Newsletter
FTC REJECTS CROSS-INDUSTRY MERGER APPLICATION
The FTC recently rejected an application from Eastern Multimedia Co. Ltd. to acquire four ca-ble TV companies. The main reason stated for the rejection was that since cable TV networks can be directly upgraded into broadband net-works, such a merger would have a severe ad-verse impact on market competition.
In the proposed transaction, Eastern Multimedia was to provide financial, technical and opera-tional management support, and was to complete the merger by appointing the CEOs of the four cable companies.
The FTC stated the view that the dominant posi-tion Eastern Multimedia would have acquired in the cable TV market would have created the risk that through refusal to trade, concerted actions, differential treatment or collective pricing agreements, Eastern Multimedia could discour-age other channels and programs from entering the market, and thereby restrict competition in the supply of channel programming.
Eastern Multimedia argued that the proposed merger would enable it to provide integrated cross-industry services such as cable TV, tele-communications and Internet services over cable TV networks. However, the FTC took the view that fixed telecoms networks can also provide broadband services, so that rejecting the appli-cation would not adversely affect the develop-ment of the national information infrastructure.