Disney, CBS Win Battle with FCC Over Disclosure

(CN) - The FCC cannot expedite the public disclosure of contracts and documents relevant to its review of the proposed AT&T-DirecTV merger, the D.C. Circuit ruled.

The Federal Communications Commission is tasked with reviewing merger proposals to determine if the merger serves "the public interest, convenience, and necessity."

As part of the review, parties must submit proprietary information about their business, such as affiliate contracts and negotiation documents.

But in the case of cable companies, such documents threaten to reveal third-party providers' proprietary information, known as Video Programming Confidential Information.

The opinion provides an example:

"Suppose DirecTV is eager for its customers to have access to ESPN. If DirecTV wishes to offer ESPN to its subscribers, it will have to negotiate a price with Disney, which owns the channel. Likewise, AT&T will have to reach its own deal with Disney if it wants to offer its customers the same sports package DirecTV does. And when DirecTV and AT&T ask for permission to merge, this information - what kind of a deal DirecTV agrees to with Disney, and how AT&T's compares - could help the Commission understand what the market would look like if the two cable companies combined."

But Disney - and other providers such as CBS and Viacom - does not want its contracts to be publicly disclosed.

If they were, "it would be a simple matter for, say, Fox to peruse those documents, figure out what Disney charges for ESPN, and then price its own sports channel accordingly," the opinion says.

While the information is covered by a protective order, entities interested in the mergers, including providers' direct competitors, can - and have - requested access to the documents.

After receiving 266 objections to these requests, the Commission decided that reviewing the objections would unduly delay its decision on the merger, and sharply truncated the process for reviewing access requests.

But the D.C. Circuit vacated the agency's decision last week, agreeing with providers that the Commission did not take proper steps to ensure that its disclosure of these decisions would not have negative consequences.

"Because corporate business documents will almost always be relevant to a merger between two industry participants, allowing the Commission to disclose confidential information based on mere relevance would mean that such information would, subject to the governing protective orders, be routinely available for inspection," Judge David Tatel said, writing for the three-judge panel. (Emphasis in original.)

To stay true to the purpose of the Trade Secrets Act, the Commission must show that the information is necessary to its review, not only relevant, according to the judgment.

"In short, by failing to explain why VPCI is a 'necessary link in a chain of evidence that will resolve an issue before the Commission,' the Commission has failed to overcome its - and Congress's - presumption against disclosure of confidential information. We shall therefore vacate the Commission's Order."

In addition, the Commission's decision seems to discard its old policy for the sake of expediency.

"Even were speed a potential concern, the Commission has failed to explain why expedited review is so important here given that it has followed the old rule through dozens of merger reviews over the last fifteen years," Tatel concluded.

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