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Will the Trump administration allow Rupert Murdoch to sell Fox to Disney?



  Media negotiated by billions

A month after it was sued to block the purchase of Time Warner by AT & T, President Trump's Justice Department could begin to analyze another major agreement with the media: Disney is expected to acquire the majority of Fox 21
st Century. .

In some respects, a potential Disney-Fox deal would raise more antitrust issues than a combination of AT & T and Time Warner, CNN's parent company.

A Disney-Fox merger would pair last year's biggest movie studio with box office sales (Disney) with the third-largest (Fox), as traced by comScore. It would reunite Disney's Marvel superhero movies, which include all Marvel characters with lots of money, except the X-Men, with Fox's X-Men franchise.

The deal would also combine Disney's ESPN cable channels , Freeform and Disney Channel with Fox & # 39; s FX, National Geographic and Star India. (Fox News, Fox Sports and Fox's broadcast network probably will not be part of the agreement, according to numerous press reports)

The combination of all those channels and film franchises could create problems for consumers. The Department of Justice will consider to what extent the new company could dominate the market, using its greater influence to compel cable companies and distributors to pay higher fees to transport content from Disney and Fox.

Related: 21st Century Fox shares soar after report of sale talks with Disney

For example, could the combined company negotiate with Comcast by raising the price of FX, threatening to take ESPN out of the air if Comcast deny? pay the highest rate? These are the scenarios that regulators will investigate.

"The combination of two entities with important content assets in television and film would generally generate a high level of concern from an antitrust perspective," said Jonathan Barnett, professor of antitrust law at USC Gould Law School.

This type of so-called horizontal mergers among competitors tend to generate even more scrutiny than "vertical" mergers such as the AT & T-Time Warner agreement, in which one company adds a new line of business when buying another, but – At least in theory, it does not get rid of any competition. And the Trump Justice Department said it will not be an antitrust measure: it shocked the business world when it sued to block the acquisition of AT & T in Time Warner.

Regulators will pay special attention to Disney's and Fox's motives for their agreement once it has been announced. It has been rumored that Disney is in the market for another giant content creator to protect against Netflix and other streaming competitors. That could not happen the regulatory call in the new antitrust era.

The Department of Justice has recently indicated that it is particularly bitter in "defensive mergers" aimed at avoiding competition. Only in the last two years, antitrust regulators blocked mergers between Staples and OfficeDepot, Haliburton and Baker Hughes, Aetna and Humana and Anthem and Cigna, all of which said they should be combined due to difficult market conditions.

However, each deal is unique, and there are several reasons why the Department of Justice could allow Disney to buy Fox.

For example, with the notable exception of superhero movies, the two movie studios in actually produce different types of content. Disney movies are usually aimed at children. Fox has a successful but far less prolific animation studio, and his main focus is action and adventure films and adult comedies.

Related: AT & T's battle with the Trump administration could enter foreign territory

Similarly, Disney's cable channels revolve around sports and family entertainment. Fox's line-up focuses on comedy, intrigue and education. Regulators may see the company's assets as complementary, rather than competitive.

And the Justice Department could even see an important part of the agreement as something positive for the media industry: the joint participation of companies in Hulu.

Currently, Disney and Fox each own 30% of Hulu, which is a player in third place but growing in a market dominated by Netflix and Amazon. By combining, Disney would take a majority stake in Hulu and could make it the place to go to see Star Wars, X-Men, Disney Princesses and Kung Fu Panda.

That could pressure Netflix and Amazon to lower their prices. But making Disney and Fox content exclusive to Hulu could also make customers pay for multiple services to watch all of their favorite movies and shows. Regulators would examine that too.

"By making Hulu more robust, the Justice Department could see the agreement as pro-competitive," Barnett said. "On the other hand, that's not necessarily beneficial for consumers."

Without a conclusion for the case of AT & T and Time Warner, it is difficult to fully grasp how regulators would react to a Disney-Fox agreement.

It would seem prudent for Disney and Fox to await the court's decision on the merger between AT & T and Time Warner. A Justice Department victory could empower the regulator to crack down on media mergers, giving Disney doubts about its likelihood of success for approval.

However, by announcing the agreement now, the AT & T-Time Warner court case could be concluded before the Justice Department has an opportunity to comment on Disney-Fox. Waiting until after the decision could delay the agreement between six months and one year.

In the changing media landscape, time is of the essence.

CNNMoney (New York) First published on December 7, 2017: 2:39 PM ET


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