Your M&A lawyer calls and delivers the good news: you just received regulatory approval of the merger of the media company you run with another major player in the industry. But not so fast. Just because your merger gets approved doesn’t mean you can impose whatever terms you want on your licensing partners. Increasingly, conditions are included within the merger approval. In a ruling of first impression by the Federal Communications Commission the pendulum seems to be swinging towards meaningful oversight via these conditions.
Armstrong Utilities and Fox Sports Net Pittsburgh (owned by DirectTV) couldn’t agree to terms of a licensing deal. Under preexisting conditions imposed by the FCC in prior mergers involving DirecTV, the network and Armstrong were required to submit their dispute to “baseball style” arbitration.
In this type of arbitration, each side presents its offer and the arbitrator chooses which of the two offers is more reasonable. The arbitrator cannot modify either offer, it must only choose.
An arbitrator originally ruled that Armstrong’s terms were more reasonable than DirecTV’s. The decision was then affirmed by the FCC Media Bureau. DirecTV appealed, challenging the FCC’s authority to impose and oversee the arbitration (among other issues). But the FCC pointed to the conditions imposed when DirecTV was purchased by Liberty Media.
So if your cable provider has been involved in a merger recently (and which haven’t?), the fine print may provide an avenue, namely baseball-style arbitration, to prevent the black out of a sports network in your area if the network and the provider can't reach agreement on licensing terms. Read the full order here.