## Facts

- The United States and the States of California, Florida, Missouri, Texas, and Washington brought a civil antitrust action to enjoin a proposed transaction combining Comcast’s distribution assets with NBC Universal’s programming assets in a joint venture controlled 51% by Comcast and 49% by GE.
- Comcast was the largest U.S. cable operator and a major broadband Internet service provider; NBCU owned broadcast and cable networks, production studios, and a one-third interest in Hulu.
- The complaint alleged the transaction would violate § 7 of the Clayton Act by substantially lessening competition through vertical integration of (1) “must-have” video programming and (2) distribution platforms, including broadband access used to reach viewers.
- The government identified risks in two related areas: local MVPD markets (cable, satellite, telco video) and emerging online video distributors (OVDs) delivering long-form video over broadband.
- The alleged theory of harm was that Comcast, post-transaction, would have the ability and incentive to disadvantage rival MVPDs and OVDs by withholding NBCU programming, raising rivals’ licensing costs, or discriminating in broadband transmission, leading to higher prices, reduced quality, and reduced innovation.
- On January 18, 2011, the parties lodged a Proposed Final Judgment (consent decree) and a Competitive Impact Statement (CIS) under the Antitrust Procedures and Penalties Act (Tunney Act) describing the alleged harm and proposed remedies.
- After the public comment process, the court entered the Final Judgment on September 1, 2011, allowing the transaction to proceed subject to the decree.

## Issues

1. Whether the proposed Comcast–NBCU joint venture, absent relief, may substantially lessen competition in violation of § 7 of the Clayton Act in MVPD and OVD markets.
2. Whether the proposed consent decree’s remedies are sufficient to prevent the likely anticompetitive effects and therefore warrant entry as “in the public interest” under the Tunney Act.

## Decision

- The government concluded that the transaction could proceed if bound by a consent decree designed to prevent foreclosure and discrimination affecting MVPD and OVD competition.
- The settlement imposed primarily behavioral obligations, including:
  - nondiscriminatory licensing of NBCU content to qualified OVDs and protections to maintain access for MVPD rivals;
  - limits on Comcast’s ability to influence Hulu through relinquishment of certain Hulu management rights and commitments related to Hulu’s access to NBCU content;
  - “Open Internet”-type and anti-retaliation provisions aimed at preventing broadband discrimination or punishment of firms dealing with Comcast’s rivals; and
  - arbitration mechanisms to resolve content-access disputes on an accelerated basis.
- Following Tunney Act review and public comments, the court entered the Final Judgment, permitting the joint venture subject to the decree’s conditions.

## Legal Principles

- Clayton Act § 7 bars acquisitions where the effect “may be substantially to lessen competition,” including through vertical foreclosure or raising rivals’ costs when control of key inputs and distribution is combined.
- Under the Tunney Act, when the government settles a civil antitrust case by consent decree, it must explain the alleged violation and the proposed relief; the court must determine whether entry of the decree is “in the public interest.”
- A Tunney Act public-interest determination focuses on whether the decree reasonably addresses the alleged competitive harm; courts generally defer to the government’s predictive judgments while conducting independent review.
- Behavioral merger remedies may be used to mitigate vertical harms by requiring nondiscriminatory access to content, restricting discriminatory conduct in distribution, and providing enforceable dispute-resolution mechanisms (including arbitration).

## Conclusion

The government alleged that Comcast’s control of NBCU programming and broadband distribution would create incentives to disadvantage rival MVPDs and OVDs, threatening higher prices and reduced innovation. The case was resolved through a Tunney Act consent decree permitting the transaction while imposing licensing, Hulu-related, nondiscrimination, anti-retaliation, and arbitration obligations intended to preserve competition in traditional and online video distribution.


United States v. Comcast Corp., No. 1:11-cv-00106 (D.D.C. 2011)