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Honourable John Manley
Minister of Industry
235 Queen Street
11th floor, East Tower
Dear Minister Manley:
Re: AOL Time Warner Merger
The AOL acquisition of Time Warner presents serious implications for Canadian consumers of broadcasting and new media services, as well as potential problems of access for Canadian content providers. These problems are not confined to Canada. Significant and reputable consumer groups in the United States, including the Consumers Federation of America, Consumers Union, and the Consumers Project on Technology, have called for the AOL acquisition of Time Warner to be stopped. We believe that the analysis of the American consumer groups is compelling, and that a thorough review of the competitive and other implications of this deal is called for.
As you are aware, the issue of the importance of carriage/content separation is not a new one for the federal government and your department. In 1995, the Information Highway Advisory Council report entitled “The Challenge of the Information Highway” had this to say on the issue:
“The Broadcasting Act calls for programming that is varied and comprehensive, expressing a range of differing views on matters of public concern; indeed, the promotion of diversity has been a tradition in Canadian broadcasting policy and regulation. As companies merge to face global competition, maximize competitive advantage, and benefit from vertical integration, maintaining diversity will require structural measures that discourage preferential treatment based on ownership interests.”
Recommendation 7.7 of the aforesaid report provided as follows:
“The principle of carriage/content separation should be maintained at a minimum through the requirement of structural separation between programming and distribution undertakings and with other reasonable safeguards.”
The legitimacy of these concerns was acknowledged by the federal government in its later report “Building the Information Society: Moving Canada Into the 21st Century”. That report noted the dangers to Canadian content for new media services:
“More important within the emerging information industry itself, there are signs of growing vertical integration between providers of broadcasting carriage and content services. This trend could ultimately leave providers of Canadian content vulnerable to discrimination. The present policy and regulatory framework may have to take this new reality into account.”
PIAC is of the opinion that the AOL Time Warner merger may have serious and sustaining implications for access and distribution of new Canadian media services. It not only blurs the line between the desirable carriage/content separation, it potentially lessens competition. In the words of our American counterparts the deal:
”…raises the threat of discrimination among content providers effectively degrading the services offered by competitors.”
We believe that the implications for Canada and Canadian consumers are such that the government should make a formal request pursuant to Article V of the 1995 “Agreement between the government of the United States of America and the government of Canada Regarding the Application of Their Competition and Deceptive Marketing Practices Laws”
The Agreement provides that:
“If a party believes that anti-competitive activities carried out in the territory of another party adversely affect its important interest, the first party may request that the other parties competition authorities initiate appropriate enforcement activities…”
We believe that AOL’s acquisition should be afforded a rigorous review by American competition authorities. It is also our preliminary view that the merger in its current form should be stopped.
We welcome the opportunity to discuss these concerns with your office and your officials. We would be pleased to provide any further information that may be of assistance to the government in making this request.
cc: Konrad von Finckenstein – fax only – 953-5013
Commissioner of Competition