United States v. Comcast Corp., Civil Case No. 11–106 (RJL).

• Decision Date: 01 September 2011
• Docket Number: Civil Case No. 11–106 (RJL).
• Parties: UNITED STATES of America, State of California, State of Florida, State of Missouri, State of Texas, and State of Washington, Plaintiffs, v. COMCAST CORP., General Electric Co., and NBC Universal, Inc., Defendants.
• Court: U.S. District Court — District of Columbia

2011-2 Trade Cases P 77,584

808 F.Supp.2d 145

UNITED STATES of America, State of California, State of Florida, State of Missouri, State of Texas, and State of Washington, Plaintiffs,

v.COMCAST CORP., General Electric Co., and NBC Universal, Inc., Defendants.

Civil Case No. 11–106 (RJL).

United States District Court, District of Columbia.

Sept. 1, 2011.

Hillary B. Burchuk, Yvette F. Tarlov, U.S. Department of Justice, Washington, DC, Jonathan Michael Eisenberg, Office of the California Attorney General, Los Angeles, CA, Eli Andrew Friedman, Florida Office of the Attorney General, Tallahassee, FL, Anne E. Schneider, Office of the Attorney General, Jefferson City, MO, John Thomas Prud'Homme, Jr., Office of the Attorney General, Austin, TX, David M. Kerwin, Washington State Attorney General, Seattle, WA, for Plaintiffs.

Arthur Joseph Burke, Davis, Polk & Wardwell, New York, NY, Michael Norman Sohn, Davis, Polk & Wardwell, Joe Sims, Kathryn Marie Fenton, Jones Day, Deborah L. Feinstein, Justin P. Hedge, William Joseph Baer, Arnold & Porter LLP, Washington, DC, for Defendants.

MEMORANDUM ORDER

RICHARD J. LEON, District Judge.

BACKGROUND

This case is before the Court on the United States' Motion to Enter Final Judgment [Dkt. # 25]. In January 2011, plaintiffs United States of America (“the Government”) and the States of California, Florida, Missouri, Texas, and Washington (“plaintiffs”), brought a civil anti-trust ¹ action to permanently enjoin a proposed joint venture and related transactions, purportedly worth $30 billion, between defendant Comcast Corporation (“Comcast” or “defendant”) and General Electric Company (“GE” or “defendant”) that would allow Comcast, the largest cable company in the United States, to control, among other things, popular video programming which included NBC Television Network (“NBC broadcast network”) and the cable networks of NBC Universal, Inc. (“NBCU” or “defendant”). Complaint (“Compl.”), Jan. 18, 2011 [Dkt. # 1]. The Government simultaneously issued a Competitive Impact Statement contending that under the proposed merger, Comcast would obtain majority control of highly valued video programming that would prevent rival video-distribution companies from competing against the post-merger entity. See Competitive Impact Statement at 1, Jan. 18, 2011 [Dkt. # 4].

On February 20, 2011, this Court signed a Stipulation and Order [Dkt. # 21], pursuant to which the defendants agreed to abide by the provisions of a proposed Final Judgment that would allow the merger to go forward, while also putting into place certain remedies for what the Government alleged was anti-competitive behavior. Defendants also agreed to comply with the requirements of the Antitrust Procedures and Penalties Act (“APPA”), 15 U.S.C. § 16, including publishing—at defendants' expense—newspaper notice of the merger, a summary of its terms, and a copy of the proposed Final Judgment. Stipulation and Order at ¶¶ 2–3; see also Pl. United States' Response to Public Comments, June 6, 2011 [Dkt. # 23]. On April 18, 2011, defendants filed a Report and Certification of Compliance with Tunney Act Requirements (“Report”) [Dkt. # 22], in which they certified compliance with Section 2(g) of the APPA and detailed communications by or on behalf of defendants with the United States regarding the Final Judgment. See Report at 1. On June 6, 2011, the Government filed a Response to Public Comments (“Response”) [Dkt. # 23] in which it summarized and responded to the eight public comments filed after the sixty-day notice required by the APPA. Resp. at 2. After analyzing the public comments, the United States professed a continued “belie[f] that the proposed Final Judgment will provide an effective and appropriate remedy for the antitrust violations alleged in the Complaint.” Id. at 1.

Then, on June 29, 2011, the Government filed a Certificate of Compliance with Provisions of the Antitrust Procedures and Penalty Act [Dkt. # 24], wherein it certified compliance with all requirements of APPA Sections 16(b)-(h) and requested that the Court make the necessary public-interest determinations required by 15 U.S.C. § 16(e) and, ultimately, enter the proposed Final Judgment.

This Court held a fairness hearing on July 27, 2011. See Minute Entry, Case 11–cv–106, July 27, 2011. The parties were given the opportunity to present oral argument and to answer the Court's questions. Upon conclusion of the fairness hearing, the Government filed a Supplemental Statement In Support of Entry of the Final Judgment (“Supp. Stmt.”), Aug. 5, 2011 [Dkt. # 26], in which it further explained the proposed Final Judgment and renewed its request for this Court to enter Final Judgment.

Upon review of the pleadings, the record, and the applicable law, the Court determines that entry of the proposed Final Judgment is in the public interest and therefore GRANTS the Government's Motion for Entry of Final Judgment [Dkt. # 25]. However, given a number of potential uncertainties regarding the Final Judgment's implementation, and consistent with this Court's “jurisdiction to issue orders and directions necessary and appropriate to carry out or construe any provision of the Final Judgment and to ‘enforce compliance, and to punish violations of its provisions,’ ” Supp. Stmt. at 6 (quoting Final Judgment § IX), I hereby order that certain future steps, described herein, be taken for no less than two years to ensure that the public interest continues to be served.

STANDARD OF REVIEW

Before entering any consent judgment offered by the United States under 15 U.S.C. § 16(e), this Court must determine whether entry of the judgment “is in the public interest.” To make that determination, the Court shall consider:

“(A) the competitive impact of such judgment, including termination of alleged violations, provisions for enforcement and modification, duration of relief sought, anticipated effects of alternative remedies actually considered, whether its terms are ambiguous, and any other competitive considerations bearing upon the adequacy of such judgment that the court deems necessary to a determination of whether the consent judgment is in the public interest; and

(B) the impact of entry of such judgment upon competition in the relevant market or markets, upon the public generally and individuals alleging specific injury from the violations set forth in the complaint including consideration of the public benefit, if any, to be derived from a determination of the issues at trial.” 15 U.S.C. § 16(e).

ANALYSIS

On July 27, 2011, the Court held a public hearing during which the Government and defendants presented arguments as to why entry of Final Judgment was in the public interest. In essence, both sides relied upon their assessment that the Final Judgment was carefully crafted by all parties to facilitate a merger, consistent with the existing antitrust laws, that carefully protected the public's interest by maintaining the competitive equilibrium of the emerging online-video market.

While asking the parties questions at that hearing, however, I grew increasingly concerned that the Government's non-appealable arbitration mechanism for online video distributors (“OVDs”) did not serve the public interest. See, e.g., Fairness Hearing Transcript (“Tr.”), July 27, 2011, at 23. Moreover, I was unsure whether the proposed Final Judgment adequately empowered the Department of Justice to enforce the terms of the agreement. See, e.g., id. at 5–6.

Not surprisingly, the Government filed a Supplemental Statement after the hearing in which it described, in detail, the dual-track arbitration mechanism OVDs may use to acquire Comcast and NBCU content under certain conditions.² See Supplemental Statement (“Supp. Stmt.”) [Dkt. # 26]. To start, the Government clarified that OVDs have two options for arbitration: the FCC process, and the new process outlined in the proposed Final Judgment. Id. at 2. Arbitration under the FCC Order, they stressed, is a matter of right, see Supp. Stmt. at 4 (citing FCC Order, App. A, §§ IV.A.3, VII.A, VII.C), and is appealable, whereas arbitration under the proposed Final Judgment is not. ³ Id. at 4–5. And although an OVD which is dissatisfied with its result in an FCC arbitration may not then take a second bite at the apple by requesting arbitration under the proposed Final Judgment, an OVD whose requested arbitration under the proposed Final Judgment is denied ⁴ by the Department of Justice may still proceed as a matter of right with arbitration under the FCC Order. See Supp. Stmt. at 5.

Of course, the Government contends that because the “FCC is the expert communications industry regulator ... OVD requests will ordinarily proceed through the FCC [arbitration] process.” Supp. Stmt. at 5; see also id...