FTC Delays Suing AOL Over Time Warner Deal
Tuesday November 28 4:53 PM ET
By David Lawsky and Jeremy Pelofsky
WASHINGTON (Reuters) - The Federal Trade Commission has delayed plans to sue to block America Online Inc.'s (NYSE:AOL - news) proposed purchase of Time Warner Inc. (NYSE:TWX - news), sources close to the talks said on Tuesday.
The five-member FTC voted late on Monday to delay taking action on the deal, the second time the antitrust authority has postponed a decision as negotiations for a settlement drag out. The move came as the agency accelerated its preparations to sue AOL in federal court to halt the deal.
The commission staff has sent letters to several companies and consumer groups from which it has gathered information laying the groundwork for court action, one source said.
Documents may be used ``in connection with an action in U.S. district court seeking to preliminary enjoin the acquisition of Time Warner Inc. by America Online Inc,'' the FTC letter said, a copy of which was obtained by Reuters.
The companies were also told that, as is routine, the FTC would seek a court order to protect the confidentiality of the materials.
The shares of Dulles, Va.-based AOL and New York-based Time Warner were down sharply, more than seven percent, parallel to drop-offs of other Internet stocks. AOL closed down $3.41 to $40.56, while Time Warner finished down $4.87 to $61 on the New York Stock Exchange (news - web sites).
The FTC and AOL are trying to reach an agreement that would delay AOL from offering its high speed Internet service over Time Warner cable until at least one competitor was able to offer service on the same lines.
Spokespeople for AOL and Time Warner declined to comment on the FTC's action.
Time Warner made a giant leap last week in its attempts to win over the antitrust authority on this score when it reached a deal with EarthLink Network Inc. (NasdaqNM:ELNK - news) to carry that company's Internet service across its cable lines.
After tense and at times contentious negotiations, EarthLink and Time Warner agreed to allow Internet service via cable lines during the second half of 2001, although specifics of the deal were not spelled out.
The FTC is negotiating terms for requiring the combined AOL-Time Warner to sign up, with pro-competitive provisions, two additional firms within 90 days of reaching a final pact with the antitrust authority, the sources said.
The two companies had sought a delay in FTC action until mid-December to allow the antitrust authority time to review the deal. They said they would not likely close the merger, which must also pass muster at the U.S. Federal Communications Commission (news - web sites), until late December or the early days of 2001.
Juno Online Services Inc. (NasdaqNM:JWEB - news), the nation's No. 3 Internet service provider behind EarthLink, also has struck a preliminary deal with Time Warner but the details have yet to be ironed out.
Still, the deals may not end all of Time Warner's regulatory woes as smaller online service providers have expressed skepticism about its recent EarthLink deal. They worry they may not be able to compete against the bigger companies.
An open access requirement ``with a publicly traded company is irrelevant because it does not provide for privately-owned ISPs who cannot afford large operating losses or large capital investments without a clear path to profitability,'' Stephen Heins, marketing director for NorthNet, said in a letter sent Tuesday to the FTC and FCC.
The FTC must differentiate from the national and small regional Internet providers where the business models are different, he said. He requested the agency include a national ISP association in its discussions about EarthLink's deal with Time Warner.
``We will survive only if the wholesale rate is low enough to allow us to pay our related cable expenses and still make a profit,'' Heins said in the letter.
The AOL-Time Warner deal is now worth roughly $99 billion based on Monday's closing stock price, well below the $164 billion value when the combination was announced almost 11 months ago. |
