M&A Deals of the Year
Introduction   Apple and partners-Nortel   Google and Motorola Mobility   Access Industries -Warner Music   Cumulus Media-Citadel   Comcast-NBC Universal   H&R Block-TaxAct   Caterpillar-Bucyrus   Ares and CPPIB-99 Cents Only Stores   Grupo Bimbo-Sara Lee baking assets   BHP Billiton-Petrohawk   Peabody Energy-Macarthur Coal   Selling off Bank of America   Dish Network-Blockbuster   Amgen-BioVex   KKR et al.-Samson Investment   Pearson-Connections Education   Alleghany-Transatlantic   Breaking up Dexia

Comcast Corp.'s $30 billion acquisition of a majority stake in NBC Universal Inc. from General Electric Co. presented regulators with a plethora of novel competition and public policy issues. So when the deal finally gained approval by the Obama administration in January 2011, it came with an extensive list of behavioral conditions that set a new standard for how the government will deal with vertical mergers.

Regulators knew as soon as Comcast's acquisition was announced that the first marriage of a major traditional media content provider and a nationwide provider of both cable systems and Internet connectivity raised questions about the deal's effect on the ability of rivals -- cable systems, satellite TV and cable networks -- to compete for customers.

Specific issues included whether Comcast's rival cable systems would be at a disadvantage negotiating retransmission and rights fees for NBCU's broadcast TV stations and Comcast's stable of cable channels. There were concerns about whether the deal might give Comcast incentive to move free broadcast content to cable. Worries arose that Comcast might favor its cable and NBCU channels in program guide placement.

An even bigger concern of the government was whether new competition from Internet video would be stymied by the merger. Would free content on Hulu LLC, partly owned by NBCU, disappear? Could Comcast limit access to NBCU content to viewers with cable Internet connections? Could Comcast use licensing negotiations for its NBC stations and its own cable channels to prevent new Web video sites from getting enough content to compete?

Finally, there were the concerns about whether Comcast, as both Internet service provider and Internet content provider might enchance access to its own content while degrading access to programming of NBCU competitors.

Regulators dealt with the concerns about Comcast's rivals with an unusually extensive set of behavioral conditions, which the buyer agreed to. The company said it would arbitrate disputes with other cable systems concerning their access to NBCU's cable channels. In addition, Comcast assured regulators that rivals' competing channels would get placement similar to its own in the event it created channel neighborhoods.

"The use of behavioral remedies isn't unprecedented, but what makes this decree unusual is the reach," says Barry Nigro, chair of Fried, Frank, Harris, Shriver & Jacobson LLP's antitrust department. He points to the 30 pages of conditions in the Justice Department decree and the list of required and prohibited conduct.

Andrew D. Lipman, a partner in Bingham McCutchen LLP's telecom, media and technology group, calls the decree "a watershed event." Adds Lipman: "The Comcast merger was a reflection of the [DOJ's] willingness to rely on multiyear conduct and behavioral conditions as opposed to structural remedies. He notes that, historically, the Justice Department has been reluctant to rely on behavioral remedies. "This attitude appeared to change under Christine Varney."

For her part, former DOJ Assistant Attorney General Varney says the review sets a bar, and she hopes her successors continue using her approach. "I hope it sets the standard for deals in ways that continue to allow pro-competitive benefits to be realized, yet assure competitive problems are appropriately addressed," says Varney, who joined Cravath, Swaine & Moore LLP in September.

She sees the decree as a balancing act. "We wanted to maintain the competitive playing field, but not impose strictures. We tried to be very careful. It was very important that we didn't inhibit [anyone] from innovating on content."

To create a template for future deals where the merger brings both helpful efficiencies to consumers and poses competitive concerns, Varney, before returning to private practice, issued guidelines for implementing behavioral conditions.

In the NBCU deal, regulators' biggest steps may have been addressing the uncharted territory of Web video and threats to potential future competitors.

The consent decree required Comcast to accept net-neutrality conditions to prevent it from putting rivals' traffic on the Web at a disadvantage. The decree also maintained that Comcast must license its content to competing Internet sites at rates similar to those of its peers. And it required Comcast to step away from active management of Hulu. Lastly, in a bow to uncertainties about the Federal Communications Commission's legal authority to regulate the Web, the decree called for the DOJ as well as the FCC to be a forum to hear complaints.