While Donald Trump’s Department of Justice has thrown a huge monkey wrench into one media-mega-merger by suing AT&T to block its planned acquisition of Time Warner, will Disney’s proposed $52.4-billion purchase of 21st Century Fox’s entertainment assets meet a similar fate?
Antitrust experts say that’s unlikely.
“This merger will happen, maybe with some tinkering around the edges,” George Hay, an anti-trust professor at Cornell law school who worked in the government’s anti-trust division in the 1970s, told TheWrap.
For one thing, Hay said, “there’s no elimination of any competition” among the Hollywood studios that would create a monopoly. “There are five or six studios now, so there will [still] be five or so others” if the deal goes through.
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Government lawyers are also unlikely to raise concerns because there is no consolidation of news outlets, Hay said. Fox is keeping Fox News, Fox Business and the Big Ten Network. “I think DOJ will decide there are enough sources of content. It’s not like CNN is acquiring Fox News.”
Brian Frons, former president of ABC Daytime and lecturer at UCLA’s Anderson Business School, said that the federal government will be examining the “concentration of power that disrupts the marketplace.”
That includes the combination of cable sports networks — especially Disney’s ESPN and Fox’s regional sports cable networks that the Mouse House hopes to acquire — and the “concentration of movie production and distribution, as it might affect theaters negotiating with a behemoth.”
But Frons noted that the new tech streaming companies have created more competition in the entertainment marketplace, which may help the Disney-Fox marriage pass antitrust muster. “Given the amount of money that Netflix is spending, Amazon is spending, Apple is going to spend, it doesn’t feel like just aggregating more content and more content resources should raise a red flag,” Frons said.
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A bigger issue for the Justice Department may be Disney assuming a 60 percent stake in the streaming service Hulu, which would allow the company to both produce and distribute content in a vertical integration that the Supreme Court has previously rejected for movie companies.
However, the government has adopted a more free market approach to vertical mergers in recent years — a sharp departure from the government’s antitrust lawsuits in the 1940s against the five major Hollywood movie studios. In that case, the DOJ argued that the studios had a market stranglehold as both movie creators and movie theaters owners, known as vertical integration. The Supreme Court strongly suggested that it agreed in its 1948 decision, U.S. v. Paramount, prompting the worried studios to sell off their theater chains.
In an odd twist of history, one of the independent studios that joined the federal government in its antitrust battle against the big five studios’ ownership of theaters was a then-upstart called Disney.
“Courts have not blocked any vertical mergers in at least 40 years,” Hay said. “Economists, for the most part, believe that vertical mergers are benign.”
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Consumer groups have notably not raised red flags over the deal. Matt Wood, policy director of the consumer watchdog group Free Press, said the merger is also “a classic horizontal merger” because it combines two rival movie studios, but the competition between movie studios and other content creators remains healthy.
“We are unlikely to oppose this deal,” Wood told TheWrap. “This is a relatively robust market.”
But that doesn’t mean the sale of Fox companies to Disney is a good thing for consumers, he said. “Any time you have a merger like this, there is a chance of fewer choices and higher prices.”
The deal also has the backing of another key player in the government: Donald Trump, who called Fox Executive Chairman Rupert Murdoch on Thursday to offer congratulations, according to White House Press Secretary Sarah Sanders.
She said Trump anticipates that the deal will create jobs, but offered no specifics.
In contrast, Trump has said he opposed the rumored AT&T-Time Warner deal during his 2016 campaign, and said it would put “too much concentration of power in the hands of too few.”
After the Justice Department went to court to stop the merger, Trump said aboard Air Force One, “I do feel you should have as many news outlets as you can — especially since so many are fake.”
Sean Burch contributed to this report.
For the record: A previous version of this story included a quote from George Hay about government opposition to vertical mergers that he amended for accuracy.
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