The merger Disney-Fox, a puzzle likely to the competition authorities

The purchase by Disney of a part of 21st Century Fox will still have to pass under the forks yoke of the us competition authorities, an equation so much more complicated than the mega-mergers have become a topic of much policy in the United States.

With this operation, the venerable company founded by Walt Disney in 1923, is going to put the hand on the film studios 20th Century Fox and the group with its own studios: the two of them, they represent 40% of revenue in the u.s. box office. In the television, in addition to its own channels ABC and ESPN (sports), Disney will now also FX and National Geographic. What to do frown upon competition authorities, who come specifically to block another huge takeover in the media sector: that of group Time Warner (studios Warner Bros., HBO and CNN) by the telecom giant AT&T.

An equation complicated by the role, real or supposed, of the president of Donald Trump, who hates notoriously CNN but finds the string listed to the far right of Fox News, which remains in the hands of his friend Rupert Murdoch, owner of 21st Century Fox. nthe White House has indicated that the two men had discussed the transaction on the phone, Donald Trump welcoming even the tycoon.

Suspicion of favoritism

Mr. Trump is at the same time suspected of having pushed the department of Justice, is legally supposed to act independently, to block the takeover of Time Warner by AT&T in order to harm on CNN. The merger is “not good for the country”, he even said so publicly. “We say frankly that these are the personal opinions of Donald Trump to CNN (bad) and Fox News (good) that decide the policy of competition”, says Richard Greenfield, an analyst specializing in the firm BTIG.

A “two weights, two measures” apparent, much more problematic that for many, this is the deal Disney-Fox who would be the most likely to cause problems of monopoly. According to Mr. Greenfield, the proposed AT&T/Time Warner asks a problem “theoretical” in terms of competition, but the fusion Fox/Disney “represents a far greater danger for the consumer” because it “will certainly lead to a price increase” or “substantial job losses”, particularly in Hollywood.

By blocking AT&T, the government “has placed very low the cursor anti-monopoly” so that “the transaction Disney-Fox seems to be much worse,” from this point of view, abounds Larry Downes, a specialist of the internet at Georgetown University. The union of writers, Writers Guild of America West, believes that this marriage of titans raises “concerns obvious and important competition.”

As Disney and Fox are already part of the “massive conglomerates of the media (who) have the power on the entertainment sector, often at the expense of creators”, “the merger of two direct competitors (…) is going to make things worse,” according to the organization.

Monopoly power

The consumers ‘ association, Consumer Watchdog also believes that the transaction “would give too much monopoly power to Disney” and would result “in higher prices and less choice for consumers.” So far, nuance Christopher Sagers, professor of law, specialist of the competition, the two mega-mergers are of different nature, which justifies, in his eyes an attitude potentially different authorities.

Because the merger AT&T-Time Warner is what is called a “vertical” amalgamation (the two companies are not competing) : the authorities will have to provide proof that the offensive of AT&T in the content produced by Time Warner is going to harm its competitors. Disney-Fox would be a “horizontal” amalgamation which would unite two companies in the same sector. However, continues the university, the competition authorities have in the past generally accepted that such mergers, as the transition from 5 to 4 competitors do not pose a problem. The course is not a long quiet river for Disney, ” said Mr. Sagers: the ministry of Justice might require that the regional channels, sports Fox should be excluded from the redemption, so as to avoid too much concentration in the television.

S&P Global Ratings also believes that Disney will have a hard time to respond to the concerns of the competition authorities, which could require divestitures. The decision of the competition authorities could not take place before 2019.

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