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Federal Judge Threatens Comcast's NBCUniversal Merger

Thursday, 28 Jul 2011 | 10:23 AM ET

The way Comcast deals with content providers for its websites may be creating an obstacle to its acquisition of NBCUniversal, the parent company of CNBC.

A federal judge on Wednesday told Comcast lawyers that he might hold up approval of the merger of Comcast and General Electric's former NBCUniversal unit.

"I'm giving you fair notice I'm not sure I'm going to sign this," Judge Richard Leon said, according to a report in the Wall Street Journal.

The merger was closed in January. But it required approval from the Justice Department due to antitrust laws. Ordinarily, judicial approval of a settlement between the Justice Department and merger parties is routine. But federal judges can hold up approval or force changes to the terms of a deal.

Judge Leon pointed to the arbitration terms for online content providers, noting the terms may not be "in the public interest."

The merger of Comcast and NBCUniversal raises antitrust issues because NBCUniversal is such a huge content creator. The fear is that Comcast could use its control of NBC's content in anticompetitive ways to punish rival cable companies. Under its agreement with the Justice Department, Comcast is required to license programing to online distributors that compete with the company's cable service.

Disputes that rise from those distribution deals are supposed to go to binding arbitration that doesn't include an appeals process. While this might seem unduly harsh, it was actually something many Comcast competitors requested. The idea is that an open-ended, appealable process would work to Comcast's advantage and hurt smaller competitors.

"Comcast has the resources to sustain an appeals process indefinitely—most online video providers would not," Corie Wright, a lawyer for a media-reform group, told the Wall Street Journal. "Their business would likely go under before a decision was ever reached on the merits of the dispute."

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