entitled ?Communications Restrictions with Personnel at the Department of Justice.? As you note, this policy includes guidance limiting discussions between the White House and the Department of Justice regarding ongoing or contemplated cases or investigations. The White House Counsel?s Of?ce, through its ethics compliance program, provides training for White House staff. As stated in the policy, it was issued to ?ensure the DOJ exercises its investigatory and prosecutorial functions free from the fact or appearance of improper political influence.? Under the policy, White House staff are required to coordinate and clear with the White House Counsel?s Of?ce any communication with the DOJ on pending or contemplated investigations or enforcement actions and such communications are made only through certain designated senior officials at the DOJ. I believe that it is essential that all investigations conducted by the Antitrust Division are initiated and conducted in a fair, professional, and impartial manner, without 1 Memorandum to All White House Staff: Communications Restrictions with Personnel at the Department of Justice, available at: 3O regard to political considerations. Contacts from the President or the White House must comply with applicable Department policies and guidance. It is important to ensure that all antitrust investigations comply with these policies, and that partisan considerations do not in?uence the handling of particular cases. 6. Please provide your opinion on the following recent mergers, including answers to the speci?c questions listed for each. a. American Airlines and U.S. Airways This merger was approved with the condition that the merged company had to divest landing rights at key airports across the country. i. In your view, was this condition suf?cient to protect consumers? ii. Is there anything that you would have done differently regarding approval of the merger, such as imposing additional conditions? b. United Airlines and Continental Airlines - This merger was approved only under the condition that the takeoff and landing rights for Newark Liberty Airport were transferred to Southwest. i. In your view, was this condition suf?cient to protect consumers? ii. Is there anything that you would have done differently regarding approval of the merger such as imposing additional conditions? 0. and DirecTV~ This merger was cleared by the DOJ without conditions; the FCC later imposed its own restrictions on the deal. But the Department of Justice concluded that there was no signi?cant risk to competition. i. Do you agree with this outcome? ii. Is there anything that you Would have done differently regarding approval of the merger such as imposing additional conditions? d. and Mobile? This merger was ultimately abandoned by the companies after the and the FCC opposed the deal. i. Do you think this merger should have been approved? ii. Is there anything that you would have done differently regarding the Department of Justice?s handling of the merger? e. Time Warner Cable and Comcast This merger was abandoned after the Department of Justice expressed concerns that Comeast would become the gatekeeper for Internetwbased services. . i. Do you think this merger should have been approved? ii. Is there anything that you would have done differently regarding the Department of Justice?s handling of the merger? RESPONSE: With respect to each of the past merger decisions referenced above, I was not privy to the confidential information and analytical data the Department had in its possession at that time, and therefore am not in a position to comment. I can say that I have tremendous respect for the individuals who have served the American public in leadership roles and the career civil service staff at the Antitrust Division. Vertical Mergers 31 7. As you know, a vertical merger is a merger between two companies in different points in the supply chain and do not compete directly against each other. For example, when a widget manufacturer buys a Widget distributor, this is a vertical merger. Some economists believe that vertical mergers are always good for consumers. However, others have raised concerns that this kind of merger can increase companies? incentives and abilities to reduce competition and raise prices a. Do you believe that vertical mergers can present competition concerns? b. If so, please describe the factors that you believe the DOJ ought to scrutinize particularly carefully when reviewing vertical mergers. RESPONSE: I think the majority of antitrust scholars recognize that most vertical mergers raise less serious competition concerns than horizontal mergers, which bring together firms competing directly against one another. One reason is that certain vertical mergers can create ef?ciencies that bene?t consumers in a way that horizontal mergers may not. At the same time, there are instances Where a vertical merger may have anticompetitive effects. As with any potential enforcement action, it is therefore important to carefully and closely assess the facts to determine Whether there is, on balance, a harm to consumers ?owing from the proposed transaction. The vertical mergers most likely to require a close look by government enforcers are those where there is risk that either upstream or competition may be foreclosed by the transaction. fMal?ket Scrutiny 8. Every potential merger presents a unique set of circumstances, including the industry in which the merger is taking place. Some industries have a history of questionable conduct, in some cases because a structural characteristic of the industry makes collusion or other abusive practices a tenable strategy. Separately, some industries implicate fundamental rights. For example, concentration in the marketplace for news doesn?t just undermine the American economy, it undermines American democracy. Concentration in the marketplace for health care or health insurmice denies Americans access to a commodity health care - that is and ought to be a basic human right. a. in your View, are there any industries that require a greater level of scrutiny by the Department due to these or related factors? b. Speci?cally, do you believe there are industries with a track record of questionable . behavior in the marketplace that merits additional scrutiny for example, industries in which there are high barriers of entry, monopoly?like tendencies, or concentrated geographical areas? 0. Do you believe that there industries in which consolidation may present a threat to core fundamental rights? i. Speci?cally, do you believe that media consolidations may merit additional scrutiny for this reason? ii. Do you believe that health industry consolidation may merit additional scrutiny for this reason? 32 d. The University of Chicago recently hosted a conference that discussed whether there is a concentration problem in America. What do you think the answer to that question is? RESPONSE: It is certainly relevant for antitrust enforcers to understand the history of an industry, especially when that history involvesprevious antitrust law violations. The structural characteristics high entry barriers) of an industry are also relevant to evaluating conduct and mergers under the antitrust laws. I believe that antitrust enforcers should be keenly aware of industries that affect American consumers in their everyday lives, such as health care and media. I did not attend the University of Chicago conference and I am not familiar with the discuSsions they held. I do believe that antitrust analysis is typically very fact based and focuses on particular markets. That said, when there is high concentration associated with a particular matter under review, closer scrutiny of the conduct or merger being reviewed may be appropriate. Sherman Act Section Two 9. Over the last few decades, there has been a trend toward narrowing the scope of liability under Section 2 of the Sherman Act, and the Department of Justice and Federal Trade Commission have brought only a handful of cases under this law in recent years. The cases of US. v. Microsoft and US. 1). demonstrated how important this law and people willing to enforce it are. As we see even more modern technologies, platforms, and complex intellectual property issues, Section 2 may be one of antitrust?s most important tools for protecting comp etition. a. Do you believe that Section 2 can be used effectively to address harmful conduct that is the product of high levels of concentration? b. Will you commit to actively and aggressively using Section 2when warranted and appropriate as one of the tools available to the Justice Department to protect the competitive process and bene?ts for consumers? RESPONSE: I believe that Section 2?s prohibitions on anticompetitive ?monopolization and attempted monopolization are an important component of the nation?s antitrust laws. If con?rmed, I will support the Antitrust Division?s efforts to enforce Section 2 actively and aggressively when warranted and appropriate to protect competition and consumers. Online Platforms 10. Many large online platforms, in addition to providing access to users and a marketplace for suppliers, operate a variety of innovative health, content, banking, and other services themselves in direct competition with other suppliers. a. What should be done to ensure that these online platforms, which act as general Internet gatekeepers, don't discriminate in favor of their own services to the detriment of robust competition and innovation? 33 RESPONSE: The antitrust laws cover unilateral and coordinated conduct in industries throughout the economy, including companies operating on the Internet such as online platforms. Over time, these laws have proven effective and adaptable to various types of anticompetitive conduct even as industries have evolved and technology has created new markets. If I am con?rmed, the Antitrust Division will investigate and vigorously enforce the antitrust laws with respect to online platforms as I would in any industry, based on the economic and analytical tools appropriate to the circumstances and to ensure robust competition and innovation. ll. Internetwbased platforms are highly valuable as well as extremely powerful, as they can often serve as both an operating system and a storefront for online services. Without safeguards, however, these tech platforms can create anticompetitive obstacles for rivals and tip the scales in an already sensitive market. a. What are the existing laws and guidelines that govern the competitive behavior of internet-bas ed platforms and how they operate in the market? b. Can dominant platforms treat themselves differently than rivals or impose obstacles that keep rivals from competing? RESPONSE: Section 1 and Section 2 of the Sherman Act govern the competitive behavior of businesses throughout the economy, including Internet?based platforms. Those laws prevent companies from engaging in conduct that harms competition without appropriate justi?cation. Whether any particular conduct is an antitrust law violation will depend on the facts and circumstances surrounding the conduct. As a generai matter, however, platforms with monopoly power may not engage in exclusionary conduct that harms consumers in violation of the antitrust laws. Wages and Labor Conditions 12. Last year, the Obama administration called on states to take steps to reduce the use of non- compete contracts. The Department of Justice and the Federal Trade Commission also released guidance for human resources departments to identify wage collusion and announced that all such incidents of wage collusion would be criminally investigatedz a. Will your Department continue efforts to monitor and bring charges against wage collusion? b. Will you pledge to continue and strengthen the previous Administration?s to prevent employers from colluding to set wages and labor conditions, including but not limited to scrutinizing the use of non~compete contracts? RESPONSE: If I am confirmed, the Antitrust Division will continue its efforts to prevent employers from colludiug to set wages or engage in illegal antispoaching agreements that hurt AmeriCan workers. Companies that compete for workers that agree to end that competition by reaching an illegal agreement on the amount of The White House, ?Fact Sheet; The Obama Administration Announces New Steps to Spur Competition in the Labor Market and Accelerate Wage Growth,? October 25, 2016, available at of? (so/20 34 wages they offer violate the antitrust laws and should be subject to full and vigorous antitrust condemnation. Enforcement of Remedies and Consent Decrees 13. The strict enforcement of remedies is crucial to the work of the Antitrust Division. Currently, the Of?ce of the General Counsel evaluates and oversees adherence to those remediess But with the advancement of data capabilities and technological innovation, proper oversight is only growing more challenging4 For example, the rise of algorithmic pricing and machine learning is bringing new dynamics to antitrust laws a. What will you do to ensure that enforcement of conduct remedies and consent decrees is implemented effectively and consistently? RESPONSE: I believe it is important to ensure that companies are abiding by the commitments they made in the Division?s consent decrees and will be aggressive to ensure they are doing so. 3 US. Dep artment of Justice Antitrust Division, Anxious: Division Manuel, April 2015, available at 4 John Kwoka, Mergers, Merger Control, and Remedies: A Retrospective Analysis ofU.S. Policy. 5 David ?Poiicing the digital cartels, Price-setting algorithms mean regulators must now tackle collusion among machines? Financial Times, January 8, 2017, availabie at 1e6- 864f?20dcb3 Seedel; eny Useem, ?How Online Shopping Makes Suckers of Us All? The Atlantic, May 2017. available at all/52144291 35 QUESTIONS FOR THE RECORD MAKAN DELRAHIM .- NOMINEE TO BE ASSISTANT ATTORNEY GENERAL OF THE ANTITRUST DIVISION QUESTIONS FROM SENATOR HIRONO 1. President Trump has met With the CEO of as well as those of Bayer and Monsanto. These companies have pending mergers subject to review by the Antitrust Division. El. b. Should the President have such meetings and should he attempt to involve himself in these mergers? Should the President disclose transcripts of his meetings with the CEOs of companies with mergers subject to US government approval? How can you ensure that the Antitrust Division will be independent from the White House when evaluating and investigating merger activity so as to uphold America?s antitrust laws? Will you pledge to disclose any White House contacts on pending or potential antitrust matters? Given concerns about the President discussing his disapproval of speci?c companies, including his opposition to the AT&T~Tirne Warner merger in particular, during his campaign, as well as about White House interference with the Department of Justice, what steps Will you take to ensure a fully independent Antitrust Division? RESPONSE: I believe it is essential that all investigations conducted by the Antitrust Division are initiated and conducted in a fair, professional, and impartial manner, Without regard to political considerations. Contacts from the President or the White House must comply with Department policies, including a 2009 memorandum by Attorney General Eric Holder. It is important that all antitrust investigations comply with Department policies, and that political considerations do not in?uence the handling of particular cases. 2. Sinclair Broadcast Group?s proposed merger with the Tribune Media Company would giVe Sinclair stations in 42 cities, expanding its reach to a total of 108 communities. This merger has raised questions about media concentration as the combined company would serve close to three?quarters of US. households. in the past, Sinclair has drawn criticism for programming that bene?tted then Republican presidential candidates Donald Trump and George W. Bush. Given reports of the President?s continued attacks on the press, including reports of his threats to jail journalists, it imperative that consumers retain access to a diversity of news sources. Not only can concentration in the media can lead to higher prices, but concentration can have the effect of limiting the number or diversity of vieWp oints in a media market. Should consideration of effects like these be considered by the DOJ when examining a media merger? How? 36 RESPONSE: It would be inappropriate for me to discuss a pending merger. As a general matter, however, I agree with you that media consolidation'is an important public policy issue. When assessing media mergers the Division is obligated to follow the dictates of Section 7 of the Clayton Act, which provides that mergers that may tend substantially to lessen competition violate the statute. 3. Regarding the Warner merger, you?ve commented that you didn?t believe it posed a ?maj or antitrust problem.? What speci?cally did you mean by that? And do you believe that by nominating you to head the Antitrust Division, the President is endorsing your View and that, despite his claim on the campaign trail, he won?t act to stop the merger? RESPONSE: As a general matter, antitrust law traditionally has recognized that horizontal mergers potentially have a more direct effect on competition since they involve direct competitors, than do vertical mergers and my comment was pointing out that understanding. I have had no conversations with the President regarding this merger. Nor have I been privy to the information currently being reviewed by the Antitrust Division. No one should infer from my comment that I have any preordained outcome in mind for this merger investigation, or was privy to any information necessary for a complete antitrust analysis. I think every transaction should be investigated and analyzed based on its particular facts and circumstances. 4. If con?rmed, you will oversee the proposed merger of Monsanto and Bayer. Many small farmers in Hawaii are concerned about the potential increase in costs for inputs, such as seed and fertilizer, that this could cause. In January, the CEOs of Monsanto and Beyer reported in a joint statement that they had a ?very productive meeting? with the President about the merger, a. Has the President discussed the Monsanto-Bayer merger with you? b. Do you know What was said in the meeting between the President and the CEOs of Monsanto and Bayer? 0. Soon, only three companies could control the entire agrochemical market, as opposed to the six that controlled most of the market in 2013. If only a fewr companies own the patents for seeds, this may be good for their shareholders, but small farmers could become completely dependent on them. Do you believe that this consolidation will harm small Hawaii farmers? RESPONSE: I have not discussed this merger with anyone at the White House and I have no knowledge of anything that was said in the meeting your question references. Moreover, it would be inappropriate for me to discuss any pending merger investigation. I can say that the agricultural sector, including farmers, is important to the nation?s economy, and I commend your and Chairman Grassley?s vigilance in oversight of competition issues in this sector. 5. Last year, Aetna announced it would be pulling out of Affordable Care Act Exchanges in eleven states less than a month after the Administration announced it would sue to block their merger with Humane. In January, US. District Court Judge John Bates found that Aetna?s public claims about their reasons for pulling out of the Exchanges were largely untrue, that 37 thewithdrawal was retaliatory, and that Aetna?s methods to conceal their process for deciding on withdrawal were done in a manner ?speci?cally to evade judicial scrutiny.? If - con?rmed, how would you address a case like this? Would this kind of pressure by a company?wimproperly using political leverage?"impact your decisions and approach to mergers? RESPONSE: I believe it is essential that all investigations conducted by the Antitrust Division are initiated and conducted in a fair, professional, and impartial manner, without regard to political considerations. Contacts from the President or the White House must comply with Department policies, including a 2009 memorandum by Attorney General Eric Holder. It is important that all antitrust investigations comply with Department policies, and that political considerations do not in?uence the handling of particular cases. . In a February court hearing regarding the Anthem-Cigna merger, Anthem?s lawyer repeatedly implied that the merger would be cleared under the new Trump administration?s Department of Justice. He said: think it?s important for the Court to understand that there are at least two pathways to a closing here. One is through appeal and the other is through resolution with a new DOJ. And the motion is intended to preserve those options, primarily.? The American Medical Association subsequently wrote a letter to the Acting Assistant Attorney General for the Antitrust Division to express its ?alarm? regarding these statements and stating its belief that ?political in?uence should play no role in the enforcement of antitrust laws.? At the end of April, the US. Court of Appeals for the D.C. Circuit ruled that the lower federal court did not abuse its discretion in preventing the two health insurers from merging. a. Should politics play a role in the application of antitrust laws? b. You lobbied on behalf of Anthem in its ongoing effort to merge with Cigna. Do you think your past relationship caused them to view the Trump administration as likely to be more favorable to them? c. In 2812, you said that lobbying Congress on antitrust regulation could be effective, saying not a single assistant attorney general or FTC chair past or present that would admit he or she didn?t care about or at least didn?t listen to what members of Congress told them. They are always going to listen.? Is this the advice you gave Anthem? d. In your questionnaire, you said that you are ?recused from any further involvemen in the Anthem?Cigna merger. What specific steps will you take to ensure that you will fully recuse yourself from the matter, and how will you avoid the type of influence you highlighted in your 2012 comments? RESPONSE: It is my understanding, according to press reports, that Anthem announced on May 12 that it was abandoning further efforts to complete the contemplated merger with Cigna. To the extent this matter is still active, I will recuse myself and follow the Department and Antitrust'Division?s policy of informing all appropriate personnel of my recusal. There. should be no political in?uence in antitrust law enforcement decisions. I cannot speak to any motivations or considerations that Anthem?s representatives had in making particular arguments 38 that were developed well after my representation of the company ended. My advice to Anthem was consistent with my advice to other clients that they should present the bene?ts of their transaction to a variety of people and groups thatwere interested in the effects of the transaction. 7. For years, US businesses and their mergers have been targeted for antitrust prosecution abroadwoften in cases where the US agencies have decided that there is no antitrust concern. a. Do you think that this is a problem that the Antitrust Division should address and, if so, how would you engage with foreign jurisdictions on this issue? b. in some cases, US companies and their mergers have faced foreign antitrust reviews that appeared motivated by a desireto protect local competitors, or by other non- antitrust industrial policy considerations. How can the US help encourage antitrust enforcers to focus their efforts on protecting competition, rather than helping competitors or satisfying other political considerations? RESPONSE: I ?rmly believe that antitrust laws should not be misused by foreign authorities to defend their national businesses or to try to exclude American businesses from foreign markets. The underlying basis for all antitrust actions, in the United States and elsewhere, should be apprOpriate legal and economic analysis. I understand that the Antitrust Division communicates this message to the international community in a number of ways. When I was a Deputy Assistant Attorney General at the Antitrust Division, one of my primary responsibilities was representing the Division?s international affairs. In that capacity, I advocated strongly for foreign enforcers to apply sound, competition?based principles in their own enforcement efforts. If I am con?rmed as Assistant Attorney General, I will support the continuation and strengthening of those contacts as well as exploring additional avenues to ensure American businesses and consumers are not harmed by discriminatory antitrust enforcement by foreign antitrust authorities. 39 CQ.com - Senate Judiciary Subcommittee on Antitrust, Competition 0003 CQ CONGRESSIONAL TRANSCRIPTS Congressional Hearings Dec. 7, 2016 Final 10f71 - 7/7/2017 11:22 AM CQ.com Senate Judiciary Subcommittee on Antitrust, Competition 82?3&printzt1?ue . Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights Holds Hearing onthe - Time Warner Transaction MST QF PANEL. MEMBERS AND LEE: Welcome to the Subcommittee on Antitrust, Competition Policy and Consumer Rights. Before we start, I'd like to thank Ranking Member Klobuchar and for her staff in preparing for this hearing today. I'd also like to thank the chairman of the full committee, Senator Grassley, for his support for the hearing. After I and Senators Klobuchar, Grassley and Leahy give their opening remarks about this hearing, we will hear from our panel of witnesses. And I will introduce those witnesses shortly, and then we will have seven-minute question rounds from members of the subcommittee. We're living in what some might describe as sort of a golden age of television. One TV writer recentiy commented that "for the first time, I?ve begun to feel like there may in fact be too much good if that were possible. From "Game of Thrones" to "House of Cards," and so many other programs across so many television networks and so many different platforms, the quantity and quality of programming content may well be greater today than it ever has been in the past, or ever could have been predicted. The creativity, however, is not limited to content creators. Networks and distributors are also innovating to allow consumers new and unprecedented access to their content of choice. No longer are consumers limited to whatever bundle their local cable operator might have put together for them. DISH, Sony, and DirecTV all offer cabte bundles allowing consumers to stream live television over the internet. Net?ix, Amazon, HBO, CBS, among others, allow consumers to purchase programming directly. And more innovation is on the horizon and coming at us very quickly, as many industry participants expect, 5G wireless technology to provide even more competition to broadband and landline cable, opening up even more possibilities to content creators and to distributors. LEE: This brings us to the very reason why we're here today, to discuss the proposed acquisition of Time Warner by and ensuring this flourishing marketplace for 20f71 7/7/2017 11:22 AM CQ.com - Senate Judiciary Subcommittee on Antitrust, Competition 0003 creative content retains its vibrancy regardless of the outcome of this proposed acquisition. is the second largest wireless carrier in the United States and through its -- Direct TV and U-verse (ph) subsidiaries, the largest U.S. cable or sateltite provider. Time Warner is currently the world?s third largest television network and filmed TV entertainment company. In late October, announced that it reached a deal to purchase Time Warner for $85 billion. The proposed transaction would combine millions of wireless and pay television subscribers with Time Warner?s media line up, which inciudes CNN, TNT, HBO and Warner Brothers Film and Television Studio. Now, the companies claimed that this acquisition will result in significant benefits for consumers. The combined company will provide quote, "stronger competitive alternative to cable and other video providers" and quote, ?better value, more choices and an enhanced customer experience for over the top in mobile viewing." Additionally by controlling the customer experience from content creation through distribution, the combined company says it'll be able to innovate its advertising practices and introduce customized or targeted advertising, providing both an approved customer experience and a signi?cant competitor to digital advertising giants like Google and Facebook. This transaction involves no horizontal overlaps. However, if this fact ended (ph) the antitrust analysis, then this would be a very Seinfeldian hearing, a hearing about nothing. Although vertical deals typically raise fewer concerns than do their horizontal counterparts, such deals nevertheless may still tend to substantially lesson competition. The key analysis takes place, of course, under the Clayton Act. The principal concern with vertica! integration is foreclosure or denying access of competing firms to suppliers and customers. A key question thus becomes wiil -- what will the incentives and opportunities be for the combined firm after the transaction takes place? Many critics of the deal have posited that all sorts of potential anti-competitive abuses may take place and that the -- that the combination of Time -- and Time Warner could create, could increase the price of or reduce access to Time Warner content to rival television distributors, there by not only raising its rival's costs, but also making its Direct TV products appear more attractive to consumers. This risk is particularly acute in the nascent (ph) online video services market. Over the past few years, we?ve seen the development of products like Sling and like Play Station View, which allow costumers to watch a live stream of cable channels via their internet connection. And Direct TV has just begun it's own similar service, called Direct TV Now. 3 of71 . 7/7/2017 11:22 AM CQ.co?m Senate Judiciary Subcommittee on Antitrust, Competition ownership of HBO, CNN and the other must-have television products of Time Warner, could give Direct TV Now a significant competitive advantage over its competitors. ownership of these channels could also potentially force Direct rivals into a Hobson's choice of higher prices or limited Time Warner content, knowing that many customers would migrate to Direct TV if its rivals refuse to pay the higher Time Warner prices that they would have to pay in that circumstance. The potential anti?competitive favoritism that the combined firm could bestow on its own products is not limited to price or access, but extends to the quality of the offerings as well. And it's here that we get to the siren song of zero rating, whereby a wireless or broadband distributor excludes particular data from counting towards its customers data consumption caps. Now on it's face, zero rating appears to be customer friendiy, the content is free for subscribers and helps them to avoid having to pay overage when they exceed the applicable data caps. However, critics argue that zero rating transforms internet service providers or wireiess carriers from quote, "relatively neutral conduits into gatekeepers." LEE: The FCC recently expressed concern that zero rating practices, quote, "may obstruct competition and harm consumers by constraining their ability to access existing and future mobiie services not affiliated with Now, critics say that such concerns would only be exacerbated if were able to bring Time Warner content under its fold and under its ownership. However, as the FCC letter itself illustrates, in regard to this merger, we also have a regulatory frame work that's designed at least to minimize, if not to eliminate many of the positive many of the positive anti competitive concerns that have been express. The issues raised by the deal are complicated and like most anti-. trust analysis, particularly most anti-trust analysis ina deal that's this big and that's this complex, they are necessarily very fact intensive. The focus of the analysis should remain on maximizing consumer welfare. And, consumer welfare is in turn maximized when we focus on protecting competition rather than protecting individual competitors from competition. Well, the final determination regarding the competitive impact of the deal, will be made by the Department of Justice. i believe we can make a valuable contribution by closely examining the questions raised by this unique and significant transaction. I lock forward-to hearing from and engaging with our uniquely talented and capable panel of witnesses today, and covering any issues that might come up. Senator Klobuchar, will now give her statement. 4 of 71 7/7/2017 11:22 AM CQ.com Senate Judiciary Subcommittee on Antitrust, Competition KLOBUCHAR: Thank you very much Mr. Chairman. Thank you for holding this important hearing. Like you, my initial statement here started out with examples of these great new offerings and we seem to have the same ideas. I was gonna mention Game of Thrones, or as you once called this hearing, game of phones, right? And, instead I now will switch to west world to show how flexible I am in this new era in Washington. 80, examples of the content we are seeing from a variety of sources. West World, and the Wire to Netflix's House of Cards, to 30 for 30 documentaries. We are seeing critically acclaimed and popular content coming from a wider range of networks and video on demand services, perhaps even more important, we see diverse voices being heard, with networks representing different viewpoints and interests. This has been referred to by both of us as the golden age of television. However, it really is actually not quite accurate, increasingly we stream shows on our computers, tablets and mobile phones rather than simply watching them on televisions. And, consumers are relying on their broadband or wireless connections, instead of their cable connections to receive that content. This competition is increased consumer demand for video content, which is benefited by content creators according to the writer's guild. There were 305 comedy and drama series during the 2015, 2016 season, compared to 204 in 2010 to 2011. Earnings for the guilds writers have grown by almost 50 percent from 570 million to 854 million, in the same time period. But there are problems, and we know what they are, because as U.S. Senators, we hear about them when constituents talk to us on the street or call our offices. The cost of cable television continues to be a burden on too many consumers. According to a report released just this morning, by consumer federation of America, the typical household, which is in America now, two cell phones one land line and video internet bundle, spends about $2,700 per year on these services. When you think of a middle class income, that is a chunk of change. We have seen this plot before, like a tired movie franchise, we can predict the ending before it begins, the promise of thriving competition collapses, replaced by dominant firms with monopoly power. We saw it in radio and television with the development of centralized networks, and finally in cabie with the rise of cable distributors and their local monopolies. This is the central question of this hearing. Will this transaction accelerate the disruptive forces that will increase competition, spur innovation, improve quality and lower costs? Or, is this one step on the road to a few dominant firms controliing content and distribution. 5 0f71 7/7/201711'22 AM . CQ.com - Senate Judiciary Subcommittee on Antitrust, Competition KLOBUCHAR: One school of thought believes that vertical transactions, in which a distributor of content acquires a supplier, rarely, if ever, undermines competition. I reject that approach. Whether an acquisition will harm consumers depends on factual investigation and careful analysis, not ideological presumptions. The federai communications commission and the Anti?trust Division of the Department of Justice have largely followed this practical approach in reviewing mergers and acquisition in this industry. In the interest of American consumers, I hope that the new administration continues that tradition. acquisition of Time Warner combines one of the world?s largest wireless cable and including satellite TV and broadband providers was one of the largest media and entertainment companies. There are three broad questions that I think we need to look at. First, will the vauisition increase incentive and to suppress competition? Various distributors of video content have raised concerns that will increase the prices that a competitors pay for Time Warner content or deprive its competitors of access to that content. Independent content providers raised similar concerns. Will post transaction, favored some content over independent content. If pursued, such tactics could increase the costs that contributors charge consumers or undermine the development of innovative distribution models. Even more troubling, the merger could stipple the diversity of viewpoints and focus offered by independent content providers. Independent contact providers are responsible for much of the innovation and diversity in programming today, but they already face a tough landscape, having to negotiate with large distributors. The second question, will the merger produce benefits? According to the parties and supporters of the transaction, combining programming content with video distribution would allow to develop new innovative offerings for consumers, improve content creation, and allow to better compete with Facebook and Google. I appreciate that just last week, launched DirecTV Now, which allows customers to access DirecTV's programming through the internet. These potential benefits need to be examined, but I want to be clear, if this transaction is found to be anti~competitive, the need to compete with other companies is not a justification. The solution for less competition is not even less competition. Finalty, if concerns exist, would conditions remedy these problems? Conditions have been used in the Comcast, NBC, Universal merger, which shares some similarities with this deal. There is however, disagreement about the effectiveness of those conditions. Further, there's growing skepticism that conditions that attempt 6 of71 CQ.com - Senate Judiciary Subcommittee on Antitrust, Competition to limit a company's conduct can never work. Mr. Chairman, I've received a statement from consumers union articulating their concerns about the transaction. I move that this statement be included in the record. And this is a very transaction, I am glad that we are taking a close look at it today, and I look forward to hearing from the witnesses. LEE: Thank you. Those will be submitted into the record without objection. We're now going to hear opening statements from the chairman and ranking member respectively of the judiciary committee as a whote. This is of course, is a subcommittee of that committee. Chairman Grassley? GRASSLEY: Also, instead of saying at the end, i may have questions for the record because after 11 :00, I may not be able to be here. All right Mr. Chairman, thank you for holding this hearing on the biggest transaction of the year; the proposed Warner merger. This deal would combine one of the nation's largest phone and internet providers with a media entertainment titan that among other things, owns HBO, CNN, TBS, TNT and Warner Brothers Studios. By expandinginto media and entertainment, strengthens its existing wireless and internetand paid TV business, and also becomes a premier content owner. The Justice Department and possibly the Federal Communications Commission will determine whether to approve or reject this merger and decide whether or what conditions should be in order for the parties to precede with the transaction. GRASSLEY: Nonetheless, this committee's oversight responsibilities is an important one where the committee can flush out potential issues and highlight possible impacts of the merger on the market and consumers. It's an understatement to say that this industry is undergoing tremendous change. People are constantly reevaluating what, when and where and how they access the media entertainment and content. Technologies are quickly evolving and delivering platforms are converging. Companies are improving their technology so that customers can enjoy better and 7of71 CQ.com - Senate Judiciary Subcommittee on Antitrust, Competition faster connectivity. Innovation is creating more options and allowing for multiple combinations. The creativity or programming content and device apps is flourishing to satisfy any and every consumer taste, young and old. Consumers are becoming increasingly knowledgeable about content offerings and their data consumption needs. No doubt this industry is going through a transformation and a disruptive time and consumers are going to enjoy and are enjoying the ride. 80 we wanna make sure that this revolution and technologies and content continues to thrive and evolve to the benefit of all consumers, all over the country, including rural communities like mine in Iowa. More content choices and assess ability options, better quality and affordable prices make for a happy consumer. and Time Warner'say that this vertical merger witl, in their words, "Benefit consumers, strengthen competition and encourage innovation and investment," and of quote. They claim that by consolidating the assets of the two countries -- the two companies, it will be able to better compete nationwide and meet expectations of consumers. Now, however, critics of the merger say that this deal will have a negative impact on competition and innovations. There's concerns there that a combined Warner will block competitor access to popular Time Warner content. There's concern that a combined company will give preferential treatment, for example, favorable channel placement and zero rating pricing to Time Warner's premium entertainment programming, then, to the disadvantage of other content producers and particularly small, independent producers. There's also a concern about Warner's to leverage their assets to negotiate better licensing arrangements or raise the price of their content to the decrement of other distributors. There's concern about the merged company's ability to employ "bullying" tactics to dictate rates and terms to other networks. There's concern that this acquisition will concentrate too much power into one conglomerate, resutting in higher prices and fewer programming options for consumers. There's also concern about the merger's implication for a free and diverse media. This is something that I recently experienced because on weekends, when I'm at the farm, aiways watch channel 349 on DirecTV. I found out that it wasn't there anymore, I asked why, and found what is going on is an unfair contract negotiations. Now, these are all serious concerns which should be scrutinized carefully by the anti?trust regulators tasked with reviewing this transaction. 8 of71 7/7/201711:22 AM i CQ.com - Senate Judiciary Subcommittee on Antitrust, Competition At the same time, some warn that we should be carefu! about how the Warner deal should be examined because of the dynamic nature of the industry, complexity of the marketplace, and fast paced innovation and changing consumer wants and demands. They question whether the current merger analysis methods are well suited to tackle this transaction and urge caution when determining the competitive effects of mergers between different complex, interconnected platforms. Secondly, they suggest that they may need to redefine market power and reassess how to analyze it in a fast shifting industry with multi-sided platforms. With tech giants like Google, Facebook, Amazon, Netflix and others changing the way consumers access content, it's legitimate to ask whether as one scholar recently said quote, "What looks straightfon/vardly anti-competitive in the old industrial- merger models, might not be so simple in the merger of modem media platforms," end of quote. Certainly, the Warner deal warrants close and careful scrutiny because it raises all these complex issues and concerns. We want to ensure that the proposed merger doesn?t allow an unfair advantage over competitors or facilitate anti?competitive practices with anti-competitive effects. Yet, we also need to be thoughtful, fonNard?looking analysis of the market that takes into account the complexities of modern interconnected media, content and telecom platforms and relationships. Ultimately, we want to ensure that competition thrives in this critical market and we don't stifle innovation. or deter emergence of cutting-edge technologies that consumers demand. Uttimately, we want to ensure that our policies don't lead to higher costs, fewer choices and worse service for consumers. i look fonNard to our discussion today. Thank you. LEE: Thank you. Senator Leahy? LEAHY: Thank you, Mr. Chairman. I am glad that Senator Lee and Senator Klobuchar are having this hearing. I I resist the temptation to go through the list of which shows I like the most and which -- and I use the most. I see too many peopie I know in the audience and l?rn afraid either make some happy or unhappy depending what I include or leave out. 90f71 7/7/2017 11:22 AM CQ.com - Senate Judiciaiy Subcommittee on Antitrust, Competition But I think it is an important hearing because the opposed, no matter what you supported or oppose it will be you have to agree the proposed 85 -- almost $85.5 billion merger can dramatically transform our nation's telecommunications and media landscape, it'll combine two titans of industry. And you have this kind of a massive consolidation, distribution in content. I mean it raises serious questions; what's it do for competition or consumer choice or privacy across the media. Our pay TV wireless, wireless and broadband, we have to look at that carefully, 130 million Americans depend upon for their wireless internet access. Last year, they acquired DirecTV's satellite television service. How is he gonna acquire Time Warner's content. These raise the questions, the obvious questions, about whether could begin to act as a biased gatekeeper for its own affiliated content and services. We know from the questions raised about the decision to not charge its wireless customers for data used to View DirecTV on their phones. Anti?competitive and anti-consumer actions by internet gatekeepers can be prevented under the FCC's 2015 Open internet rules, to establish clear and enforceable bright-?tine prohibitions on blocking or throttling and discriminating against lawful content on the internet. Meaningful net neutrality protections ensure the internet remains an open platform, one that fosters innovation and free speech. Strong net neutrality rules help mitigate concerns about a post-merger ability to harm competitors and consumers. But the very -- these net neutrality rules which I believe currently protect consUmers, appear to be under serious threat by the incoming administration. The president-elect has been openly opposed to net neutrality. He's formally named three staunch net neutrality opponents to oversee his FCC transition. And I think any weakness weakening of these rules are gonna cause serious harm to consumers and harm that would only be exacerbated by but we'll still be further mergers in the industry. That harm's not limited to this transaction, but impact all Americans who rely on the free exchange of ideas and information on the internet. As chairman, l'm going to submit questions for the record where have some due evolving appropriations at the moment. But l'm very concerned about this. I know you are. I know Senator Klobuchar is. LEAHY: Thank you. LEE: 10 of71 7/7/2017 11:22 AM CQ.com - Senate Judicialy Subcommittee on Antitrust, Competition Thank you, Senator Leahy. Your questions and those can be submitted by Chairman Grassley and anyone else wiil be admitted without objection. OK, we're now going to turn to our witnesses. I?m going to introduce them and we'll swear them in. Then we'll hear from each of the witnesses. We'll start from my left and move to my right. Randall Stephenson is the chairman and CEO of Mr. Stephenson was named to his current position in 2007. Since then, has invested to become a global leader and providing integrated communications services to businesses and consumers -- hang on, gotta make sure that I don't miss yours up mess yours up with someone else. Video entertainment, high~speed internet, and mobility to IP network services and the internet of things. Mr. Stephenson began his career with Southwestern Bell's Telephone Company in 1982 in Oklahoma. He served as the company's senior executive vice president and chief financial officer from 2001 to 2004, and from 2004 to 2007, he served as the company's chief operating officer. He was appointed to board of directors in 2005. He's a member of the board of directors of Emerson Electric and Boeing, a member of the PGA Tour policy board, and national president of Boy Scouts ofAmerica. Mr. Stephenson received his BS. in accounting from the University of Central Oklahoma and his Master of accountancy from the University of Oklahoma. Jeff Bewkes is chairman and CEO of Time Warner Inc. He was elected chairman of the board of directors in January 2009, having served on the board since January 2007. He was elected CEO of the company January 2008. Part of being named chairman and CEO, Mr. Bewkes served as Time Warner's president and COO from January 2006'to December 2007 and is chairman of the entertainment and networks group from July 2002 to December 2005. Before joining the corporate management of Time Warner, Mr. Bewkes served as chairman and CEO of HBO and as president and COO of HBO. Mr. Bewkes serves on the boards of Yale University and the partnership for New York City and serves on the advisory board for the Creative Coalition. He's also a member of the business council. Mr. Bewkes has a BA. from Yale and an MBA from Stanford. Mark Cuban is an entrepreneur and investor. He's the owner of the Dallas Mavericks, Landmark Theatres, and Magnolia Pictures and is the chairman of the HD TV cable network, AXS TV. He's also one of the main shark investors on the ABC reality television series ?Shark Tank." In 1995, Mr. Cuban and fellow Indiana University alum, Todd Wagner started AudioNet combining their mutuai interest in Indiana Hoosier college basketbali and webcasting. With a single server and line, AudioNet became Broadcastcom in 1998. By 1999, Broadcastcom had grown to 330 employees and $13.5 million in revenue for the second quarter. In 1999, Broadcastcom was acquired by Yahoo for $5.7 billion 0 in Yahoo stock. 110f71 7/7/2017 11:22 AM CQ.com - Senate Judiciary Subcommittee on Antitrust, Competition 0003 Gene Kimmelman is the president and CEO of Public Knowledge. Previously, Mr. Kimmelman served as director of the internet freedom and human rights project at the New America Foundation and as chief counsel for the US Department of Justice's anti-trust division. Prior to joining the Department of Justice, lVlr. Kimmelman served as vice president for federal and international affairs at Consumers Union. He's also served as chief counsel and staff director for the anti-trust subcommittee of the Senate judiciary committee and legislative director for the Consumer Federation of America. Mr. Kimmelman began his career as a consumer advocate and staff attorney for Public Citizen's Congress Watch. lVlr. Kimmelman is a graduate of Brown University and holds a JD. from the University of Virginia where he received the Fordsman (ph) Fellowship. He was also a Fulbright Fellow. He presently serves as senior fellow at the Silicon Flatirons Center for Law, Technology, and Entrepreneurship at the University of Colorado and is senior associate with Global Partners Digital. Daphne Ziman is a filmmaker, founder of a music label philanthropist and author living in Beverly Hills, California. She's the president and chief creative officer of Cinemoi, a television network focusing on film, fashion, and international style, founder ofa music label, Unicorn SSD Records, a writer, director, an award- winning author, and a philanthropist. lVls. Ziman works as a writer, producer, and director. Her latest fiim, "Footsteps," debuted on Showtime. lVls. Ziman also serves on the advisory board of the philanthropic arm of the State Department, IREX as well as the board of trustees of Children's Institute International, is a chairperson Love, Adoption Brings Children Love. Before we begin, I'd like to swear in the witnesses and ?so if you'd all stand and raise your right hands. Do you swear that the testimony that you're about to provide to the subcommittee will be the truth, the whole truth, and nothing but the truth? Thank you. Mr. Stephenson, you'll be up first and you mayrbegin. STEPHENSON: (OFF-MIKE) LEE: . Ifyou could push the button until it turns red, we can hear you better. STEPHENSON: And the rest of the members of the committee, i appreciate the opportunity to talk 12 01?71 CQ.com Senate Judiciary Subcommittee on Antitrust, Competition about the benefits of combining distribution with the worid class content of Warner Bros, HBO, and Turner. And for your constituents, we believe the benefits are straightforward and they're substantial. They will get more choices and lower? priced options and that means more nationwide competition against the cable companies in each of your respective states. What this merger is not about, is consolidation either in media or in telecom. is a communications company. We distribute content. Time Warner is a media and entertainment company. They create content. And this is a classic vertical merger and it eliminates no competitor from any market. In fact, it increases competition, particularly against the cable companies. And our intent is to disrupt the existing pay TV model. We want to get the most content to the most people at the lowest prices and we want consumers to pay for their content once and then watch it anywhere at any time. Every episode, every season, on whatever device they choose. But disrupting entrenched business models is hard and it generally takes bold steps and combining scaled distribution with scaled content creation is such a step. it's going to allow us to accelerate innovation and without exception, when one company accelerates innovation in a market, everyone accelerates innovation. And faster innovation and content delivery will naturally accelerate deployment of SG mobile networks with greater than one gig speeds. And we've seen this happen before. it's important to recall that we launched the world's first iPhone at on a 26 network. And as demand for the iPhone and more bandwidth exploded, the US. mobile industry accelerated deployment of 3G and then 46 mobiie networks. And this drove, two, multibillion dollar network upgrades in the course of five years. And we're about to experience this again. DirecTV Now and other planned innovations with Time Warner are 56 services that are effectively going to be launched on 4G networks. And just as we witnessed with the iPhone, we expect 56 deployments to accelerate. And notjust for We think it will accelerate across the industry creating even more competitors for cable. And this is exactly what we believe consumers want. New, lower-priced options and the power to decide themselves. And a good example as has been referenced in the earlier comments is our new DirecTV New product that we launched last week. This is 100 channels starting at $35 streamed to any device. The customer has no contract requirements, no credit check, no installation, no set-top box, and the price includes the data charges for mobility customers. And during our first week in the market, the uptake of this new service has exceeded all expectations. And as predicted, the industry has already begun responding. in fact, just last week, shortly after we announced this product, CBS added the NFL to its alluaccess streaming service at no additional cost. Innovation by one invariably begets innovation by ali. I've talked a lot about what will change because of this merger 13 of7l 7/7/201711:22 AM i CQ.com Senate Judicialy Subcommittee on Antitrust, Competition and I want to really quickly talk about what will not change. will continue to be a leading investor in America. We've invested more in the United States than any other company, each of the past five years. You should expect that to continue. We will continue to do our part in keeping America the global leader in two specific areas. Innovation and deployment of advanced communication networks and creating content peopie want to watch. And we will encourage and support independent journalism. STEPHENSON: And we will not withhold content to disadvantage somebody else. Time Warner was built on a platform of broad distribution of its content into every home and it would be illogical for us to change that. I And, finally you should expect to continue doing what we've always done, that's distributing a wide array of diverse high quality content across all of our platforms. So, in conclusion, this merger is going to drive investment, it?s going to drive innovation in an industry that we believe is begging for both of those. So, Mr. Chairman, thank you for the opportunity and look forward to your questions. LEE: Thank you Mr. Stephenson. Bewkes? BEWKES: Chairman thank you, Chairman Lee, Ranking Member Klobuchar and members of the subcommittee. Thank you for inviting me; I'm Jeff Bewkes, Chairman and CEO of Time Inc. -- Time Warner Inc. I appreciate the opportunity to talk to you this morning about why a combination with not oniy makes sense for Time Warner, but also is good for consumers. In short, combing Time Warner?s video content with distribution will accelerate the development and delivery of the next generation of video services, providing consumers with greater choice, convenience, value, and importantly, better affordability. Before I talk more about that, let me briefly tell you about Time Warner. Since 2009, we've been focused on producing and distributing video content, film, television and video games at the wholesale level across a wide range of outlets. We do this 14 of71 7/7/2017 11:22 AM CQ.com - Senate Judiciary Subcommittee on Antitrust, Competition through three divisions, Warner Brothers, on Box Office and Turner Broadcasting. We do not own any cable, satellite, telephone, broadband, or wireless distribution business. And, as a video content company, our success depends on achieving the broadest distribution of our content, and on embracing innovative ways for consumers to enjoy what we have to offer. Warner Brothers is a great example of this. it's the leading television studio in Hollywood, because the most talented producers, directors and writers come to us to make their shows. The reason they do that is they know that Warner's will find the best home for their shows on any network or overtop services. Warner supplies shows to every broadcast network. While also producing for basic cable networks, premium cable services, including both HBO, it's competitor show time and services like Netflix and Hulu. Warner has also been a feeder in innovation, including making it possible for viewers to watch the full season of its shows on demand on broadcast networks. Those principles of broad distribution and innovation hold true at HBO, whose success depends on reaching and passionately engaging viewers, whether they subscribe to a paid TV service or only have broadband. That's why we launched HBO Now, which offers HBO's programming without the need for a paid TV subscription. The same is true at Turner. Turner must distribute its networks which depend on subscription and advertising revenue, broadly across all platforms and devices. That's why Turner is licensed it's networks to new broadband delivered bundles offered by Dish, Sony, Direct TV, and Hulu. We're proud of what Time Warner's accomplished, but today we're competing for consumer's attention, not just with other TV networks, but with everyone from and Amazon to YouTube and Facebook. Great content is not enough, you need to deliver great consumer experiences and that's whatjoining with will allow us to do. We'll continue to work with all distributors, both but combining with will make it easier and faster for us to innovate for consumers. Including offering more Choice in network bundles with great interfaces, great on demand content and interactive features, more over the top services like HBO Now and More short form content, particularly on broadband and mobile. Currently, when we try to introduce innovations for consumers, we often need to roll them out distributor by distributor as part of a affiliated agreement negotiations, that take place only every few years. TV Everywhere is a pretty good example of this. We introduced TV Everywhere in June of 2009. it was based on the simple idea that, if you subscribed to paid TV service, you ought to be able to watch your favorite programs, notjust on TV and 15 of71 7/7/2017 11:22 AM CQ.com - Senate Judiciary Subcommittee on Antitrust, Competition 0003 on the TV set, but on any connected device of your choice, at no extra charge. It's now seven years later, and TV Everywhere still isn?t fuliy embraced by all of the cable distributors. BEWKES: By combining with we can accelerate the process of introducing innovations on a nationwide basis and we can have more flexibility to adjust to changing consumer expectations. Providing consumers with more choices and better experiences, at more attractive prices, while spurring industry-wide competition and innovation. That's why we believe that this transaction is right for our company and good for consumers. Thank you. I'll be happy to answer the questions on any of these points. LEE: That you Mr. Bewkes. Mr. Cuban? CUBAN: Thank you for inviting me to give my testimony and speak before you today. My name is Mark Cuban and I've been an active entrepreneur in many fields throughout a career spanning over three decades, having started started or invested in more than 200 companies, creating thousands ofjobs. I?m also proud of the fact that a TV show I'm part of, Shark Tank helps inspire millions of potential entrepreneurs every week. The media world has changed. Back in 1995, a partner and I started a company called AudioNet and built ourselves as the broadcast network on the internet. We were one of, if not the very first streaming content aggregator and distributor on the net. Back then, the biggest competitors to our online streaming and consumption of our content were radio and TV. The world has changed quite a bit since then, but maybe not in ways that are obviously. Historically, TV had been the median. We had we all used to wonder why we spent so much time watching TV. When asked why TV, my answer was always the same. TV is the best alternative to boredom. It's the closest that we can come to doing nothing while thinking we are doing something. It was always our go to way to kitl time. Those days are gone. In the past we went to our media. We came home, turned on the TV, plopped down on our favorite or couch and vegged out, pulled out a cold beverage. Today, our media comes to us. How content comes to us is changing almost daily, 16 of71 CQ.com - Senate Judiciary Subcommittee on Antitrust, Competition and has become an important subject in a world of anti?trust in media and distribution. Today our best alternative to boredom comes from an app. Firing up an app on whatever device you happen to have in your hand, no matter where in the world you are, is how we kill time. The idea that TV is the dominant content delivery mechanism no longer is valid. Instead, we fiil our time by consuming content for Facebook, lnstagram, Snapchat, Messenger, Whatsapp and slowly, from virtual reality companies like Oculus Rift. Combined, these apps reach more than 1.5 billion users a month. They can deliver any kind of content in any manner the consumer would like to receive, be it message, video, VR, post, ad, you name it to populations around the worid in a I manner that dwarfs television. Facebook is without question in a dominant position, if not the dominant position for content delivery. Imagine what Facebook and theirrespective competitive landscape would look like if they had not acquired lnstagram, Oculus Rift or Whatsapp. if those were separate companies competing in the marketplace, the content world would look much different and be far more competitive. Facebook maybe the biggest player now, but they are not the only major content provider. Snapchat is taking over miilennials as the best alternative for boredom. We all have seen the never-ending stream of selfies, videos and more take over some of our kid's lives. For those younger than the Snapchat generation and yes, they do exist -- there is Musical.ly and Live.ty with tens of miilions of users and growing. Or Microsoft's Minecraft, inquired property, with over 100 million users. I can tell you from personal experience, punishment for my 7 year old is taking away his Minecraft videos. He could care less if he loses TV privileges. TV is experiencing a declining share of content consumption. It is losing viewer to the other dominant content players in Netflix, Amazon with Prime, and Twitch, an acquired property. Apple with music, Beats as an acquired property, and finally Google with YouTube, also an acquired property. And Google has the ultimate programming guide, their Search. Given the time constraints, 1 will pick another time to discuss the impacts of having only two companies, Google and Apple that act as the sole gatekeepers to the app ecosystem. But you may notice that have not mentioned or Time Warner yet, because neither is in a dominant position. By themselves, and Time Warner will have a very difficult time controlling their own destinies, let alone trying to insert influence on a market. This merger is not one of survival and opportunity, but one that's needed by consumers. We need more companies with the ability to compete with Appie, Google, Microsoft, Amazon and Facebook. Deiivering content to consumers in this app-driven world is not easy. It is very expensive and difficult. Apple, Googie, Amazon, Microsoft and Facebook are five of the seven most 17 of71 7/7/2017 11:22 AM CQ.com - Senate Judiciary Subcommittee on Antitrust, Competition valuable companies by market cap in the world, and all have established dominant positions. That is exactly what the Time Warner acquisition -- why the Time Warner acquisition for is an important strategic content acquisition. Alone it will be very difficult, if not impossible, for either to compete with either of the companies I mentioned. Together it will still be difficult, but they wiEI have a chance to battle the dominant players, and increase consumer choice in competition for consumer attentions. I've run out of time, but l'd like to also say that each of the largest content companies We mentioned so far, Facebook, Google, Amazon, Microsoft and Apple, present much, if not all of their content algorithmically. At least with good old?fashioned TV, we get to pick the channels we want, rather than have our feed tell us what we want. Thank you and I'll look forward to answering your questions. LEE: Thank you, sir. Mr. Kimmelman? KIMMELMAN: Thank you, Mr. Chairman, Senator Klobuchar and members of the subcommittee, on behalf of public knowledge and today I'm joined by Consumer Federation of America and our statement. I appreciate the opportunity to testify. Mr. Chairman, l'd like to ask that the report we released this morning that Senator Klobuchar referred to with, could be see if they?d be put in the record. I know it looks like great bedtime reading to you by its size. LEE: Without objection. KIMMELMAN: But I start here, because this is about a description of the last 20 years of activity in this industry, which I think is relevant to look at this morning, as you consider the impacts of this merger. All the leadership of the committee pointed out all the potential pros and significant cons of this. raise this because what it shows is that that $2,700 that consumers are paying per month, there are a lot of issues as to why that number is so big. During that 20 years, there were times when lax anti-trust oversight allowed substantial mergers of cable and telephone companies and content companies, there were times where there was limited regulation. And what we conclude is, 18 01?71 7/7/2017 11:22 AM CQ.com - Senate Judiciaiy Subcommittee on Antitrust, Competition looking comparing the prices consumers are paying with the actual competitive costs; we're probably being overcharged by at feast about $45 per month. Your constituents, for those services, because there are too few players already in these markets. They're massively concentrated. So, in that context, adding firms that have more than 130 wireless subscribers nationwide, 25 plus percent of all TV viewers through satellite and wire, bundled services with market power, and the wonderful content that Mr. Bewkes described with Time Warner raises very significant questions for consumers. Now they've talked about all the wonderful things they can do. I want to highlight they are excellent companies that have begun to compete more aggressively in the over?the?top market. They're doing really good things for consumers. That's wonderful, as separate companies, contracting with each other and others in the marketplace. The question for anti?trust review and regulatory authorities is, will that continue? They've described what they have done very well, and we applaud it as benefits to consumers in many instances, but will that really continue? With these enormous assets coming together and in a market where there are very few players just ask your constituents, how many broadband providers do they have, how many cable or other comparable TV providers that can give them the full panoply of services, how many are there? And I appreciate Mr. Cuban's points, but the fast time I looked Google and Facebook weren't charging me more than $200 a month to get those apps, to get their content, and the last time I looked, you all may remember this, too, do you remember when you as teenagers or your kids spent more than like an hour on the phone? Talking to friends? Do they do that anymore? No, Snapchat, apps. its voice service that has gone here, but that is not the same as professional quality video that Mr. Bewkes' company produces. That's something different. And every one of those companies Mr. Cuban referred to, relies on the fundamental infrastructure, the plumbing of the internet and telecommunications system that is controlled by very few companies, two dominant cable, two dominant phone, including KIMMELMAN: It is that market power that concerns us, and is this just a hypothetical or possible? Well, the Department of Justice and FCC have already found that incomparable transactions including Comcast, NBCU, when you combine this kind of quality content with market power, there are enormous incentives to favor yourself and harm competitors, block competitors, raise prices to rivals. And this deal is even bigger. That was a regional cable monopoly. This is 19 of71 7/7/2017 11:22 AM CQ.com - Senate Judicialy Subcommittee on Antitrust, Competition nationwide, satellite TV distribution, nationwide wireless. The incentives will be even greater. In that environment, the bottom line is, we urge law enforcers to reject this merger unless they can absolutely show that these competitive harms will not arise, that there are actual paths to increase. benefits to consumers and absolutely show that they truly have the regulatory tools in an environment, where it appears regulations will be withdrawn and oversight will be limited. This is notjust about money, Mr. Chairman, members of the subcommittee. it is the diversity of programming owned by different people over different platforms that fuels our democracy. No one has said it better than the president-elect. it is in that environment we urge to you look at this carefully and enforcers not to take risk with the transaction that could be harmful to that democratic process and consumers' pocketbooks. Thank you. LEE: Thank you. Me. Ziman? ZIMAN: Chairman Lee, Rankingi'Member Klobuchar and members of the subcommittee, I want to thank you for inviting me to testify today about the impact of the proposed AT&T?TimeWarner merger on minority channels, cultural diversity, gender diversity and independent programmers. My name is Daphna Edwards (ph) Ziman. And, as many of you know, I've spent the last 20 years of myulife coming here to advocate on behalf of women and children. l'm here today as the founder, president and chief creative officer of Cinemoi, a women?owned 24whour award~winning network dedicated to curated films, high fashion, internationat lifestyle and environmentally profound programming. Cinemoi is an independent network that is trying to make a difference in the media industry. It's designed to lift the image of women. Cinemoi is defined by high quality content. Originally we launched en DirecTV on September 17th, 2012. Cinemoi is available on Verizon 5 for a tier (ph) and via (ph) the internet and reaches millions of subscribers. Cinemoi is a true independent. We chose not to be a part of a bundle because doing so would undermine what Cinemoi is and woutd stifle our creativity. Cinemoi is also a minority owned channel, as it is one of the only two networks majority owned by a woman; the other one is Oprah Winfrey and she?s distributed 20 0f71 7/7/201711222 AM CQ.com - Senate Judiciary Subcommittee on Antitrust, Competition by Discovery. Independent programmers are the risk?takers that provide innovative content. Today, 90 percent of the content on TV is controlled by six conglomerates. The industry is currently structured to shut out new entrants, which are mostly independent programmers, and keep channels like Cinemoi from making it and providing competition to incumbents in the industry. independent programmers understand very well the pressures that (ph) face from giant content providers. But more consolidation is not the answer. In the current state of the media industry, the survival of independents is at a significant risk. Further consolidation would be catastrophic to diversity, additionally silencing minority and women-owned voices. claims that vertical integration is not harmful. The fact is that vertical consolidation gives both the means and the incentive to discriminate against independents. For example, Cinemoi competes with many cable networks, Turner Classic Movies being one of them, which is owned by TimeWarner. DirecTV's own tent of (ph) research showed that two-thirds of viewers aiso watched Cinemoi. In a non-vertically integrated market, competition between Cinemoi and TCM is in the best interest of the public. But when owns TimeWarner, shutting out competitive channels like Cinemoi is not only easier but cheaper. Such loss falls upon the American people. argues that OTT distribution offers sufficient opportunities for independents but relying on OTT is the one-way ticket to bankruptcy. Like other independent networks, Cinemoi is negotiating deals on these new platforms. However, linear distribution, because of its broad reach, remains the most effective way to develop awareness, brand recognition and consumer demands. The OTT market is a maze of confusion and lots of content that's not organized. Approximately 20 percent of television households are cold cutters, not because of preference but because of the intolerance to the lack of curation bundles of repetitive the repetitive and copycat programming. The remaining 80 percent should be -- should not be denied programming'that meets their needs and interests. OTT revenue alones (sic) will never allow independent networks to compete with incumbent channels that enjoy multiple revenue streams. 21 03371 7/7/201711222 AM CQ.com - Senate Judiciary Subcommittee on Antitrust, Competition 0003 Moreover, controls the distribution to more than 172 million cable, Internet and mobile subscribers and can utilize a variety of techniques to favor its own content and disadvantage independent networks like Cinemoi. These concerns are real. DirecTV and is currently under investigation by the Justice Department for unfair tactics against programmers. in fact, independent programmers are only offered channel on if they sign a pay-for-play deal with DirecTV, That's precisely what happened to Cinemoi. Look at the panel testifying today. It is supposed to represent a broad cross-section of the industry, yet it is dominated by white men. The idea the -- that opportunity is lacking for women and minorities in media isn't hypothetical. It is clearly symbolized by this dais. Women are the majority of the population, controlling 14 trillion in wealth, two?thirds of the country's wealth and 70 percent to 80 percent of all household spending. Yet only two networks are owned and controlled by a woman. Women deserve presence in the media. The airwaves utilizes belongs to the American people, bestowed upon the by the people, for the people. And has a fiduciary responsibility to utilize this resource in the best public interest. That obligation includes creating opportunities for cultural diversity and democracy of voices. Sadly, is doing everything in its power to avoid a review by the FCC, the one agency that could review this merger through public interest lens. 80 the question for policymakers is this: does a company that will go to any to avoid public interest scrutiny really care about democracy and cultural diversity, the survival of independents, risk?takers or innovation? The American consumer is ultimately the one that will be the worse off from further consolidation in this industry. If we learned anything from this last election, it is that the American people are angry about the growing divide between the haves and the have-nots. Independent programmers are the have-nots in the media landscape. Diversity of content is in the public's best interest. OK, I have things to say, if you'd like to ask questions. Thank you. Sorry. LEE: Thank you, Ms. Ziman. OK. I will now kick off the questioning. lVlr. Stephenson, I'd like to start with you. I'm going to ask you a very simple question. 22 01?71 I 7/7/2017 11:22 AM . CQ.com - Senate Judiciary Subcommittee on Antitrust, Competition Will this merger, assuming it's carried out to completion, will it result in lower prices for consumers? And if so, how and why? STEPHENSON: was asked that exact same question in front of this committee a couple of years ago when we were working on the DirecTV transaction and 1 represented that, yes, it would; by virtue of the innovation, we'd be able to bring lower price capabilities to the consumer. I And literally within a (CROSSTALK) LEE: Which wasn't the exact same question because it was a different context and STEPHENSON: But it was a very -- it was a very similar transaction in that the lower prices would be a result of the innovation that would follow. And within a year, year and a half of that transaction closing, the innovation has followed. And, in fact, there have been two significant innovations. If you're a DirecTV customer, you can stream all of that content to your mobile device -- no charge. And then we launched, as I said, last week, DirecTV now. This is a little over a year since we closed the transaction, 100 channels at $35. And I think that is significant innovation that did result in lower prices to the consumer. And in $35 includes the mobile streaming. So as you put two companies together under one umbrella, this is why it's so important, Senator, if you'll bear with me a moment, you can speed innovation like you can never do in OrangeLink's (ph) relationships and transactions. DirecTV is a is a classic example of how that happens. What we are talking about doing, by combining TimeWarner and is taking the innovation in DirecTV now to a whole different place and a whole different level, because our ambition is to ensure that the customer pays for their content only one time, because, today, a customer pays for their content. If they want to watch it on a mobiEe device, they probably have to pay for it again via an app. If they forget to watch a show and they want to go look at it on over?the?top means, they'll have to pay for it again. Our objective is to take that out of play, pay for it one 23 of71 7/7/201711:22 AM - CQ.com - Senate Judicialy Subcommittee on Antitrust, Competition time, give the consumer the ability to watch it anytime, anywhere, on any device they want. We think that will result in lower prices and lower cost to the consumer. LEE: Mr. Kimmelman, what is your response to that? Mr. Stephenson tells us it will result in lower prices. What do you say? KIMMELMAN: Hard for me to see it for sure, Mr. Chairman, because, in the DirecTV deal, which we had concerns with, which were addressed by regulators and the anti-trust officials, there were 'clear efficiencies of putting together a bundle that a satellite company could not do on its own for transmission. It couldn't really offer both video and broadband. 80 I am extremely pleased to see Mr. Stephenson's companies responding to that and taking advantage of those efficiencies to lower prices. I I don't see those here in this transaction. They could contract to do the same things that he's talking about as wonderful innovations without the risks of the merger. LEE: Mr. Cuban? What's your reaction to the answers given by Mr. Kimmelman and CUBAN: Yes, I'm just not realty my wheelhouse. I don't have a comment on it. LEE: Got it, got it. CU BAN: (CROSSTALK) LEE: IVlr. Bewkes, I'd like to turn different question7/7/2017 11:22 AM CQ.com - Senate Judiciaiy Subcommittee on Antitrust, Competition back to that if you?d like. But I first want to ask you so I'm encouraged to hear that TimeWarner's business model is based on broad distribution for content. Other companies obviously have taken a different approach. Netflix, for example, has been a successful company. It's got a market cap at $52.9 billion and so that's a viable option to take a different approach different approach. Can you tell me how TimeWarner weighs broad distribution versus exctusive contentyou balance BEWKES: Sure. LEE: relative attractiveness? BEWKES: We're been able to build our networks -- CNN, HBO, TNT, Cartoon Network ?4 only because we have broad distribution. And if we were to and we've never done this -- if we were to not offer our networks over any of the cable satellite, telco or over?the-top platforms that are now the place where increasing numbers of Americans are choosing which one to get their TV service through, we would be cutting off meaningful revenue for our company. There's no incentive for us to do that. That's first. Secondly, we invest a lot of money in making these brands relevant CNN, HBO, if you all think about them and we'd be doing that in a manner where we'd be hurting the very investment we're making in having these brands mean something. Third, there's a considerable amount of advertising support behind the Turner networks, including CNN. And if we didn't have full coverage, we can't sell advertising effectively to advertisers. Fourth, it's very important and it's essentially the life blood of our company to be able to attract the best talent, the best directors, the newest movie idea. These 1 come from independent producers. They come to us because we have the resources and the distribution reach to put their product in every home. lfwe didn't have that, we wouldn't be able to get the next hit show, the next hit movie. 80 those are essentially the reasons why we would never even think of doing this. And then a final point, which, Gene, you might want to comment on, we owned 25 of71 7/7/201711:22 AM CQ.com Senate Judiciary Subcommittee on Antitrust, Competition TimeWarner Cable for 20 someuodd years; either a big piece or a minority piece and we managed it. It never occurred to us to do anything either restrictive or different in terms of price position, packaging, access to networks for that company when we owned it versus what we then did after. BEWKES: So there's just simply no incentive for us to do it and, in fact, there?s really no ability for us to do it. It would hurt our business. LEE: There's no incentive; could those incentives change over time? Couldn't those incentives result down the road in you taking a different path? BEWKES: No, Senator, I can't see a case. And I'd invite anybody here to try to propose one where that would make any sense at all. (CROSSTALK) LEE: lVlr. Kimmelrnan is shaking his head. Do you want to add something to that, sir? KEMMELMAN: I totally understaner. Bewkes' point and his description of his business and it's exactly what NBC said when they came before you and they were being combined with Comcast. 7 In a careful analysis, the anti?trust division did not find, when the companies merged, that those incentives were the same and that there were opportunities. And while TimeWarner Cable was, what, 15 million subscribers and certainly it made no sense to limit TimeWarner content to just 15 million, here you have 25 million-plus from satellite and video. And you?ve got more than 130 million now wireless. With that customer base, you have to look at the real combined incentives. This isn't TimeWarner entertainment, TimeWarner's incentives as a content company. This is the merged with content. And I just think the anti-trust officials are going to need to look carefully at those. 26 of 71 7/7/201711122 AM CQ.com - Senate Judiciary Subcommittee on Antitrust, Competition LEE: OK, I see my time's expired. And we want to stay on the clock here. We're going to go next to Senator Klobuchar. KLOBUCHAR: Thank you very much Mr. Chairman. I want to start with Mr. Stephenson. With your initial question about the prices for consumers -- and i know you've focused on the last deal with DirecTV and what had come out of that. Just to be clear on this acquisition, do you believe that it's going to lower prices for customers for DirecTV broadband services and mobile services? When you want to take each one. STEPHENSON: I can and intend to represent to you that, by virtue of innovation with TimeWarner and going head-to-head against the cable providers with new products and new capabilities, that we will bring the consumer better priced options than what they have today. To take each one of those apart I find difficult because the consumer has gotten to a place where they're not procuring each one of those independently. That's the reason for the way we're pricing DirecTV now. We're -- think about what we're trying to do. We're going against a cable provider to compete. You buy TV service from a cable provider today, you spend $50 to $100 per month. Regardless of how much you watch, it does not change what you pay. If you sleep with the TV on all night long, it doesn't change what you pay. To compete against a cable provider, we have to bring a mobile service. And We're competing with a mobile service that has the same characteristic. Can you make it where the consumer does not think about how much they're leaving the content on? As we work with TimeWarner and begin to think about new forms of content, cloud-based DVRs, getting the rights and putting those kind of capabilities into our product offering, bringing more value to the consumer, giving them the ability to use video over their mobile device just like they do when they're watching cable TV we think that's a huge value to the consumer. KLOBUCHAR: OK. 27 of71 7/7/2017 11:22 AM CQ.com - Senate Judiciary Subcommittee on Antitrust, Competition Mr. Kimmelman, because, you know, you have your new report coming out today, what, 46 a month, you say, that cable subscribers are paying that they shouldn't pay. 80 how did that fit into what Mr. Stephenson was saying when he's arguing, well, this is a new kind of offering that could help bring those prices down? KIMMELMAN: It is a new kind of offering, it is extremely welcome in the marketplace to see the DirecTV now offering and challenging cable, which no one traditionally has gone out of their historical telephone region or cable region to challenge each other all good. That's all premerger. I applaud that. The question is what happens when you combine all of these assets. And that's the fear. And, again, it may be a wonderful product. Mr. Stephenson says pay once, sounds great to the consumer But if it's what happens to others who want to get on that service? if it's zero rated, are they all going to get on? What happens to others who want to offer a different product? Are they all going to be able to get TimeWarner content under the same terms and conditions or (CROSSTALK) KLOBUCHAR: Right. I mean, so there are a variety of competitive harms that have to be looked at in comparison to what they want to offer. KLOBUCHAR: And I want to end with that. But before I get there, i just want to talk about this issue that Mr. Cuban raised, you know, it's the competition, with potentially the new environment with Facebook and Google. And I'm hoping we're going to have a hearing on some of these broader communications issues, next year. That was my OK. So but, on this generally, how do you see this one? Mr. Cuban says, well, no, they need this to be able to compete in this new world. 28 of 71 I 7/7/201711:22 AM CQ.com - Senate Judiciary Subcommittee on Antitrust, Competition 0003 But you point out that they're not paying money for Google or Facebook apps, right? KIMMELMAN: Senator Klobuchar, I would urge the committee to look at every place there is market power in the sector. There could easily be that in the online distribution on the platform, among the platform companies. When I was at the Department of Justice, we looked at transaction involving Google and a company cailed and we were prepared to challenge it; it was airline services online software that we thought would foreclose competition in that market. Their -- and a consent decree was worked out. But there could be legitimate issues in many places. But the fact those companies are prosperous and may be doing things that are harmful does not take away from the fact that here we have very few ways for the consumer to get to their apps, their other services. And is one of the dominant gatekeepers to get there. KLOBUCHAR: OK. Mr. Cuban? CUBAN: Yes, I would disagree with that; just on its surface, the DirecTV now is an example. If Apple decided they didn't want to distribute it, they have nothing. If Google decided they didn't want to distribute it or either decided to give it such placement that people would have a hard time finding it, they have no business there. And so they really can't even control their own destiny. And I think it's an issue that's out of their hands, despite what Mr. Kimmelman is saying. KLOBUCHAR: OK. i want to just end here on the content side here with you, Me. Ziman. You described this practice you referred to as pay-to-play and talked about how it harms independent programmers. Could you explain that more? And do larger networks have to pay to play? ZIMAN: 29 of71 . 7/7/2017 11:22 AM CQ.com - Senate Judiciaiy Subcommittee on Antitrust, Competition 0003 Yes. Independents now barely can get on at all. If they do get proposals, it's usually free for a period of time or otherwise pay?for?play, which means they have to pay to access the subscribers, which means that they cannot (CROSSTALK) KLOBUCHAR: Because they're not going to be part of the bundled package? They're not -- but not just that, because they're not given the bandwidth to be able to access. And if they are, they're sent to Siberia. So -- and the reality is that the are concerned that any of those independents may become must?have content because then they'll have negotiating power. My friend, Mr. Cuban, has negotiating power because he owns a sports team. The reality is that one of the highest executive at DirecTV said to me point-blank, we're in the male sports business. So you are dealing with independents that have so much other content that the public wants and is interested in and they're not getting access to the pubtic. And that's wrong. It's wrong for democracy. KLOBUCHAR: All right. Speaking of sports, iVlr. Stephenson, in your testimony you say that programming is more valuable when distributed to as many eyes as possible. However, NFL's Sunday ticket is available only through DirecTV. And during the Comcast?NBC Universal (ph) merger, the parties made similar arguments yet the FCC decided that the merged company would have incentive to limit the distribution of its content and discriminate against independent content providers. I want to make sure I understand your position. Are you saying mergers, where a content distributor acquires a content producer, can never raise antiwtrust concerns? Or that, in this particular situation, there?s not an issue? And how do you answer this fact that there's a lot of concern here about -- with owning content at the same time as distribution, that there would be discrimination? 3O 0f71 7/7/201711222 AM CQ.com - Senate Judiciazy Subcommittee on Antitrust, Competition STEPHENSON: I'li try to take the question apart and make sure I answer it fuliy. The NFL is probably a classic example of a content owner, who pretty much determines and dictates how content is distributed and they're very strong. They have a great product and they parse the content up significantly. And we pay them for whatever rights we can get from them. So they kind of -- not kind of; they determine how the content is distributed. We don't. We distribute it to our customers for what we pay. It's not something that we just exclusionarily put it out there. It's what the NFL has contracted with us to do. In terms of I want to make sure I understood the second part of your question as to a vertical merger. (CROSSTALK) KLOBUCHAR: Right. STEPHENSON: do I think that's just a cookie KLOBUCHAR: Right. STEPHENSON: No, no, i don't think there's such a thing, particularly in the world of anti~trust. I believe this particular merger, when you put it together, you see that, before the merger and after the merger, the competitive market looks identical. The distribution market looks identical. The content creation market looks identical. There are no overlaps. And so it is a classic vertical merger. But the Department of Justice will look at this. And to the extent there are concerns, we do believe they could be remedied with conditions. STEPHENSON: As it reiates to the comment about independent programmers, though, I'd like to just quickly respond. 31 of7i 7/7/2017 11:22 AM CQ.com - Senate Judiciary Subcommittee on Antitrust, Competition If there is concern about access of independent programmers to the consumer, the one model that does not work -- and we're demonstrating that is the present model. The present model needs disruption. it needs a different model. That's what we?re trying to do with both this transaction and the prior transaction we did. But the reality is, when we acquire content from content owners, there is a medium by which we ifwe want the top content they own, they say take that plus the other five or six channels that you possess. That is what's filling up this program guide. It?s not anybody trying to be exclusionary. it is filling up the program guide with peripheral stuff that you have to take if you want to get the primary content that a content owner wants. DirecTV Now is step one; acquiring TimeWarner is step two. But DirecTV Now is how we're skinnying down a lot of that peripherai stuff, getting a smaller bundle that the consumer wants. That's how you get to a $35 price point rather than $80 price point. That's where we think we have an opportunity to keep doing more and more of this in the future. KLOBUCHAR: And just last, I know we response from Ms. Ziman very, very quickly, but could you foresee that there would be a some of these bundles that wouldn't involve sports? STEPHENSON: Oh, of course. In fact, there is a huge segment of our market that wants a bundle that does not include sports. Sports is probably the biggest driver of the content cost in the bundle today. And to the extent we want to meet a certain price point for the certain segment of our customers, getting sports out is the way you drop the content cost and get a lower price point in the market. It's really important. KLOBUCHAR: Except for the NBA Dallas games. All right, OK, thank you. LEE: Senator Hatch? 32 0f71 7/7/2017 11:22 AM CQ.com - Senate Judiciaiy Subcommittee on Antitrust, Competition HATCH: (inaudible) is here today and l'm helping to host them. So I'm thanking you very much for atlowing me to go ahead here. And my colleagues as well. This is an important hearing and an important subject we're considering today. l'd like to begin by quoting briefiy from an op-ed published yesterday in ?Forbes," that I believe frames how we should -- how we should approach the subject of today?s heanng. The central question in any merger review is how the transaction will impact censumer welfare. Because and TimeWarner are not competitors, concerns about increased market power or a loss of competition, the sort of sorts of concerns we often see in large mergers, apparently do not apply. Rather the pertinent inquiry is whether ownership of TimeWarner content will lead to exclusive dealing, improper favoritism or other acts that narrow consumer choice and reduce service quality. At the same time, we should carefully evaluate the party's claims that the merger wili benefit subscribers by, for example, expanding the amount of available content that doesn't count against data caps, unquote. Now I hope these principles can guide our discussion today and ask unanimous consent of the copy of the op-ed that I wrote be entered into the record. LEE: Without objection. HATCH: Mr. Stephenson, you've pushed back pretty strongly on claims that will have an incentive to favor TimeWarner content over non?affiliated content excuse me or to withhold or threaten to withhotd TimeWarner content from competing broadband providers. Now I?d like you to spell out your argument for me. Why wouldn't it make economic sense for to use its ownership of TimeWarner content to raise prices or attempt to freeze out competitors? And why wouldn?t it make economic sense for to degrade service speeds for non?affiliated content? STEPHENSON: I'll start with why we would have no incentive to preference. 33 of71 7/7/2017 11:22 AM CQ.com - Senate Judicialy Subcommittee on Antitrust, Competition could paraphrase your question, I think I understood it correctly, TimeWarner content over others and I think it's important to understand and I've thought a lot about this -- we're paying, including the debt, over $100 billion for TimeWarner, investing a lot of our shareholder money to acquire this content. It's very, very unique content. And you heard Mr. Bewkes earlier explain the business model and how he built a business that is worth $100 billion, which is quite a feat in and of itself. The business model's fundamental premise for attracting talent, for attracting investors into content, the fundamental premise of that is wide and broad distribution of their content into every home, particularly in the United States of America. While one could argue and I'm sure the Justice Department will took at this closely while one could argue that it might advantage our distribution business to somehow give proprietary access to TimeWarner, it would make no sense to $100 billion business we're acquiring to do that. It would impair the value of that business dramatically. And I've received a big education from Jeff on this. The Clint Eastwoods, the Steven Spielbergs will not bring their talent and their capabilities to a company like this that is that is limiting the distribution of that content. It is a fundamental basis of the value of the company. So Ijust .. I don't see, first of all, the economic rationale and nor do see, from our standpoint, the customer rationale, because, at if you go back to the distribution side, we have built ourfranchise on a very open model. lfthere is content that the consumers demand and want, we want it out there. We have littie value ifwe start limiting access to content. we are what we call an open source company. We're not smart enough to know everything the consumer wants, whether it be an app, whether it be a smartphone device, whether it be content. So we try to open our network up to all and accommodate all that want to come in and iet the customer choose what they want. So limiting the content that our customers can get in this day and age of the Internet is, candidly, for a distribution company, not a smart business move. HATCH: Thank you. Let me just ask this question to Messrs. Stephenson and Bewkes. l'd like to zero on -- in on the benefits to consumers. Now how specifically will this merger benefit consumers? And l'd like to you share specifics, not generalities. 34 of 71 7/7/201711:22 AM CQ.com - Senate Judiciary Subcommittee on Antitrust, Competition And to give an example, Mr. Stephenson, in your testimony, you talk about DirecTV Now. How will this merger help you deploy DirecTV Now? And how will that service benefit consumers? STEPHENSON: Thank you. DirecTV Now, it took the DirecTV acquisition to make that a reality, to get a relationship with content players and the to gain the rights, the content rights, to distribute their content to mobile devices. That's how DirecTV Now became a reality. What we essentially acquired from the content owners was only that, the ability to distribute their content. To the extent that we want our customers to be able to store their content, once they've paid for it, they would like to store it. We call it a cloud?based DVR. But think aboutjust storing the content. To the extent that our customers would like to be able to take that content and interact with their friends on social media with that content, they?d like that. We gained none of those rights in these negotiations to bring DirecTV Now to market. As we look towards the day after this closes, and we have ownership of the TimeWarner content, with ownership you can begin to do those kind of things. We can give our customers the ability to store TimeWarner content. We can give them the ability to interact socially on "Game of Thrones" and "Westworld" and so forth, that they cannot do today. We are convinced, just like with DirecTV Now, once we got certain content players to come on board, others began to come on board. I am convinced that model will play out again as we begin to innovate with TimeWarner content; giving our customers unique and different capabilities, other content creators will follow. HATCH: OK. And, Mr. Bewkes, just to finish with you and your testimony. (CROSSTALK) HATCH: Well, let me just ask this question ofyou. in your testimony, you say that the TV Everywhere initiative you launched in 2009 hasn't grown the way you hoped that it wouid. 35 of71 . 7/7/2017 11:22 AM CQ.com - Senate Judiciary Subcommittee on Antitrust, Competition How will this merger help you deliver more content to more consumers more quickly? And to both of you, ask, how will this -- how will this merger affect the prices consumers pay? You?ve somewhat answered that. But if you could spend a little more time on it, l'd appreciate it. BEWKES: Thank you. I think the way that it would advance that effort, which is to put video on demand capability on all our networks, and we hope that would drive competitionto have every network that you have on your television dial be on demand. 80 you could watch whatever network you want whenever you want. You don't pay again to do it. You have increasing numbers of shows. 80 if you find a show in the middle of the season, you can go back and watch the first one and you should be able to watch it on your iPad or on your mobile device without any further charge. We instituted that change and offered it for no charge whatsoever seven years ago. We announced it with Comcast back in that day. And we hoped that all the distributors cable, telcos would pick that up and offer to consumers fult VOD across every channel on the dial, just the way HBO had done again for no extra charge in the '90s and is the way Netflix or YouTube works today. BEWKES: Here we are, seven years later, a great -- in many parts of the country, if people were listening to this, they would say, don't have this in my home. I'm not used to going to Channel 4 and iooking at NBC or watching FX on Demand." We've because we I think if you look at the DirecTV Now offering, we've been saying very publicly for five years we think that consumers need interfaces that work the way Netflix, Xfinity and the way the one works, where it's easy to ?nd shows. It's easy to search across networks. It's easy to do all of that, again, at no extra charge. And we think by putting this competitive offering into the market, where you have full VOD on all these networks that are in your DirecTV package and at a price that's basically it's either half or less than half the prevailing price on average in the country that's going to force competition, both at the distributor leveE, all the other cable and telephone and satellite companies, and it's going to force competition at the network level, where other networks that have heid it back, 36 of71 7/7/2017 11:22 AM CQ.com - Senate Judiciary Subcommittee on Antitrust, Competition looking to get price increases out of it, realize they ought to just grant it and give people a better deal. HATCH: Thank you. Thank you, Mr. Chairman. LEE: Senator Franken?? FRANKEN: Thank you, Mr. Chairman. I'm a little confused about something. It's this basic premise that HBO, for example, attracts its talent because it for the because it has the widest possible distribution. No, ldon't think that's why talent went to HBO. think talent went to HBO, as I remember, because it was of very high quality and it was actually exclusive. So it's the opposite. In other words, that when "The Sopranosget "The Sopranos." And everybody wanted to see "The Sopranos." So this idea, which is this basic premise that everybody went to HBO because we guaranteed everybody would see you, ain't true. So I don't -- I just don't get that. Now, Mr. Bewkes, you were recently quoted in "The New York Times" article responding to my concerns about how a combined AT&T?TimeWarner could prioritize its own content and restrict other distributors' access to it, you quickly dismissed those fears, saying that engaging in such behavior would not be in the company's best interests. and, quote, "lt would be like selling toothpaste and not putting it in Duane Reed BEWKES: Yes. FRANKEN: 7 It doesn't make any sense. That's your qUote. I'm not sure your it's your analogy that makes any sense. It's not like selling toothpaste and not putting it in Duane Reed. HBO isn't a toothpaste. It's like CVS -- or it could be CVS manufacturing the greatest toothpaste in the world and not letting Duane Reed sell it or, more to the point, it's like selling "Game of Thrones" 37 of71 7/7/2017 11:22 AM CQ.com - Senate Judiciary Subcommittee on Antitrust, Competition and not letting Comcast subscribers watch it or, very likely you?ll get to answer the question after I ask it. BEWKES: l'm sorry. (LAUGHTER) FRANKEN: Making Comcast pay more for the privilege of having "Game of Thrones? or "Veep" or the rest of the line-up. Now I want to be clear what we're talking about here. Should this deal be approved? Nothing is preventing a combined AT&T-TimeWarner from going to any of its competitors in the pay TV market and charging double for access to "Game of Thrones" and "Veep," et cetera. Or the combined company could simply restrict access to the programming entirely and wait for competitors' customers to flock to DirecTV or HBO streaming services. I don't think these hypotheticals are outlandish at all. You'd have every reason to do this, ifyou could, ifthat would make more money. And this is also to Mr. Stephenson, you'd have you could make more money for in the long run. This is the this is the incentive that's created by the merger. So Mr. Bewkes? I know you're eager to answer this. Do you agree that a combined AT&T-TimeWarner will have greater leverage when negotiating program carriage with other content distributors as a result of this deal? And do you agree that a combined AT&T?TimeWarner would have a financial incentive to use this leverage for its benefit? BEWKES: May l? OK. (CROSSTALK) FRANKEN: 38 of71 7/7/2017 11:22 AM CQ.com - Senate Judiciary Subcommittee on Antitrust, Competition There was a long pause there. BEWKES: sorry I was so eager to answer. No, I don't agree. i don?t think it would have -- it would not have the incentive nor would it have the ability to do that. It may require a back?and-forth. But let me try to answer the first part. No. the -- we don't -- all networks, whether it is NBC putting on the show, "BEindspot," the show is on NBC. It?s exclusive to that's where you have to go to watch it. If you want to watch ?House of Cards,? you (CRossnuk) FRANKEN: You didn't have to pay to get NBC. BEWKES: Yes, you did, sir. You had to subscribe to $80 to $120 of network fees so thatNBC could get paid that way. If you're talking in the case of HBO, Nettlix, Showtime, those are a little FRANKEN: No, well, and wait a minute. There's a distinction between HBO and NBC. BEWKES: Yes. FRANKEN: BEWKES: Yes. FRANKEN: And HBO costs you money. You had to pay for that. NBC came with tree, with the package, whatever package you have. In fact, you used to be able to watch every TV show for free. 39 of 71 7/7/201711122 AM CQ.com - Senate Judiciaiy Subcommittee on Antitrust, Competition BEWKES: Right, so I think we all remember that term, pay TV. That was HBO, Showtime, Netflix, et cetera, where you have, as a viewer, the choice to either pay to have it in your home or not pay to have it in your home. And when you decide to buy that network for the month, you then get the shows on that network, "House of Cards" on Netflix, "Billions" on Showtime, ?Game of Thrones? on HBO. Those are premium services, there's no advertising. If you don't like the content because of its nature, you don?t have to have it in your house. It's quite a different business. But what I was saying in the analogy is right on the toothpaste, is it would make no sense and, in fact, we could go into it -- to hot sell HBO on the Comcast cabie system, on the Verizon cable system. It would make no sense not to offer it. FRANKEN: Yes, would it pay -- make sense for to use its leverage to charge Comcast more? BEWKES: No, because we don't have the market power to do something like that, either at or at HBO. The market's way too competitive for that sort of thing. And remember FRANKEN: I really think, though, Mr. Kimmelman might disagree with you. BEWKES: Well, there's no history ofanyone pulling off something like that. And this company is certainly not big enough at either end to do that. FRANKEN: IVlr. Kimmelman, do you have any thoughts? Well, it's this very concern that, again, NBC, you know, these are wonderful business men. You know, I understand their goal as to what they're doing with their business. NBC said the exact same thing. I'll just say the enforcers found that there were these incentives; they imposed limitations or would have blocked the transaction there. This is even larger. And I'll 40 of71 7/7/201711:22 AM CQ.com - Senate Judiciaiy Subcommittee on Antitrust, Competition FRANKEN: And did they live up to the conditions? KIMMELMAN: Some. But there have been a lot of problems, I think companies like Ms. Ziman's company would not have the resources to take even advantage of those tools. I think there are significant difficulties with conditions which we could get into later. But there has clearly been a history of this kind of favoritism and discrimination. Hi just remind you the bipartisan Congress in 1992 stepped in and required cable to sell its products, TV networks, that were they were vertically integrated to satellite in order to aliow satellite to get access to the product. You could have made the same argument, why wouldn't we want to have more people getting it? Because it was a competitor to cable. l'm not worried about Comcast not getting TimeWarner content in this instance. l?m worried about the online distribution that would compete with that is'growing right now, not being able to get exactly what it needs to be a real competitor. FRANKEN: Well (inaudible) a second round of questions. Will there be (inaudible)? (inaudible) you very much. And ljust -- oh, (inaudible) so l'm over my time. But I just want to say that I remember that people flocked to talent flocked to HBO because it was a premium channel and that you people had to pay to go there. STEPHENSON: (inaudible)? I didn?t get a chance to respond to Mr. Franken? FRAN KEN: The chairman. STEPHENSON: Yes, senator i just want to make a point that anybody, though, any household in 41 of71 7/7/2017 11:22 AM CQ.com - Senate Judiciary Subcommittee on Antitrust, Competition America and today any person with a mobile device can subscribe to HBO. i think that was the point we were trying to make. It's not exclusive to anybody. it's broad distribution that anybody can (CROSSTALK) FRANKEN: . talking about now. I'm talking about what built the franchise of HBO. And it was a completely different premise than what Mr. Bewkes was presenting in his opening. FRANKEN: And ljust wanted to make that point, that it was not what attracted great talent to HBO. It was in a different model. And what built that franchise was a completely different model. We'll get to -.. I want to get to some other questions later. LEE: Senator Perdue? PERDUE: Thank you (inaudible). You know, in my business career, it seems to me that this economic miracle that we've enjoyed here over the last certainly 70 years, 75 years, was built on innovation, capital formation and the rule of law. And this concept that we're talking about today, this vertical integration, by the way, is not a consolidation. I think that's very plain and we need to remember that in the committee. But this is -- this economic miracle was built on transactions just like this in other industries. Vertical integration is nothing new. I personally have participated in it, in order to compete, not to dominate. Size today doesn't necessarily correlate to dominance. When you talk about innovation and technology changes like we're talking about today, in this industry particularly the consumer has benefited from the aggregation of the ability to (inaudible) as Mr. Stephenson said (inaudible) comment, they (inaudible) the most content to the most people at the lowest cost. That's called capitalism. if they don't do that, they won?t be able to compete. Mr. Cuban, you said something earlier that really resonated with me, you commented about to watching TV and watching young kids today and how they consume input is totally different than we all -- when we all grew up. But I think sometimes being in the Senate is like watching TV, too. You think you're 42 of71 7/7/201711:22 AM CQ.com - Senate Judiciaty Subcommittee on Antitrust, Competition doing something but you're really not doing much. And (LAUGHTER) i hope that today will be a little different. And I want to get your perspective because you're in a Unique position to have a unique perspective on this transaction. I would have thought you would have been a witness for an anti-position against this deal. And i want to talk about your experience and the roadblocks you had to innovation in getting your content out there. And are you concerned about the combination and the size of this deal harming your ability to be creative and innovate? CUBAN: Let me give you some background. I own AccessTV and Movies. We were -- AccessTV started off as which was the first all high-definition TV network. And it was absoiutely independent and we continue to be independent. And too let me also add something that Senator Klobuchar suggested, that because they own the Dallas Mavericks, that improved my ability to get carriage for AccessTV and Movies. Well, TimeWarner Cable is the incumbent cable network in Dallas and have not been able to get carriage there. So I've faced the challenges. I also own Magnolia Pictures, which is a movie distribution company; Landmark Theaters, which has 300 screens and is geared towards independent movies and have produced -- and produced movies through a company called 2929 distribution. Some of the movies were "Enron: The Smartest Guys in the Room," which got nominated for an Academy Award and "Good Night and Good Luck." And "Good Night and Good Luck," as an exampie, we weren't big enough to distribute it. So we worked through Warner Brothers to distribute, to get full distribution. There are just -- we have to compete. As an independent network, i feel the pain that Ms. Ziman feels. There -- you know, at AccessTV we geared gear ourselves as a music network geared toward the 45?plus. We don't like to tell our advertisers that but that's who watches more TV. And it's a challenge for to us get distribution. But with the new methods of distribution like DirecTV Now and others, Slang (ph) in particular, that has opened the door. in the past, we were -- the distribution was constrained, as Ms. Ziman mentioned, because of bandwidth. There just -- you couldn't put on another high-definition network, particularly with standard definition which took up even more bandwidth. And so now with new methods of distribution, there's new hope. There's more hope for independent networks like ours. And i think this merger opens those doors. You 43 of71 7/7/2017 11:22 AM CQ.com - Senate Judiciary Subcommittee on Antitrust, Competition know, as an example on DirecTV Now, AccessTV is distributed in their $35 bundle. Movies is not. We've got to do a better job at Movies to convince them to carry us. That onus is on me. And so, you know, to your point earlier, it's very competitive. It's a free market still in a lot of respects and I think this combination opens doors. I think they recognize now that bandwidth is more available through online offerings. They can support more independent networks, more minority?owned networks. And we've seen that start to happen. And I think the combination of them owning content, you know, there's a lot of things when we took at online content and, particularly, television distributed content and we say, why don't they do that? And itjust makes perfect sense for us to have remote DVRs or other features. And, as a content owner, it's like I'd love to offer those features as a smaller content owner. But until the big guys start doing it and set the precedent, us little guys don't get to offer it. So these new precedents that are set, I think, will really push the way for better services and more consumer friendly services and really expand the ability for independent networks to compete. PERDUE: Yes. Thank you. Mr. Bewkes, could you taik about what factors today add friction to your ability this is pre-deal, before the deal, as you exist today, what causes friction to your ability to innovate? And how would this merger with help your content developers provide better and quicker and cheaper content for consumers? BEWKES: OK, thank you, Senator. The main friction now is that we have to put our networks through the existing cable satellite distribution plant, which had a certain technological ability to it; Only, recently did it have the ability to do video on demand. And increasingly we're competing against video being delivered over broadband only that has full two?way video on demand. And where the broadband services have the direct retaii data of what you're watching, who you are, where you're buying your stuff, so it implicates advertising and subscription. What we've been trying with HBO first and then with Turner second -- but we really have all we haven't been successful in the broad 44 01?71 7/7/2017 11:22 AM CQ.com - Senate Judiciary Subcommittee on Antitrust, Competition 100 channels we've all got in our homes. We tried to make our channels all video on demand in a way where you could go as a viewerand search back and forth, watch full seasons, really get the same because there's more and more networks and content avaiiable. You need to be able to search for Netflix or on an Apple TV or that kind of a thing. Most of the distribution companies, particularly cable companies, have not uniformly offered that. And the way that American consumers get a change in their habit about something as important as television is it has to be consistent across all the-channels and it has to be nationat. And we think if we can get this going, competition with lower prices, better, smaller bundles, more effective advertising can bring more competition in all of these areas. We don't obviously and we can't determine what all the other media companies do. We don't have that big of a market sharecompetitive innovation in the hands of consumers, we think consumers liking it can get those changes to be universally adopted. That would give us a chance against these giant technology companies that, by their own definition, have massive global scale. PERDUE: Thank you, Mr. Chairman. have other questions I'd like to submit to the witnesses in writing. LEE: Without objection, they'll be admitted, thank you. Senator Blumenthai? BLUMENTHAL: Thanks, Mr. Chairman. Thanks for having this hearing. And thank you all for being here. have serious concerns about this transaction. I have yet to be convinced that the benefits outweigh the harms to competition and possibly to consumers. It is a vertical merger. It doesn't take out a competitor but it potentially has seriously negative impacts on competition and on consumers. And it is different from the NBC?Comcast merger, which, as Mr. Kimmeiman points out, has had problems itself and had to be modified by regulators. It involves wireless. It's a national platform. And it involves more than one platform. But speaking very biuntly, what I think, what any of my colleagues think, may make 45 of 71 7/7/2017 11:22 AM CQ.com - Senate Judiciary Subcommittee on Antitrust, Competition no difference whatsoever because Donald Trump has said he's going to block this merger. And I take him at his word. VVhy? We operate as an act here. (LAUGHTER) I know that, Mr. Stephenson, you've met with the Trump transition team. Have you met with the Trump transition team? STEPHENSON: No, Senator, I have not. BLUMENTHAL: Well, then what remains on the record is that the president of the United States -- or I should say the future president of the United States has said he's going to block this merger and he said it emphatically and unequivocally. And he has said it because and quote, "It's too much concentration of power in the hands of too few," end quote, a classic antitrust analysis from the president- elect. Now, I'm a strong supporter of antitrust enforcement and I may well agree with Donald Trump. What concerns me is the reason that he gave -- an additional reason -- which is that he is very unhappy with the CNN news coverage. And for a public official to use the blunt, heavy instrument of law enforcement to try to silent or change coverage by a news department of any company is, for me, absolutely abhorrent. Would you agree? STEPHENSON: You're referring to me? I'm sorry. 46 of71 7/7/2017 11:22 AM CQ.com - Senate Judiciary Subcommittee on Antitrust, Competition BLUMENTHAL: I'm asking both you, Mr. Stephenson, and Mr. Bewkes. STEPHENSON: Senator, I'm a novice in the world of politics so I would struggle to engage at that level. My expectation was, when we announced this deal and is today, that the Department of Justice will be the one reviewing this transaction and making the determination whether it's competitive or not and is it competitive under the law. And so our expectation is to present our facts. We actually believe the facts are going to be very compelling and very good that this is pro-competitive and pro-consumer. So I'll leave it at that. BLUMENTHAL: Mr. Bewkes? BEWKES: Yes, and entirely agree with what Mr. Stephenson just said. In temples of the independence of ourjournalism -- and I hope all the other journalistic outlets -- we have always vigorously defended that for decades, whether when we were at Time Inc, whether and when we have CNN. And we intend to continue defending and being an independent journalistic voice. Everyone that watches us may have their own opinion about whether we succeed in being objective. We try hard every day and we're going to continue to do that. BLUMENTHAL: You understand that What troubles me is that the president-elect has said that his Justice Department will enforce a different standard of law, depending on what kind of coverage his administration receives. Will you commit that your news coverage will in no way be influenced or impacted by what the President of the United States says about this transaction? BEWKES: Yes. BLUMENTHAL: Mr. Stephenson? 47 of 71 7/7/2017 11:22 AM CQ.com - Senate Judiciary Subcommittee on Antitrust, Competition STEPHENSON: Yes, sir, of course. Yes. BLUMENTHAL: And wouldn't you agree with me that for anyone in the Department of Justice or any law enforcement agency to threaten or use more vigorous or aggressive law enforcement, in effect, in retaliation for news coverage that doesn't please that public official would be an abuse of power? BEWKES: I would if you're asking me. BLUMENTHAL: I'm asking you and I'll turn to other members of the panel as well. but you're the ones who will be making decisions about BEWKES: Well, I BLUMENTHAL: -- and, by the way, the president has made similar kinds of remarks about NBC and about "The Washington Post" in terms of the enforcement of laws potentialiy against them -- the president? elect. BEWKES: May make a comment? BLUMENTHAL: Please do. BEWKES: I don't think we should be selective about retweeting here or restating the various comments that various elected officials or those running for office made upon the announcement of this merger because there were comments made by candidates on all sides, including Mr. Sanders, Mr. Kaine, saying that they were against the merger, again, before any of them had the information. And what Randal! and I are saying is that we're confident that once everyone and including the questions you've raised today -- hears the facts and has the 48 of7i 7/7/201711222 AM CQ.com - Senate Judicialy Subcommittee on Antitrust, Competition appropriate competitive analysis on this that it will be seen and concluded by everyone, even with the concerns you've stated, that this will have pro-competitive effects that will benefit both competitive structures, diversity of voices and consumer price alternatives. We believe it and we think we can prove it. BLUMENTHAL: And just want that -- I want -- I want to make clear that my point here is not that other candidates may have commented or not about this merger. It is perfectly appropriate for a public official or a candidate to comment on the merits of anti-trust enforcement. But to threaten more vigorous or adverse enforcement against a particular company because he doesn?t like the news coverage, is a threat to the First Amendment. That's the fundamental point here. l'm a believer in strong antitrust enforcement. welcome President?elect Trump?s interest in this area. i find absolutely abhorrent the threat against a news organization based on its content of more vigorous or adverse enforcement against it simply because of a dislike of that coverage and I welcome your commitment that his statements will have absolutely no impact on the content of coverage. I hope the same will be true of NBC and the Washington Post because this kind of potential abuse of power is a threat to fundamental liberties way larger than the issues we're discussing right here. Thank you. LEE: Senator Tillis. Senator Tillis, you're up to bat. TILLIS: Thank you, Mr. Chair. i want to get back to the merger and the potential acquisition. (LAUGHTER) And actually, i would like to start, Mr. Bewkes or Mr. Stephenson, if you could briefly explain to me how this DirecTV New product that you're offering and distributing through network, how that how you may enter into other relationships with other wireless providers to accomplish the same thing and how would those transactions look? STEPHENSON: Yes, thank you, Senator. 49 01?71 7/7/2017 11:22 AM CQ.com - Senate Judiciary Subcommittee on Antitrust, Competition Actually, we stole the concept for DirecTV Now with free data included from prior deals that we have done. In effect, this premise of free data, if you wilt, with DirecTV Now, it actually goes back decades. The first instance of it was a 1-800 service when you called Sears Roebuck. You dialed 1-800 and Sears Roebuck picked up the tab for the picked up the tab for the tong distance service. And that actually drove long distance prices down over time. I mean, all of a sudden, everybody started using that type facility to get people to call their franchise. So, what happened then in 2008 is Amazon launched a reaily groundbreaking product called the Kindle and we did a deal with Amazon where they actuaily when you delivered a book to the Kindle, you paid $10 for your book, that included the data charge. Amazon paid directly that data charge. That's the concept that we took advantage of with DirecTV Now. DirecTV is paying the charge for the data to the mobility business. And by the way, that is ou:r lowest wholesale rate available in the marketplace today to DirecTV, to Amazon, to any big, smail, medium sized company that wants to do this same approach. We're actually convinced thatjust like 800 service drove long distance prices down, this will also drive video prices down as people begin to leverage this same capability. I think that's right. And Mr. Cuban, almost hesitate to even speak with a Hoosier after the devastating loss of the Tar (LAUGHTER) a week or so ago, but I'm going to anyway. In your opening comments, you were really talking about the disruptive nature of other content providers today and I saw you shake your head on a couple of occasions when I think what we're trying to do -- your comments kind of suggested that you?re trying to skate to where the puck's going to be. CUBAN: Correct. TILLIS: And a lot of this discussion is where the puck is today. CUBAN: Without question. 50 01?71 7/7/2017 11:22 AM CQ.com - Senate Judiciary Subcommittee on Antitrust, Competition And if we don't look ahead, then some of these premier providers are going to be hamstrung against other ones -- against other disruptive forces that could ultimately, I think, create a consolidation and upward pressure on prices. Wouid you agree with that? CU BAN: Yes, sir. There's already a consolidation that we don't see going on. When I went through the list with Facebook, Amazon, all the content -- the primary content that they offer came through acquisitions. Their biggest content plays were acquisitions. What's happening now, though, is they're not acquiring big companies like Time Warner. They're acquiring disruptive companies that are choosing not to go public for $100 million or $1 billion that flies completely under the radar and that's how they're competing. CUBAN: And I'll give you a perfect example how the nature of and it's kind of silly, but how the nature of content is changing. I wanted to test Facebook Live just to see what kind of audience I could get. No lie, i took my breakfast, empty plate, one pepper on it, put up a Facebook Live, and within a minute, I had 1,500 live viewers. Within 30 minutes, I had 10,000 live viewers. i thought, OK, maybe that'sjust Facebook Live. It's new. i went to a new platform called Lively. was with my kids. Again, I try to be a geek and keep up with this. were going down a slide into the lake. And just put it on them. On Lively within 20 minutes I had 35,000 live viewers. For an independent network, 35,000 live simultaneous viewers is huge. That's changing the nature. CNN, a great program, is 2.5 million viewers watching it at a given point in time. That's nothing on Facebook live compared to and other platforms. It's changing whether we want to admit it or not and that's having significant impacts, and really the biggest challenge is getting people to watch TV. That's going to be -- you know, with all these things, you're hoping to find new ways where people go back and say, OK, I want to try watching TV again, and that will increase (inaudible) and we see it with the NBA, we see it with the NFL and all forms of content. And think something else that one of my colleagues mentioned was -- well, first off, ifl look at HBO, HBO became a premier channel not because they charge people to watch it but because they have extraordinarily good content. Extraordinarily good content that people were (ph) willing to pay a premium for. 51 of71 7/7/2017 11:22 AM CQ.com - Senate Judiciary Subcommittee on Antitrust, Competition 0003 But there's a lot of times when l'm channel surfing, which usually happens late at night, when l'm back in my I don't get to channel surf as much when l'm at home because my wife can control the remote. But when l'm looking, l'm going through all these channels, l'm going, why am I going through all these, and am paying for them? NBC is not free. ABC is not free. They're all negotiating some baseline cost that go into your baseline cable biiE, and I would like to reach a point in time where have the freedom to have options. A sportsless option seems like a very sad place to me, but some option, to where I don't necessarily have channels that I consider extraneous based on my viewing habits, and then from time to time, I will pay a premium if I want to go and access content that may be on a channel that I would not regularly want to pay for because I don't have a need or a desire to have that. That's the model that we're getting to. And i think if we don't, as a matter of -- I'll leave it to the antitrust division in the Department of Justice to ask you the right questions to make sure that you're not wading into any antitrust areas. But if we as a body (inaudible), if wejust continue to focus on where the puck is versus where the puck is going to be in terms of content delivery, and this industry 10 years from now, then I think we're going to disadvantage some reai innovators. There's some legitimate issues that need to be addressed, but we need to be very, very careful or we?re going to cause some of the leading innovators in the world not to be able to innovate because of constraints we're putting on people using old world models to assess where the new horizons are for content delivery. Thank you. LEE: Senator Flake -- FLAKE: Thank you, Mr. Chairman, and thanks for having this hearing. It's been enlightening. l'm trying to view this all through the lens of my own kids. have two married kids, newly married, who wouid no more sign up for DirecTV or Dish or Broadcast than they wouid to get a land line in their home. That's just not something they would consider. They might try to crib off of my DirecTV, ?nd out the password and use it, but they would never think of that. And that's why when I hear Mr. Zimmerman talk about this and the competitive angle, it seemslike an excellent argument you're giving that would have been more appropriate 10 years ago or 15 years ago. But it doesn't seem to be where the puck is, or certainly where the puck is going. I think we have to consider more who the competition really is, that this isn't traditional antitrust competition among broadcast media, but among the edge 52 of 71 7/7/20171122 AM CQ.c0m - Senate Judiciary Subcommittee on Antitrust, Competition providers. And Mr. Cuban, you talked in your statement about the real competition. I Do you want to talk a little more about that? About who the real competitors are. CUBA: mean -- we apps compete for our time now. When as i mentioned, when we look for something to do, a way to kill time, we look at our phone. And all you have to do is look at the rise of Snapchat, the rise of Musically, the rise of Lively, the rise of lnstagram. That's what consumes our attention. Kids don't go to TV anymore. You mention your children. have a seven?year-old and I went to help coach his baseball team and none of them knew the ruies because none of them ever watched TV and watch baseball like we grew up doing. They didn't know the rules for football. l'mean, i can't even bribe my son to go to a Cowboy game. That's just not how it is. But if take away his Minecraft videos, he throws a hissy fit. And, sure, our consumption habits change as we age but and I'm sure they will for all my kids but, at the same time, on-demand, in-hand viewing through streaming is how people consume content. And it's going to be a challenge and I think they face additional challenges from a tech perspective. You know, Randall mentioned 56 coming along and i think it will get here sooner rather than later. There's going to be people cutting the broadband cord. And just like you mentioned your kids never would have thought to buy a land line, i tend to believe that there will be a point in time where we won't think about wired broadband as being commonplace. And that's going to create a whole new list of challenges for them. So, you know, technology marches on, whether we like it or not. And I think we can't look backwards and look at historical norms in order to predict the value of this merger. (UNKNOWN) . When Senator Blumenthal talked about the incoming president talking about going against this merger, simply because of the size of it, how does this size of the merged company, how does the size compare to the real competitors we're talking about, some of the edge companies? Any figures there? Mr. Randall (sic)? STEPHENSON: Yes, Senator, if you put our two companies together, the combined market cap, 53 of71 7/7/201711222 AM CQ.com - Senate Judiciary Subcommittee on Antitrust, Competition I depending on the day you look at the market, is $300 billion-$350 billion. The companies that Mark has referenced, whether it be Google, Facebook, Apple, these companies have market caps that are about two times that size. So as we talk about size and the significance of size in a deal like this, I think we have to recalibrate what size means in this new world because we're about half the size of most of these companies that are really providing the competitive threat to our core businesses today. (UNKNOWN) All right. Mr. Kimmelman, do you have any response to that in terms of where -- are we discussing what the market is or it was a few years ago? KIIVIMELMAN: Senator, I totally concur in your assessment. My kids do the same thing as yours. I think we should skate to where the puck is and we should look at where the market is going. l'll just note, on the margin, young people are doing different things; 90 percent, though, plus of the revenue comes from a lot of the traditional sources and the companies will skate to where the puck is. They will try to control as much of that new distribution as possible. On the online platforms, i totally agree, there is a lot of attention. But what we used to do on phones a lot of kids are now doing on Snapchat. What we used to do in terms of listening to records is now iTunes. It's not that TV has disappeared or video doesn't matter, it's people are doing it in new forms. 80 I'm all for looking at who the other players are but none of them charge me $200 a month to get access to that online content. That's where your kids get it. And if they're if they're mooching off of your DirecTV, that's probably why -- they don't want to pay $200 a month to get all this stuff. So somebody's paying and I just want to make sure it's a fair price. But there is no question that the online platforms are going to be big players here. But they don't control that wire, wireless, whatever it is, even if it's not wired, broadband, satellite, they don't control that into our homes. And you can probably only get it from a coupie players. That's where there is an antitrust probiem. That's where there's a control problem that we want the enforcers to look at. (UNKNOWN) 54 of 71 7/7/2017 CQ.com - Senate Judiciary Subcommittee on Antitrust, Competition Is that -- is -- who's paying for content, is that really relevant to the competitive nature of these kind of mergers? Mr. Cuban, do CUBAN: Yes, I would say if you aren't paying for the content, you are the content. You know, you're being sold and advertising is paying for it. And I'd also say like my 10-year-old daughter doesn't have a cell phone account but she has a phone and she gets access to wireless through wi-fi at various distribution points and she knows where they are and she goes there -- and I'm not just talking inside my house, I'm talking outside the home. So the notion that a wireless provider is the only way to access this content isn't necessarily the case anymore. And those optionsare expanding rapidly. I'd also say to respond to Gene that Flurry, which is anapp monitoring company just came out this week and said, for non? traditional, TV?type content, all consumers are consuming 133 minutes, more than two hours per day, of non-TV?like content on their phones. The world is changing and how we consume it is changing and it's not driven by pure mobile. FLAKE: Thank you, Mr. Chairman. LEE: Thank you, Senator Flake. We're now going to start a second round of questions. lVlr. Stephenson, let's go back to you. Section 5 of the FTC Act, as you're aware, permits the FTC to take action to prevent, quote, "unfair or deceptive acts or practices in or affecting commerce." However, that provision contains a carve?out. It contains an exception for common carriers and, as I'm sure you're aware, the US. Court of Appeals for the Ninth Circuit recently extended this exception to cover even aspects of and its activities that are non-carrier activities. Is it your position that TimeWarner's business will become exempt from Section this transaction is approved and kicks in? STEPHENSON: Yes. I'm not a lawyer so I'll try to address your question as best I can. 55 of71 7/7/201711:22 AM CQ.com - Senate Judiciary Subcommittee on Antitrust, Competition 0003 Obviously with the net neutrality provisions, is our privacy standards and so forth are under the purview of the FCC. As with TimeWarner, so Verizon has the same issue of buying AOL, buying Yahoo! 80 Comcast and NBC, you have this same issue, where there's this confusion about a content company under the purview of the FTC, a common carrier, per se, is under the purview of the FCC. it is confusing. And I would suggest that this is an area, perhaps, where Congress really should consider taking up bringing some clarity because it's not that we have regulation gaps in this area; it's that we have regulation overlaps. And it is a bit confusing as to who controls who (sic). So I would actually encourage perhaps maybe some legislative effort to address this issue. Sure. And get that. get that we have some regulation overlap. We?re not talking about regulation overlap here; we're talking about a gap. We're talking about a carve?out and I can -- I would imagine you would have to agree that if that were the case, if the exemption for Section 5 currently enjoyed by also extended to TimeWarner, if this transaction were completed, that would be cause for concern by some. I assume you would acknowledge that? STEPHENSON: Yes, i believe the law is that, if owned TimeWarner, they would come under the FCC's purview in terms of regulating these issues. LEE: OK. I've got a another line of questions I'd like to extend both to you, Mr. Stephenson, and to Mr. Bewkes jointly. So when Comcast and NBC completed their merger back in 2011, you recall there were some concerns expressed by CNBC and others and the -- or rather concerns expressed by Bloomberg and others relative to CNBC. And there were conditions but in place to guarantee that Bloomberg would have access. It ended up taking three years of litigation to bring that about. Shouldn?t we be concerned about the possibility that any conditions put in place here, designed to guarantee access to your network, might not be followed, in much the same way that this required three years of litigation, expensive time-consuming litigation, occurred in the wake of this other merger? STEPHENSON: 56 of71 CQ.com Senate Judiciany Subcommittee on Antitrust, Competition I've been asked a lot about conditions imposed on other companies in this regard and I'm not knowledgeable about the ability of those companies to comply with those conditions. I would tell you we have had several mergers where conditions have been posed on us. I think you would find that our track record in adhering to those has been very strong. I would also suggest that the Department of Justice has not seemed to have any lack of resources in pursuing areas where they believe we were out of compliance with conditions. And so 1 fully expect that, if any conditions are applied to this particular transaction, we'd comply with those just as we have every other transaction. LEE: Did you have anything to add to that, Mr. Bewkes? BEWKES: Yes. i think the same is true in the history of TimeWarner. We had a merger with AOL, where some agreements on carriage of other networks were made and they were followed with no incident. And the in the Turner and TimeWarner merger, we had conditions which also were followed without incident. So'our record is without there is no instance in which we did not comply with any conditions we had in our various mergers. LEE: All right. And, of course, I'm not talking about your companies in particular but your companies in particular are the ones that want to become one company right now. And you can understand why some people would express this concern when you do own some news entities and there are other news entities that have expressed concerns that they might be blocked out for one reason or another, either through pricing models or as a result of where you locate them, what number they are assigned, what channel they're assigned, whether it's put in the same grouping as other news outlets or otherwise. Do you understand why people might have that concern? STEPHENSON: Yes, sir, I do and i don't i don't think those are terribly unique to other concerns people have expressed in past mergers that we've been a part to party to. And I do believe that that those have been adequately addressable with concessions and conditions. 57 of71 7/7/2017 11:22 AM CQ.com - Senate Judicialy Subcommittee on Antitrust, Competition And again, I will repeat, I think both companies have a stellar a flawless track record in complying with those conditions. LEE: Ms. Ziman, you state that over?the-top distribution is, as I believe you put it, a one-way ticket to bankruptcy. Can you explain why this is not what you would consider a viable business model for independent netWorks? ZIMAN: Well, right now the OTT market doesn't have the amount of subscribers that make it a business. Number one, it's a maze of confusion, as I said before. it's a search engine nightmare for a lot of people that aren't used to it. Mr. Cuban's children are much more used to it than some people that are a little older. But at the same time, in order to get, number one, license fees, that's impossible. And in order to get advertisers to advertise with you, it's such a small market, it wouldn't work. Plus you need to be able to use the linear service in order to actually get your brand known to the public and, at the same time, you need to be able to show the public that you're delivering a network that is curated and that meets their interests and their needs in order for them to then also want some VODs of a the OTT market. We are actually distributing as Cinemoi over the OTT market. But the reality is it's a very fragmented market right now and confused market. And, therefore, if we relied on it solely, it would be a one- way ticket to bankruptcy because you can't survive. You have the obligation -- we are all gatekeepers to the communication media. That's a fiduciary responsibility, to deliver to the public content that is quality oriented, that they deserve. That means that you have to spend money in either licensing content or original productions. disagree with some of the people that think that HBO is there because of distribution. HBO is there because of quality. Many people, many stars, come to us as a small company and give their services for very small amount of money because of the quality of the programming that we ask them to participate in. The reality is we still have to spend money. We still have to convince advertisers to go along with some of this. That's impossible. In order to get an advertiser interested, you have to have a distribution of 55 million subscribers. That's almost impossible right now because the are shutting the doors on independents, on innovation, on good quality, original programming. 58 of71 - CQ.com - Senate udicialy Subcommittee on Antitrust, Competition Unless you are bundled, you don't have any negotiating power. mean, Mr. Cuban is partners with CBS. It's a different story. And even he couldn't get a TimeWarner. It's an impossible marketplace right now. And we need to improve it. And ifwe really look at what is happening here, we're moving towards an oligopoly. And if you look at Taiwan, for instance, where six conglomerates own all the media, when they want different content, they simply trade at the cost of the public, which is rising and rising, and at the cost of free speech. LEE: Thank you. Senator Klobuchar? KLOBUCHAR: Thank you very much. I apologize for leaving briefly. Senator EVlikulski was giving her closing speech of her career and then we were -- had big event on Cuba and I carried (ph) the bill to lift the embargo. So as opposed to Mr. Cuban, was with the Cubans. So I wanted to kind of go back to some of these cost issues. Mr. Kimmelman, the money the typical American household which you mentioned spends on these services, $2700 per year, continues to trouble me and I'm concerned that this transaction won't reduce that burden and I think you argue there could be a chance that it would increase it. Is this a legitimate concern? And why? KIMMELMAN: Senator Klobuchar, I think that that's the baseline and it is the result, if you look at a 20-year period, of consoiidation and limited regulatory oversight during periods of that that have enabled prices to be in?ated. There is competition on the margin, there's new competition coming from new sources, but it's hard to squeeze that out. I will say that with what is being offered now in the market that includes what Time Warner is offering and there is hope. The online platform is opening up some and they?re offering new products and new services and some at lower prices. The real fear is whether the combined company once it gets -- looks at its overall interests will favor itself and potentially harm competitors. KLOBUCHAR: Right. KIMMELMAN: So that's Where the rub comes on the prices. They might offer a better price and they may offer it for some time, but in the long run will the competitive process be 59 of71 7/7/2017 11:22 AM CQ.com - Senate Judiciaiy Subcommittee on Antitrust, Competition 0003 benefited? That's what I think the enforcers need to look at. KLOBUCHAR: So you see this as a -- there is a chance that it could be another model rather than just cable? KIMMELMAN: Absolutely. In some ways, I think that's our only KLOBUCHAR: OK. KIMMELMAN: for all the reasons everyone here has stated. KLOBUCHAR: OK. But you're concerned about a few things. One is that the prices may initially I think you know, whatever it is, $60 or something, and then it goes up and that it would be $35 for 100 channels, but then it goes up. And so you're worried about that and you're also worried that there would be less competition for, say, content and things like that and eventually we have problems because of that. KIMMELMAN: And KLOBUCHAR: And you KIMMELMAN: Yes. KLQBUCHAR: could build some conditions into that or not? Well, let me just say, part of the reason for the longer term concern is that Comcast already vertically integrated and has all the NBCU suite of programming. Here, you have Time Warner programming. Now, will they compete aggressively against each other? I certainly hope so. But in 60 of 71 7/7/201711222 AM CQ.com - Senate Judiciary Subcommittee on Antitrust, Competition a market where there are few vertically integrated companies, there is a danger that they will buy more, CBS, Viacom, who knows, to escalate against each other but also possibly follow the same basic market business structure and deal with each other maybe even at pretty high prices because they pass those on to the consumer in their own market, but then charge them through to every other distributor in the market. Now, again, if if somebody can come up with something comparable to HBO, they can compete against it. It's been tough, there are only a few major content providers that provide that high- quality professional content and we tend to get locked into that. So yes, you buy other things on the side, but that just means you're paying more for other things. That's why the bill is so high. KLOBUCHAR: And Mr. Stephenson, just -- I know you're gonna answer that, but so $35 for 100 channels is a good deal, but isn't that an price and it's going to go up to $60 or something like that? STEPHENSON: These two go together, but I think it?s important to understand why we put a $35 product out inthe marketplace, and it's because the other system, the old system is just flat out broken. Content costs continue to escalate, cable bills continue to go up and we're at a $100 average cable TV bill and 20 million households have opted out. They've left the system. They said we don't want this product anymore, it's too expensive. So we brought this product to market to address those 20 million households and it is proving we found the sweet spot. So it's not as though we have pricing power down here. The pricing power doesn't exist because the customer said we opt out if you don't meet this price point. So we have tried to get the cost down -- the content cost down, the distribution cost down, no set top boxes to ensure that we can get into a market and hit a price point that the customers will come back into the pay TV system. And they're doing it. I think as soon as we think we can begin to move prices up and take advantage of that, they have demonstrated they'll leave us again. So i think we're bound on this and I think we have we've reached a place with the consumer that they're happy and I think they're willing to enter this marketplace again. KLOBUCHAR: To get at some of Ms. Ziman's points, in your testimony, you say, Mr. Stephenson, in short, we are still going to purchase high quality content from atl corners of the content community and we'll continue to distribute Time Warner programming 61 of7l 0003 7/7/2017 11:22 AM CQ.com - Senate Judiciaty Subcommittee on Antitrust, Competition widely. Am I understanding your position correctly then that after the acquisition, would not discriminate against independent content providers in favor of Time Warner content? STEPHENSON: i don't think we have a choice. The business proposition is you better have a wide array of content, there are too many alternatives, you will lose customers if you do not. Now, I think we've pointed out an interesting dilemma here. We want a broad, wide range of content brought into this ecosystem and everybody wants to be paid for their content whether it gets broad viewership or not. At the same time, we're being challenged can you get prices down, get prices down, get prices down? The two are inconsistent, all right? So we have to figure out what content do the customers want, not what do we want, not what does the government want, but KLOBUCHAR: STEPHENSON: the customers want. KLOBUCHAR: Get it, but you at the same point, what I'm asking about is would you discriminate against non-Time Warner content STEPHENSON: No. KLOBUCHAR: OK. STEPHENSON: Again, I don't see -- there?s no advantage to it nor would we do it. KLOBUCHARdetermine at this point where contract negotiations between providers and distributors are long, difficult and complicated, how do we determine whether has lived up to that commitment? 62 of71 7/7/2017 11:22 AM CQ.com - Senate Judiciary Subcommittee on Antitrust, Competition STEPHENSON: I think we ought to allow the Department of Justice to formulate an approach for doing that. KLOBUCHAR: OK. lVir. Bewkes, my last question here. In your testimony, you explained that quote, "Time Warner's goal has always been to distribute our content broadly across all distributors and platforms." So am understanding this correctly, that after the acquisition, Time Warner wilf not limit the availability of Time Warner content to content distributors that compete with BEWKES: Right. Correct. KLOBUCHAR: OK. And we've heard that one can deny content through the offered terms and prices. How would we determine that or that you were living up to this commitment if there's some kind of discrimination based on prices? BEWKES: Well, again, i think the DOJ will be able to easily see that. We?ve got fairly uniform contract provisions across all distribution platformsyou think of Verizon, Comcast, afl the different companies, they've all -- quite vigorous in the negotiation and they're -- it's a very competitive situation, so everyone would know because they would not accept terms that were not equal for what they could get on other -- from other content providers. KLOBUCHAR: OK. My last question, lVlr. Kimmelman, just because I've had some of the incomings (ph) of some of these complaints, the Comcast?NBC Universal merger was approved with conditions, as you know. How effective do you think those conditions were in preventing anti? competitive harm? Because I think it will inform the Justice Department and agencies and this committee as we go forward in terms of what conditions we think would be appropriate. KIMMELMAN: Senator, I think it's a mixed bag. I mean, I think that the fact that Netflix has grown, the fact that Sling TV has been able to get Comcast, NBC programming are the 63 0f 71 7/7/2017 11:22 AM CQ.com - Senate Judiciary Subcommittee on Antitrust, Competition more positive signs. Some of the big companies have been able to take advantage. of that, i think smaller companies have come up short. Even Bloomberg went through a (CROSSTALK) KIMMELMAN: excruciatingly painful dispute over that. I mean, the problem with the problem with conditions is exactly the questions you were just asking. Is it discrimination? Are the prices the same? Here, it's even more complicated than with Comcast because it's nationwide distribution. It's wireless, which has inherent latency problems and issues where the bandwidth isn't enough and there's some legitimate reasons why you're not getting the quality you want. But then there could be some finger on the scale. And I will say that as much as I firmly respect the Justice Department's ability to enforce conditions, I know they do not have the engineers and the network experts to look at all these kind of issues, they're very aware of that. So these are very difficult areas to thoroughly police if there is an inclination to discriminate. KLOBUCHAR: Very good. All right. Thank you, all of you. LEE: Senator Franken? FRANKEN: Thank you, Mr. Chairman. 80 I Googled on my phone Wayne Gretzky and where the puck is going. (LAUGHTER) And the first -- first entry is in the annals of overused corporate (LAUGHTER) few match the immortal words of Walter Gretzky as passed on to the world through his son Wayne, "Skate to where the puck is going, not to where it has been. 80 congratulations to several of us for using the most overused corporate cliche. (UNKNOWN) 64 of 71 7/7/2017 11:22 AM I CQ.com - Senate Judiciaiy Subcommittee on Antitrust, Competition 0003 I must have realty missed something. FRANKEN: You did. You were listening to Barbara lVlikuiski talk about I doubt about hockey. I want to l'll tell you where the puck is going, it's going to wireless. Okay? So Mr. Stephenson, I want to talk briefly about data-free TV which allows customers to stream DirecTV without incurring any data charges. white paper on the topic suggests that this offering is not discriminatory against other programmers or over the top competitors because they can pay the exact same rate that DirecTV pays fo:r the privitege. However, as I understand it, the FCC (ph) has done the math and estimates that it would cost an unaffiliated mobile video service provider like Netflix or Huiu far more to participate in the program than the $35 a month that DirecTV currently charges. The FCC argues then that participation in the program would make it difficult, if not infeasible, for a DirecTV now-competitor to offer its customers a competitively priced service. So my question is, Mr. Stephenson, explain again how your company is not taking money out of the how this isn't anti-competitive, because you'd be taking money out of your right pocket and putting in the your left pocket if DirecTV is paying a lower price, and you're basically supplementing them. And as the FCC asks in its most recent letter to you, how exactly does DirecTV make payments to mobility for this service, and do the respective entities record such payments? STEPHENSON: - I don?t know what exactly the payment mechanism is across entities. FRANKEN: I think it would be good that you did know it. STEPHENSON: The results reflect well, I don't know if we actually do a wire transfer or if there's just a journal entry to record the transfer, but at the end of the day, the results of DirecTV do indeed reflect that cost that's paid to our mobility business. They do. And so when you look at the margins of DirecTV, they reflect that cost in it. And there is a cost incurred by deiivering mobility. It?s a variable cost business, to put another megabyte -- FRANKEN: But how do we know that you can't be favoring something that you own, DirecTV, 65 of 71 7/7/201711:22 AM CQ.com - Senate Judiciary Subcommittee on Antitrust, Competition 0003 as opposed to some entity that would like to have their data delivered free to the consumer? STEPHENSON: We are charging everybody the exact same. The lowest wholesale price for data transport that we have. Everybody gets the same. Big companies, small companies. Companies are buying FRANKEN: I'm not sure about that assurance. How do we know that? STEPHENSON: We can provide the data. The Justice Department can look at this and get themselves comfortable with the data. It's just a data question, right? And we can make the data available. That's not a difficult thing to do. Is that what FRANKEN: It sounds difficult to me because we don't know how much -- how do you compute that? I mean, this is basic STEPHENSON: How do we compute what? FRANKEN: Yes, well this is basically unlimited data to -- for your user to DirecTV, so -- in other words, if some other provider is parallel to DirecTV wanted to get free data or wanted that service on on, delivered by to stream them, how do we know that you?re not giving DirecTV a deal? Because you own it. STEPHENSON: 7 This is a mechanism that's been used in our industry for decades, and there is a pricing mechanism. Same terms and conditions. We will not discriminate against others who want to provide the same service. So it's been going on for decades. FRANKEN: OK. Mr. Kimmelman, could you speak to Mr. Stephenson's characterization of track record on complying with commitments as spotless? KIMMELMAN: Senatorthink it's a great company and I think they are a very 66 of 71 7/7/2017 1] :22 AM CQ.com Senate Judiciauy Subcommittee on Antitrust, Competition aggressive competitor. Sometimes aggressive competitors can step over the line. There have been varieties of complaints at different points in time. I don't think it's worth going into it in great detail. -- i mean, these will be reviewed by the agencies. They're a wonderful company, but everybody who is competing hard sometimes competes a little too hard. And that's nothing new in the marketplace. The issue (CROSSTALK) FRANKEN: Well, a year ago, was slapped with a $25 million fine f0:r failing to protect its subscribers' personal information. Mr. Stephenson about a year ago he and I discussed how his company lobbied to prevent municipalities from building their own broadband networks to meet their communities? needs. This is using your competitive advantage. And I'd love to see that data. And I think that, by the way, I would like to see the FCC involved in this. When Bloomberg in the Bloomberg dispute, wasn't that that was the FCC dealing with that. That was not -- you said the DOJ has all these resources. That was the FCC dealing with Bloomberg, right? KIMM ELMAN: That?s correct, Senator. FRAN KEN: Yeah. STEPHENSON But the consent decrees in these things are with the Department of Justice. KIMMELMAN: Well, in a number of these cases, Senator, there have been paraliel commitments at the FCC with an understanding the FCC would do the enforcement because they are the regulator of the industry with the expertise. So, Iwill say there were, for example, on access to programming and Comcast-NBCU, there were restrictions put in place. The Department of Justice decided not to impose those because the FCC was putting those in place. There were parallels for trying to block online innovation in video, and the Department of Justice consent decree said they would defer to the FCC for enforcement action in most or nearly all instances. So, each one of those, at least, involved dual agency action with a reliance on the 67 of 71 7/7/201711122 AM CQ.com - Senate Judiciary Subcommittee on Antitrust, Competition FCC for the -- for the deep industry expertise. They also Hi just mention one thing. Mr. Chairman, you had raised the section 5 issue. ljust want to point out that we believe the court decision was horrible and it needs to be appealed. But there is a gap here that I think Mr. Stephenson missed, which is that if they purchase Time Warner and they have content, the FCC can only regulate their common carriage business, regardless of how the court wanted to look at it. They are restricted by Congress to only looking at common carriage assets, which i do not believe these assets would be, and many of their other value-added services, or anything that's online service. So there is a gap there that I think is significant. STEPHENSON: I would not I'm not smart enough, knowledgeable enough of that particular area, particulariy as it relates to content, to refute that. just do think it points out, though that there is a need to get clarity around the regulations over these issues. Yes? FRANKEN: Are we going go to a third round? Or can I complete my questioning? LEE: If you?ve got another question, go ahead. FRANKEN: Sure. lVIr. Stephenson, I want to turn now to something you said at a Wall Street Journal Live event. You shrugged off the comparison of your deal to Comcast?NBC Universal, saying that one of the biggest regulatory concerns around that deal, net neutrality, has largely been resolved. Now, that event happened prior to November 8th. So I'm going to give you another chance to address the comparison. Mr, Stephenson, do you still think the concern over ensuring net neutrality has largely been resolve? And as an historic opponent of net neutrality, are you going to urge President-elect Trump to enforce the open internet order and ask Republicans in Congress to halt their plans for legislation repealing the order, in order to get the deal approved? 68 of71 CQ.com Senate Judicialy Subcommittee on Antitrust, Competition I STEPHENSON: l'd like, first, to suggest am not a strong proponent of net -- opponent of net neutrality. We have I have 2010, been an advocate of the net neutrality principles -- no blocking, no discrimination, no paid prioritization. We helped craft those rules; worked with Senator (sic) Waxman to help craft the rules that we hoped would become law. We actually FRANKEN: Wait, wait. Didn't you go to court STEPHENSON: just we went to court against Title categorization of our services. That is not synonymous with net neutrality. Net neutrality has historic -- net neutrality has historically been defined by this body in the Senate, and historically at the FCC as no blocking, no discrimination, no paid prioritization. The FCC chose to take a much broader approach and put all wireless and broadband services under Title II regulations, a 1939- based regulation, for these services that are moving and transitioning fast. I do FRAN KEN: You went to court before they did that. You went to court, which basically forced them to do that. STEPHENSON: No, sir, we did not. No, we did not. The 2010 rules that were imposed, Verizon opposed those in court. We did not. FRANKEN: OK. STEPHENSON: We supported them and we helped craft them. OK. Then I stand corrected, i guess. It's not the first time. (LAUGHTER) So thank you. 69 01?71 7/7/2017 11:22 AM CQ.com - Senate Judiciary Subcommittee on Antitrust, Competition ljust wanted to -- I guess I'm done. I would like to see the FCC, by the way, have jurisdiction here. Mr. Kimmelman, would you? KIMMELMAN: Yes, Senator Franken. I mean, again, I think that there is a legitimate role. There's a question of exactly how that jurisdiction is divided and what assets are involved in the transaction that's for the companies and the FCC to work out. But at least as compared to previous transactions that are similar, I think it would be beneficial to the public policy process. FRANKEN: But Mr. Stephenson and Mr. Bewkes, you have not committed to submitted your deal for review by the FCC. That's correct? STEPHENSON: We're working through that process right now, Senator. The trigger for FCC review 1 is whether we assume any licenses from Time Warner. We're going through they own access to over 100 licenses. We're going through license by license discerning which license do we need to actually transfer. So until we get through that review, we can't state whether there will be an application with the FCC or not. Now, I would suggest to you that the DOJ, as Mr. Kimmelman has pointed out, looks these matters for expertise. have'no doubt the DOJ Will continue to work with the FCC as they go through this review. We will also keep the FCC posted on our'process, whether we do a formal filing or not. FRANKEN: Well, it's just that there's a different level that you have to meet, whether it's FCC or DOJ. And FCC, their merger review requires that any proposed deal actually benefits consumers. So, I I would think that the message you're sending to us and the current and potential consumers, if you can't confidently assert that this deal benefits the American public, there's not a great message. Mr. Kimmelman, do you think the FCC should review this deal? KIMMELMAN: Yes, Senator Franken. If it's within theirjurisdiction at all, then I believe they should. I think it would add a benefit to the overall public policy analysis. FRANKEN: 7O of71 7/7/2017 11:22 AM CQ.com - Senate Judiciary Subcommittee on Antitrust, Competition OK. Thank you. LEE: I want to thank all of you for coming and participating today, for answering our questions and providing your testimony. We have received a statement from Mr. Patrick that will be admitted into the record. The record will remain open for a week for additional questions and submissions. This hearing wilt be adjourned. CQ Transcriptions, Dec. 7, 2016 List of Panet Members and Witnesses PANEL MEMBERS: SEN. MIKE LEE, CHAIRMAN SEN. CHARLES E. GRASSLEY, SEN. ORRIN GHATCH, R-UTAH SEN. DAVID PERDUE, R-GA. SEN. THOM TILLIS, SEN. AMY KLOBUCHAR, D-MINN. RANKING MEMBER SEN. AL FRANKEN, D-MINN. SEN. RICHARD BLUEVEENTHAL, SEN. CHRIS COONS, SEN. PATRICK J. LEAHY, EX OFFICIO WITNESSES: RANDALL STEPHENSON, CEO, JEFFREY BEWKES, CEO, TIME WARNER MARK CUBAN, CHAIRMAN, AXS TV, OWNER, DALLAS MAVERICKS, LANDMARK THEATRES, AND MAGNOLIA PICTURES GENE KIIVIMELMAN, PRESIDENT AND CEO, PUBLIC KNOWLEDGE DAPHNA ZIMAN, PRESIDENT, CINEMOI Source: 00 Transcripts 71 of71 7/7/2017 11:22 AM Foster, Wayne From: Gilhool, Bridget Sent: Friday, July 7, 2017 1:45 PM To: Scheele, Scott; Frankel, Lawrence; Hughes, Jared Brink, Patricia Subject: Capitol Forum FW: Tech Weekly: White House Reportedly Considers Utilizing Merger Review Good afternoon Regards, Bridget From: The Capitol Forum Sent: Friday, July 7, 2017 1:01 PM To: Gilhool, Bridget Subject: Tech Weekly: White House Reportedly Considers Utilizing Merger Antitrust Authorities Take Lead; Germany Updates on Facebook investigation; Uber Hits EU Wall Web Version Update preferences Unsubscribe Teoh Weekly: White House Reportedly Considers Utilizing Merger Review; international Antitrust Authorities Take Lead; Germany Updates on Faoebook Investigation; Uber Hits EU Wall Vol. 5 No. 219? July 2017 Click here to access our library. Gooqie Shopping Case Conference Call On June 28, The Capitol Forum sat down with Professor Alan Riley to discuss the prohibition decision in the Google Shopping antitrust case. One highlight to note is that Professor Riley said that the Google Shopping decision "shows that the Commission is unafraid to bring these cases.? ?It sends a signal that Brussels is interested in going after the platform monopolies. And again? what you hear on the street in Brussels is that there is an interest, an appetite was the word that was used to me, for the Commission to ?nd the right case or the right set?of evidence to bring, deploy a case against Facebooki And that?s the potential next target in line. And, of course, the Bundeskarteliamt Federal Competition Authority is already investigating Facebook. And the Commission is looking at Facebook and looking at business practices, I suspect there have been at least a Couple of complaints on Facebook's practices? said Riley. This Week in Tech News Trump administration reportedly considers leveraging merger review to hit CNN. A New York Times profiie of CNN President Jeff Zucker published Wednesday has a considerable 1 nugget regarding the media company?s parent, Time Warner. President Trump?s team has reportedly considered using the Justice Department's review of the ATT-TW merger in its ongoing confiict with the media company. ?White House advisers have discussed a potential point of leverage over their adversary, a senior administration official said: a pending merger between parent company, Time Warner, and IVir. Trump?s Justice Department will decide whether to approve the merger, and while say there is little to stop the deal from moving forward, the president?s animus toward CNN remains a wild card,? the NYT article reads. Besides the implications for the ATT-TW deal, stakeholders coutd consider this as proof positive that then~candidate Trump was not biuffing when he invoked competition law as a political tool. Trump previously indicated Amazon could be targeted with antitrust actions due to Jeff Bezos' ownership of the Washington Post, and he recently began that feud anew with a fresh -- albeit muddled tweet. Facebook and Google also faced the ire of the President preselection in ?fake news?~type tweets. Amazonconsiders teaming with Dish Network in tetecom. The Wall Street Journal reports that Amazon and Dish-Network heads Jeff Bezos and Charlie Ergen, respectively, have been in conversations about ways the two companies could partner in teiecom, according to WSJ sources familiar with the conversations. ?Among the ideas: Amazon could help finance a network Dish is building focused on the ?internet of Things? the idea that everything from bikes to Amazon?s drones can have web connectivity everywhere. Another idea is that Amazon, as a founding partner of Dish?s new wireiess network, could offer an option for Prime members to pay a iittle more a month for a connectivity or phone plan, one of the people said," reads the article. The article further states that ?an all-out acquisition of Dish by Amazon is highly unlikeiy.? Any partnership would represent yet another vertical the retaii giant enters. The company has recently focuSed on through its Echo devices and tried unsuccessfully to push a set of Fire phones, though telecom service would has different beast. Google EU decision gives rise to further international scrutiny. Following the company?s $2.7 billion fine at the hands of the EC, the knives are out for Google as some politicians abroad call for action. A domino effect that sees other countries emulate the European approach could see the tech giant facing similar cases. in South Korea, the leader of the FairTrade Commission, Kim Sang-lo, has recently spoken critically of the tech giant, according to the Korea JoonAng Daily. ?In an interview with the [Korea Joan/ting Dal/y], Kim said he wlii monitor globai IT firms to find out if there are any violations in collecting big data. Kim added that he will look into whether such firms hamper small companies entering the market," reads the article. It is notable that despite Google's low market share in South Korea, policymakers are still calling for action. Meanwhile, in March, Turkey opened an antitrust investigation on the Android operating system. We have previously reported how the international community could look toward the EU for guidance on competition policy in the tech space if the US. continues to cede ground as a leader. It would not be surprising if Turkey, or cases from other countries, how close to the forthcoming Android decision. Germany competition authority issues update on Facebook investigation. Germany?s competition authority, the Bundeskarteilamt, commented on its ongoing investigation of Facebook in its annual report last week. ?Here we are faced with two key tasks. we have to keep markets open to stop the internet giants from making it impossible for newcomers to enter the market and to give competitors a chance. Secondly, we have to protect consumers from the abuse of market power,? read a statement from Andreas Mundt, head of the Bundeskarteilamt. The German authority had previously said in the press release announcing the investigation that it Is determining whether the platform's terms and conditions? represent an abusive imposition of unfair conditions on users Bloomberg reported that lVlundt said he is ?eager? to presentfindings this year. Uber hits wail in EU. Matching Ubers social and legal domestic troubles are its regulatory hurdles abroad. The NYT reported Tuesday that a senior adviser for the Court of Justice of the European Union recommended that the EU treat the company as a traditionai taxi service, including the stringent regulations those businesses face. The recommendation is nonbinding, and Uber said in a statement that it will ?await the final ruling later this year,? though the NYT reported that adviser recommendations are generally followed. ?The'latest recommendation came less than two months after [the adviser] delivered a similar opinion to the court, arguing that Uber should have to comply with rules governing transportation companies. A final ruling in that case is expected by late summer, and a decision related to Tuesday?s case is due by the end of the year," reads the article. Uber has mostly sidestepped federal regulatory and enforcement actions in the US that would threaten its core business, though it has come under broad scrutiny for its platfornncontractor employment structure and strategies to avoid existing regulations. That impunity could be coming to an end, as Re/code has reported the DOJ is investigating Greyball whiie the FTC has opened its own inquiry on some of the data?handling mishaps that have plagued the company in recent years." Zuckerberg supports Universal Basic Income continues not running for president. Mark Zuckerberg took to his profile Tuesday to discuss a political initiative he values. Zuckerberg described how Alaska .. a state with a little over one person per square mile makes use of its replete natural resources to provide a form of ?This is a novel approach to basic income in a few ways. First, it?s funded by natural resources rather than raising taxes. Second, it comes from conservative principles of smaller government, rather than progressive principles of a larger safety net. This shows basic income is a bipartisan idea,? Zuckerberg writes. ?When you?re losing money, your mentality is largely about survival. But when you?re profitable, you?re confident about your future and you look for opportunities to invest and grow further,? he continues. ?Alaska?s economy has historically created this winning mentality, which has led to this basic income. That may be a lesson for the rest of the country as well.? Zuckerberg has previously espoused the idea of though he has denied that his 50~state trip is a way to gear up for a presidential run. in that case, perhaps could be considered the first plank in his ?how to be a popular lnternet guy and not a politician? platform. Quick Bytes a You should be outraged at Gooqle?s anti-competitive behavior [Washington Post] 3 0 Even as they criticize Trump?s aqenda? tech execs like Eric Schmidt and Elon Musk are backinq Republican campaiqns [Re/code] as Apple News May Let Publishers Sell Ads Their Own Wav [AdAge] a? Alphabet, Amazon Dominance Mav Prompt Re?Write of Monopoly Rules, Opinee MKM [Barron's] iPhone Buds Are Too Valuable to Report to Apple [Motherboard] Amazon?s Alexa passes 15,000 skills. up from 10,000 in February [TeohCrunoh] a? Media buvere warn Facebook viewability ?diabolical and horrible? [Ad News] News Feed FYI: Showino More Informative Links in News Feed [Faoebook Adam Mosseri] on Auto Companies hurtinq from latest rival Amazon [New York Post] . @00qu funds automated news protect News] From: Casey, Maureen To: Attorneys Subject: FW: Klobuchar queries US attorney general about White House interference in Time Warner antitrust review- MLex Of?cial Statement Date: Friday, July 7, 2017 2:18:35 PM Hi Ali, I iVl a read From: i\/lLex Editorial [maiEtozpress@mlex.com] Sent: Friday, July 7, 2017 1:56 PM To: Casey, Maureen Subject: Klob?uchar queries US attorney general about White House interference in Warner antitrust review Mtex Official Statement Klobuchar queries US attornev General about White House interference in Time Warner antitrust review in? i ng'r MLex Summary. US Senator Amy Klobuchar sent a letter to Attorney General Jeff Sessions on Friday asking if the White House has contacted the US Department ofjustice regarding the Time Warner deal and if he would notify Senate Judiciary Committee leaders should such contacts occur. The Minnesota Democrat's letter references a The New York Times report that said White House advisers discussed the pending Warner merger as a point of leverage against Time Warner?owned CNN, which President Donald Trump has criticized for its news coverage. "This report is deeply troubling. I hope you agree that the President or his advisers' concerns about the content of CNN's press coverage have no place in antitrust enforcement," wrote Klobuchar, the ranking member on the Judiciary antitrust subcommittee. Read more a? I i .. a cart I I I, 2017 MLex Global Antitrust All rights reserved. From: Roy? Deborah To: Huqhes, Jared A.: Chu. Alvin Subject: FW: And Time Warner: Another Merger Update Date: Monday, July 10, 2017 3:36:55 PM Let me know if you can?t open this attachment. Debbie From: account@seekinealoha.com on behalf of Seeking Alpha Sent: Monday, July 10, 2017 2:30 PM To: ciaodeb@hotmail.eom Subject: TWX: And Time Warner: Another Merger Update And Time Warner: Another Merger Update 721.341} rim, Moenot l'13nw1ei til 'iil'iir?i ll; elirme atg?aiteiss to your Aloha ibis: emeii semi to Ciaodeb??hotmailcom by fieekihg Alpha Seeking Aiol?ia, Vanderbilt Avemie, 133%: ?oor: New "mrk, NY 10017 Uodate vour email orelerences Ungubscribe from TWX i Unsubscribe from all emails From: Car on lan ATR To: Subject: NYT on the "small army" "doggedly investigating" Date: Monday, luly 10, 2017 5:26:11 PM 7/ attwtimewvarnerumerger.lit-ml Technolog Blockbuster Deal for Time Warner Hangs in Limbo By QECILIA KANQ and de la JULY 9, 2017 WASHINGTON At the Department of Justice, staff members in the antitrust of?ce have been doggedly investigating blockbuster $85.4 billion bid for Time Warner. They have deposed the executives of both companies; questioned several media, telecommunications and technology rivals; and demanded thousands of pages of con?dential documents from scores of businesses to discern if the deal would violate competition laws and thus if it should go ahead at all. But eight months into the review, the small army of career antitrust of?cials is marching toward a great unknown. Dylan Carson US DOJ ATR TEL Section Of?ce: 202 598-8799 Mobile: dylancarson 1 us .ol.gov From: Kiser Melanie To: Carson, Dylan (ATR): Subject: RE: NYT on the ?small army" "doggedly investigating" Date: Monday, July 10, 2017 5:44:36 PM From: Carson, Dylan (ATR) Sent: Monday, July 10, 2017 5:26 PM To: Subject: NYT on the "small army? ?doggedly Investigating" 1 7/0 7/ OQ/teclmolo gy/ att?t.ime?wam erwm eraenhtm Technology Blockbuster Deal for Time Warner Hangs in Limbo By CECILIA KANG and MICHAEL J. de la MERCED JULY 9, 2017 WASHINGTON At the Department of Justice, staff members in the antitrust of?ce have been doggedly investigating blockbuster $85.4 billion hid rm ".1?7lme Warner. They have deposed the executives of both companies; questioned several media, telecommunications and technology rivals; and demanded thousands of pages of con?dential documents from scores of businesses to discern if the deal would violate competition laws and thus if it should go ahead at all. But eight months into the review, the small army of career antitrust of?cials is marching toward a great unknown. Dylan Carson US DOJ ATR TEL Section Of?ce: (202) 598?8799 Mobile: dylan.earson@usdoj.gov From: Young. Frederick To: Kiser Melanie; Carson. Dvlan Subject: RE: NW on the "small army? "doggedly Envestigating" Date: Monday, July 10, 2017 5:45:40 PM From: Klser, Melanie Sent: Monday, July 10, 2017 5:45 PM To: Carson, Dylan (ATR) Subject: RE: NYT on the ?small army" ?doggedly investigating" From: Carson, Dylan (ATR) Sent: Monday, July 10, 2017 5:26 PM To: Subject: NYT on the "small army" "doggedly investigating? 7/ 07/ 09/ tech noloay/ att~tlme~warner~m eruenhtm l?eehnoiog Blockbuster Deal fer Time Warner Hangs in Limbo By CECILIA KANG and MICHAEL J. de la MERCED JULY 9, 2017 WASHINGTON At the Department of Justice, staff members in the antitrust of?ce have They have deposed the executives of both companies; questioned several media, telecommunications and technology rivals; and demanded thousands of pages of con?dential documents from scores of businesses to discern if the deal would violate competition laws and thus if it should go ahead at all. But eight months into the review, the small army of career antitrust of?cials is marching toward a great unknown. Dylan Carson US DOJ ATR TEL Section Of?ce: 202 598-8799 Mobile: Ian. From: Martin? John (ATR) To: Tobev. Mark Subject: July 11 2017 News Clips Date: Tuesday, July 11, 2017 3:33:43 PM Attachments: July 11 2017 News Team, Attached are news Clips from this past week. Best John Warner News Clips 7/11/17 Contents Senator Raises Concerns of White House ?Political Influence? Over Warner Merger2 Blockbuster Deal for Time Warner Hangs in Limbo 4 Warner Bros Digital Network Names 3 SVPs. 7 Disney, Fox and Viacom Among Media Stocks Pounded by Cord?Cutting 8 Sinclair begins to make the case for $3.9 billion Tribune deal 10 HBO and Cinemax Now Available On Hulu 12 Senator Raises Concerns of White House ?Political In?uence? Over AT &T-Time Warner Merger Variety, 07/0 7/201 7? After reporte that the Trump administration may nee government eporovel ot merger with Time Warner ee ?leverage? otter CNN, key Demoeretie eenetor ie eslring Attorney General Jeff Sessions for dieoleeure of eny oonteote between the White Houee end the Justice Department about the trenseetion. Sen. Amy Klobuchar (Wt/tinny tanking member of the Senate Judieiery?e ettbeornrnittee, wrete in the letter thet ?ehy oolitioel interferenee in enforcement ie uneoeentehte.? ?Even more eeneerning, in thie inetenoe, te thet it enpeers thet eome eevieere tn the President may believe thet it ie eperenriete tor the government to nee ite law enforcement authority to eiter or eeneor the press. Such an eotion would vieiete the hiret Amendment,? ehe wrete. On Wenneedey, the New Yerk ?l?irnee, eiting an unnamed eenier eominietretien ottieiet, eeid that the merger wee ?pntentiel pnint of leverage? in CNN. The Deity Getter renerten thet the edminietretion ie conditioning ite enneort of the rteei on Whether CNN chief Jett Zuoiter te tired or toroen to reeign, Kiobooher eekee tor eonteete between the White Houee end the Juetioe Seperti?nent on the merger. Trump hee repeatedly etteeked the network ee ?take newe," end even tweeted out a video in which he?s shown wrestlinq a man, with the CNN loge superimposed over his heed, to the grennd, The videe hed been altered trern ene tehen et a Wreetleiiflenie event about 10 yeere ego. The Jeetiee {Department is reviewing the $85 billion Werner but he Antitruet Divieton weighe whether conferrn te entitruet law, not over whet ite tinneet would he on the nature end tone of newe coverage, Meken Detrehirn, Trump'e choice to teed the entitruet divieien, ie etill eweiting Senate confirmation, bet during hie eentirrnetion hearing, he eeid thet he Wooid rneintein the indenendenee ot the divieion. hiohueher noted thet ehe hee reieect ?eerioue queetione ehont the impeet? of the merger, tint wrote thet the ?treneeotion ehonld be judged eolely on tte impeet en oomeetitton, innovation, end eonenntere, not are ?leverege? tor politieel gein.? Still, the idea that the White Houee weeld try to exert its ihtiuehce everthe review, for peliticei rather then eetitruet eencerne, has been to eorhe ehtitreet experts. Derihg the eempeigh. Trump eeid thet he eppheed the Warner merger. citing the eeheehtretieh of the media. He has said iittie pubiicty about the eehdihg treheectihh e?hce thee. Eh December, CEO Reheat! Stephehem wee eeked about Trump?s epeoe?tieh tea the ehd even then suggested thet Trumh?e with CNN was teeter. ?Ahytime the president at the United States; cemee eut ehe? they?re not in fever of whet you?re trying to do, you have to pay attention,? he eeid at media eertterence. ?But i den?: knew whet pert etthe deei he?e reterrieg to. We heard rumors he?s: het happy with CNN, :90 thet might heve ceme into it.? Stepheheeh met with ?trump tr: Jehuery, bet the campehy eeid that the merger was hot 1202489518/ Blockbuster Deal for Time Warner Hangs in Limbo New York Times, 07/09/2017 At the Department of Justice, staff members in the antitrust of?ce have been doggedly investigating blockbuster $85.4 billion bid for Time Warner. They have deposed the executives of both companies; questioned several media, telecommunications and technology rivals; and demanded thousands of pages of con?dential documents from scores of businesses to discern if the deal would violate competition laws w? and thus if it should go ahead at all. But eight months into the review, the small army of career antitrust of?cials is marching toward a great unknown. For one thing, the Justice Department of?cials still don?t have a boss who will have the ?nal say on whether to approve or block the deal. President Trump?s pick for assistant attorney general in charge of antitrust matters, Makan Deirahim, has been held up in a logjam of nominees in the Senate. And Mr. Trump himself, who said during last year?s campaign that he opposed the deal, is another wild card. A senior administration of?cial said last week that members of the White House were discussing how they might use their perch over the merger review as leverage oVer Time Warner?s news network, CNN. All of that has effectively put into limbo the most signi?cant business deal before the Trump administration, a benchmark for business transactions going forward. In turn, that has cast a cloud over the business world, which is watching the regulatory process with 'intense interest. ?We?ll obviously take a hard look at that,? Charles W. Ergen, the chief executive of Dish Network, said in a call with in November, referring to bid for Time Warner. ?It?s going to be a big deal. We?re certainly going to have some concerns.? Mr. Ergen said that purchase of Time Warner would spur other cable and satellite companies to seek deals with wireless companies and content ?rms. ?People on the sidelines have to do something different,? he said. ?You can remain on the sidelines, but that might be malpractice.? The deal is still expected to be approved because and Time Warner don?t directly compete. But unlike past megamergers such as Comcast?s purchase of NBCUniversal in 2013, this one is potentially trickier from an antitrust perspective. That?s because has a nationwide footprint with its wireless and DirecTV satellite service, and could use that reach to demand higher fees from media companies and other cable and satellite firms. ?The business community is watching intenselyto see what an antitrust D.O.J. will look like in the Trump administration and how much of the rhetoric from the campaign trickles down into policy,? said Vivek Stalam, an analyst at New Street Research. ?People are looking at Time Warner as the ?rst indicator of what that will be like.? As the review process drags on, business leaders are not sitting on their hands, with many continuing to carry out their strategic plans. In May, Lowell McAdam, chief executive of Verizon, which has already snapped up AOL and Yahoo to expand its digital media offerings, said at an industry conference that the telecom company was keeping its eyes and ears open for deal making. ?We have always been a company that prefers to do organic growth,? he said. ?But if there was an opportunity to accelerate the strategy, we would look at that. And people should be ?red if they don?t look at those sorts of things.? Still, the bumpy regulatory process adds uncertainty. While the and Time Warner regulatory review is not taking longer than those of other megadeals, the delay in bringing in a permanent assistant attorney general has put the process into a holding pattern. And in the vacuum of leadership, more obstacles have emerged for the deal. Some employees of media and telecom companies were recently deposed as a part of an investigation by a coalition of about 20 state attorneys general into purchase of Time Warner, according to two people with knowledge of the depositions, who asked not to be named because they were not authorized to speak publicly. The attorneys general asked whether would charge competitors like Dish higher fees for Time Warner content such as HBO shows and NBA. basketball games on TNT, and whether such price increases could lead to higher television costs for rural customers who rely on satellite services, said the people with knowledge of the investigations. The attorneys general are sharing information with of?cials at the Justice Department. Justice Department of?cials and the state attorneys general are also exploring whether?other content companies such as Starz and Showtime premium channels offered at an extra cost like Time Warner?s HBO could have a harder time reaching customers, according to ?ve people with knowledge of the investigations. Those companies are concerned that could promote only HBO to customers, they said. could also offer free and unlimited viewing of HBO for its wireless customers while the streaming of competing premium channels would count against data limits. Some lawmakers have become more vocal about their concerns. Several Democratic senators recently wrote to Attorney General Jeff Sessions that the deal should be blocked if there was evidence of consumer harm. And Senator Susan Collins, a Republican from Maine, wrote a letter last month to the Justice Department?s acting head of antitrust, asking for stronger scrutiny of the deal so that consumer choices would not be reduced. On Friday, Senator Amy Klobuchar, Democrat of Minnesota, also expressed alarm at reports that the White House might be trying to in?uence the Justice Department?s merger review because of Mr. Trump?s rocky relationship with CNN. ?Any political interference in antitrust enforcement is unacceptable,? Ms. Klobuchar wrote to Mr. Sessions. ?Even more concerning, in this instance, is that it appears that some advisers to the president may believe that it is appropriate for the government to use its law enforcement authority to alter or censor the press.? The Justice Department declined to comment. has said it still expects the merger review to be completed by the end of the year. Last month, chief executive, Randall Stephenson, attended a White House tech event, the latest of several meetings he has had with other executives and White House of?cials since the election. Since the Time Warner bid was announced, has spent $8.2 million on lobbying. It had 27 outside lobbying firms and was ranked eighth in total lobbying spending. has said that it has no incentive to withhold Time Warner shows from competitors and that the review appears to be moving smoothly. ?Over the past eight months, we have provided information to any regulator that has requested it, and we have appreciated the chance to answer their questions,? said Fletcher Cook, a spokesman for Rival companies may push for the Justice Department to demand tough conditions for merger approval but not to reject the deal outright. Inspiring government regulators to crack down on an acquisition would endanger their own consolidation efforts. Even so, the uncertainty is set to continue. When the Senate comes back into session on Monday, Mr. Delrahim, Mr. Trump?s nominee, will have three weeks to get confirmed before the full August recess. But it is unclear whether he will move past the logjam, and a delay in his appointment could signi?cantly set back and Time Warner?s review. Antitrust experts are doubtful the companies and the Justice Department would want to rush through the investigation until Mr. Delrahim is in place. m/ 20 i 7/ 07/ 09/technolo gv/ Warner Bros Digital Network Names 3 SVPs The Wrap, 07/10/20] 7 Three key hires have come on board to run Warner Brothers Digital Network, a division that manages both distribution and content for the label in the digital space. Former Spotify acquisitions head Eric Besner was named senior vice president in business development. Native son Greg Salter will serve as senior vice president in business and strategic planning, moving over from the same department at WB corporate. Katie Soo, formerly of Media and Hulu, has been named senior vice president of marketing. All three will report to Warner Bros. Digital Networks Executive Vice President Jay Levine. ?They each bring broad experience and a digital-native perspective to their respective areas of expertise and will be key in helping us ramp up our operations as we continue to grow both our digital short?form production and OTT offerings,? Levine said in a statement. Before Spotify, Besner was a ?agship member of the Net?ix Originals team, overseeing that launch as VP of original programming. He?s also worked with Lucas?lm. 800 will increase brand awareness and direct consumer relationships. At Hulu, she served as Head of Social across brand, originals, content and product. She?s also an early alum of Dollar Shave Club, the viral sensation that sold in 2016 for a reported billion dollars. At corporate, Salter oversaw mergers and acquisitions and strategic investment. He?ll provide a similar function at the digital network, reporting to WB Chief Digital Of?cer and EVP Thomas Gewecke. ?To me, this is the most exciting part of the business and the fastest growth area,? Salter told TheWrap. ?If you look at consumer behavior and its evolution to platforms and formats, we have a huge opportunity to tap into that.? Salter said the team will focus on ?how to reimagine the studio in the digital era, and that includes skillsets and abilities to get closer to our consumer.? Warner Bros. Digital Networks consists of the studio?s digital and OTT video services, producing native content and tasked with growing direct-to?consumer business. They work with with sister divisions Turner and HBO, and have a portfolio that includes Boomerang (a partnership with Turner, Machinima, Uninterrupted (a partnership with LeBron James and Maverick Carter), Ellen Digital Ventures (a partnership with Ellen DeGeneres), a DC Entertainment-branded service debuting in 2018 and more to be announced. besner/ Disney, Fox and Viacom Among Media Stocks Founded by Cord-Cutting The Street, 07/11/2017 The second quarter wasn't kind to media stocks. And that has gone for July thus far as well. While media companies that own cable TV and broadcast networks differ in small and Iargeways, few. have been immune to concerns about cord?cutting. And the second quarter appears to have been the worst quarter on record for declines in subscriptions to traditional video. Not only are more people dropping their cable TV or satellite TV service, the number of new subscribers is failing to offset the declines. According to Wells Fargo Securities LLC, pay?TV providers led by Charter Communications Inc. (M) Comcast Corp. (CMCSA) and Dish Network Corp. lost a net total of 1.28 million subscribers in the second quarter. That's an increase over the first quarter, when the net subscriber decline totaled 748,000. Wells Fargo media analyst Marci Ryvicker's tabulation is just a tad higher than a second-quarter analysis two weeks ago from UBS, which put the industry loss for the quarter at 1.2 million subscribers. Given the acceleration in cord-cutting, media stocks have been falling. Since March 31, Walt Disney Co. (gs) has dropped Twenty?First Century Fox Inc. (M) has lost 13.1%, Discovery Communications Inc. (M) is down Scripps Networks Interactive Inc. has declined 14.3% and Viacom Inc. (W) has tumbled 26.4%. To be sure, the advent of new online pay-TV services is cushioning the decline. Second?quarter net subscriber declines totaled 858,000 subscribers when new services such as lnc.'s (I) DirecTV Now are included in the tabulation. Yet it's important to realize that those services aren't necessarily generating the same revenue for network owners or pay?TV operators as traditional cable and satellite TV. From all indications, a multichannel service priced at roughly $40 per month may not even be profitable. More concerning, the accelerating pace of subscriber declines in the second quarter came as stepped up promotions for DirecTV Now and its DirecTV satellite service, Alphabet lnc. (GOOGL) launched YouTube TV and Hulu LLC, jointly owned by Disney, Fox, Comcast and Time Warner Inc. (TWX) began selling subscriptions to its-multichannel online service. Despite the best efforts of a formidable industry, the pay?TV universe continues to shrink. The second?quarter decline equates to a 2.5% annual drop in traditional subscribers and puts the industry on pace to lose 3.4% of its base in 2017 after enduring a 1.5% decline in 2016. For the immediate future, cord-cutting shows no signs of slowing. Sinclair begins to make the case for $3.9 billion Tribune deal Chicago Business Journal, 07/10/2017 Sinclair Broadcast Group Inc. disclosed that its $3.9 billion acquisition of mm Media Co. will cause it to exceed the national television ownership limit while also arguing the deal. is in the public's interest. The Hunt Valley television broadcaster will exceed the ownership cap by 6.5 percent, according to applications filed June 26 with the Federal Communications Commission. Currently, broadcasters are capped at 39 percent ownership nationwide. There are 10 markets where Sinclair and Tribune own stations and because of FCC rules Sinclair would not be able to own both. The deal could result in spinoffs if Sinclair has to divest some of its stations. According to the filing, "the applicants intend to take actions in such markets as necessary to comply with the terms of the merger agreement and the commission?s local television ownership rules as required in order to obtain FCC approval of the transaction." The markets where Sinclair (NASDAQ: SBGI) would not be allowed to acquire stations include: Seattle-?Tacoma, Washington St. Louis, Missouri Portland, Oregon Salt Lake City, Utah Oklahoma City, Oklahoma Greensboro?High Point?Winston Salem, North Carolina Grand Rapids?Kalamazoo-Battle Creek, Michigan Richmond?Petersburg, Virginia Des Moines-Ames, Iowa Indianapolis, Indiana 0 0 Through the acquisition of Chicago?based Tribune (NYSE: TRCO), Sinclair expected t_o add 42 stations in 33 markets, giving the broadcaster a total of 233 stations across 108 markets nationwide and reach into 72 percent of the US. The deal has come under scrutiny with critics accusing Sinclair of being right wing? leaning and saying the deal will continue a trend of consolidation in a media industry that needs more independence. 10 The New York Times in May published a story accusing Sinclair of sending "must?run" segments to its stations to push a conservative agenda. The issue was highlighted again by comedian John Oliver during the most recent episode of his HBO show "Last Week Tonight John Oliver." Now, the public may send written comments to the FCC if they oppose the deal. Opponents have until Aug. 7 to file "petitions to deny." Sinclair and Tribune will then have until Aug. 22 to file oppositions to the petitions. Replies by both sides are due Aug. 29. The FCC's process requires Sinclair and Tribune to prove the deal is in the public's interest. For their part, the companies said in the FCC filing the deal "will increase the merged company?s capability to serve the public by increasing its operational efficiencies, allowing Sinclair to upgrade the stations? facilities, expand the stations? local coverage (including local news), offer even greater value to multi~channel video distributors, and increase syndicated and original programming offerings." Sinclair and Tribune said "ever?increasing operating expenses" and increased competition from other media, including cable and internet, for advertising revenue threatens "local television stations? ability to provide high?quality, free, public interest services to their communities." "The transaction will produce both operational ef?ciencies and economies of scale, as well as greater audience reach which will make Sinclair more attractive to programmers, including networks and syndicators, generating reven?es that can be reinvested in the broadcast operations in a manner that improves service to the public," the companies wrote in the FCC filing. Sinclair added that the deal will also help it roll out new television broadcast standards, known as ATSC 3.0 or Next?Generation TV. ournals.com/ chicago/news/ZO 1 7/ 07/ '1 9-bi] 11 HBO And Cinemax Now Available On Hulu CED, 07/0 7/20] 7 Hulu and HBO announced a partnership in which Hulu will add on?demand subscriptions and live TV viewer access. Effective on July 6, Hulu viewers can stream shows, movies, documentaries, sporting events, and more both live and on demand. Viewers can access the new Hulu setup by adding the premium channel to their service for a payment of $14.99. In addition to HBO, the deal also enables Hulu viewers to add Cinemax programs for $9.99 a month. Purchasing subscribers of the HBO add?on through Hulu will also gain access to HBO Now through their .Huiu account. The add-ens are available across Hulu?s subscription plans, whose timing comes ahead of summer premieres for shows like ?Game of Thrones,? ?The De?ant Ones,? and ?Ballers.? The Cinemax add?on offers access to hundreds of movies like ?Warcraft? and ?Deepwater Horizon,? along with programs like ?The Knick,? ?Outcast,? and ?Banshee.? Live channels like HBO 2, HBO Family, HBO Comedy, ActionMAX, ThrillerMAX, and MovieMAX (all in HD) will be available to viewers throughout July and August. Both HBO and Cinemax join Hulu?s offering of subscription plans, like it?s $7.99/1nonth Limited Commercials plan, $1 1.99/month No Commercials plan, and Hqu with Live TV (Beta). This feature includes both live and on demand programming from .more than 50 sports, news, entertainment and kid?s channels, along with Hulu?s premium streaming library for a premium of $39.99. HBO and Cinemax feeds on the eastern and western US. coasts will be available to viewers on supported devices. Hulu?s recently unveiled user experience is currently available on Apple TV (4?11 generation), Xbox One, and Android mobile devices. Addmons will reportedly be available on more devices as more new user experiences continue to roll out across more major platforms throughout the summer. 12