Tuesday, May 07, 2019

Regional Sports Networks, the DOJ, and the First Amendment

Sinclair Broadcasting Group has agreed to buy 21 regional sports networks and Fox College Sports from Disney.
As predictably as a proverbial knee-jerk, some competitors in the video marketplace quickly announced their opposition to the deal. Matt Polka, CEO of America's Communications Association, a trade group representing smaller cable operators and telecommunications providers, has already called on the Department of Justice to reject the transaction.
I'll say right up front that I have questions regarding whether the DOJ's Antitrust Division, at least when it comes to the communications, information services, and video markets, appreciates the extent to which ongoing transformations and convergences are altering the competitive landscape so that traditional legacy product and market definitions no longer hold.

I certainly don't doubt that those at the Antitrust Division are acting in good faith. But I hope the Department will not lightly dismiss the judicial rebuke it received when U. S. District Court Judge Richard Leon refused its request to block the AT&T/Time Warner merger. The trial court's decision, affirmed by the D.C. Circuit's recent opinion in United States v. AT&T, Inc., repeatedly faulted DOJ for refusing to credit the "real-world evidence" of the "tectonic" changes occurring in the video marketplace. Foremost among these changes is the quick rise of major online video streaming services like those offered by Netflix, Amazon, Hulu, and the like. And the court also took into account the extent to which digital web giants like Google and Facebook increasingly are cutting into advertising revenues heretofore garnered by traditional video distributors such as cable operators and broadcasters.
Regarding a current FCC proceeding to determine whether, pursuant to Section 623 of the Communications Act, "effective competition" exists in particular local video markets so as to relieve Charter from rate regulation, just last week I said this in "The Metaphysics of Video Competition":
"This one 'effective competition' determination proceeding demonstrates yet again why Congress needs to update the Communications Act. Whatever Congress may have been thinking when it adopted the "effective competition" provision in 1992, it certainly didn’t have in mind today's myriad – and still proliferating – Internet video streaming services. I need not name them all here or say more here about their competitive impact."
I understand that the FCC, in the "effective competition" proceeding, is acting in the context of the Communications Act's provisions which, aside from the outcome of any particular proceeding, are in need of updating when it comes to regulations applicable to the video marketplace. That's why I said:
"A good place at least to start considering an update of the Communications Act video provisions is Rep. Steve Scalise's deregulatory 'Next Generation Television Marketplace Act,' first introduced in 2011. The bill made sense then and it makes even more sense now, when the video marketplace is much more competitive today than it was eight years ago."
But now back to the Sinclair-Disney transaction and Sinclair's acquisition of the regional sports networks. I hope DOJ will be cognizant of the extent to which consumers already have – and increasingly so – choices available with regard to both video distributors and video programs.
It's no surprise that there will be claims of potential foreclosure, or diminishment of competition, by those seeking to prevent consummation of a merger or acquisition of assets, or at least to have conditions imposed. That's as sure a bet as wagering that the sun will rise in the East tomorrow. Most often these claims come from competitors, or those purporting to represent consumers, who forget that the antitrust laws are intended to enhance consumer welfare, not protect competitors.
One final note: It is likely that the Antitrust Division will be importuned to interfere with the Sinclair-Disney transaction based on the claim that the regional sports network programming somehow is "must have" programming – presumably meaning, in this age of media abundance, that a platform that doesn't offer the very same sports programming at the very same time, and in the very same format, ipso facto is rendered non-competitive. No matter that there is more sports programming available on more platforms than ever before.
In the context of commenting over the years on the FCC's program access regulations, in essence a form of compelled speech that in and of themselves raise First Amendment concerns, I have said that FCC enforcement actions relying on agency-defined "must-have" categories of programming, such as sports networks, amount to content-based speech controls.
Were the Department of Justice to base its actions on judgments regarding whether particular programming is or is not "must have" content, the First Amendment concerns are not materially different than they are cross-town when the FCC engages in such content-based determinations. Absent a video marketplace in which consumers' choices of viewing platforms and programming are demonstrably shrinking, rather than expanding, I'd prefer to leave the choice of what programs consumers "must have" to the marketplace, rather than the government.
Such an approach would be better for consumers – and for respecting the First Amendment as well.