D.C. must clear HSN-QVC merger

QVC Network’s proposed marriage with Home Shopping Network will require the blessing of regulators from three government agencies, and may run into trouble.

The Federal Trade Commission, the U.S. Dept. of Justice and the Federal Communications Commission will all have a shot at nixing the proposed deal, which is already drawing criticism from Media Access Project, a liberal D.C.-based public interest law firm.

MAP deputy director Gigi Sohn said the proposed HSN-QVC merger is “potentially fraught with antitrust problems. When you’ve got two of the largest players in this (home shopping) game becoming one, you have to ask a lot of questions.”

Sohn said her group is considering asking the FCC to reject the proposed transaction on grounds that it may violate FCC rules that limit a TV network’s ownership of cable systems to 10% of the national audience and 50% of a local market.

Sohn noted that Denver-based Tele-Communications Inc., the parent company of HSN’s Liberty Media, has a national cable penetration of more than 20%.

To avoid facing FCC scrutiny, QVC and HSN may argue that HSN is not a “network” in the sense that ABC, CBS and NBC are networks. Indeed, one FCC official said Monday he doesn’t believe the agency has ever directly addressed the question of whether HSN is a network in the traditional sense.

Though he was not commenting Monday, Senate antitrust subcommittee chairman Howard Metzenbaum (D-Ohio) might also emerge as an opponent of the proposed QVC-HSN pact. Metzenbaum earlier this year protested Liberty Media’s purchase of an 80% stake in HSN as “another example of the growing horizontal concentration and vertical integration in the cable industry.”

At the time, Metzenbaum asked the Justice Dept. to study the anticompetitive effects of the Liberty-HSN deal. Justice later signed off on the transaction, but that was before Janet Reno was named attorney general and appointed a new antitrust team.

Sohn predicted Justice’s scrutiny of the proposed HSN-QVC merger “won’t be as snappy a decision as the last time.”

A key issue that presumably will be addressed by the FTC and Justice is the relevant market for home shopping services. Lawyers for QVC and HSN are expected to argue that a joint QVC and HSN entity would not constitute undue market influence, since the shopping channels also compete with local Sears stores and area shopping malls for business.

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