Monday, November 23, 2015

The Comcast Time Warner Merger (2014)

Brian Roberts, CEO of Comcast
On February 13th, 2014 Comcast Corporation and CEO Brian L. Roberts announced that Comcast and Time Warner Cable had submitted a proposal to merge under Comcast in a stock swap worth approximately 45.2 billion dollars. Each company's CEO talked positively about the merge proposal and how it would be beneficial for both companies and the customers. Time Warner Cable CEO Robert Marcus stated "This combination creates a company that delivers maximum value for our shareholders, enormous opportunities for our employees and a superior experience for our customers."
Despite the optimism of the CEO's, many consumers were wary of the pending transaction. Many customers were dissatisfied with Comcast's rising prices and sub-par customer service. Many feared that a monopoly was going to be created in the Cable market since both Time Warner and Comcast are superpowers in the cable and broadcasting industry. If a monopoly was created, higher prices and a likely decrease in quality was going to be in store for customers. With a potential monopoly looming over the cable and broadband market ethical questions were raised about the two large businesses merging together to gain control of a large portion of the industry.
The Anti-Trust Division of the US Department of Justice began reviewing the case on March 6th 2014. They examined how the market concentration would be affected if Time Warner was to merge with Comcast. Since Comcast and Time Warner generally broadcast to separate areas where they are not competing, the US Department of Justice had to examine the markets on an individual scale.
FCC Commissioner Mignon Clyburn

While the US Department of Justice was reviewing the case the Federal Communications Commission announced that it too would be reviewing the case on April 8th 2014. The FCC set up a 180 day period where the case would be discussed. Although the FCC reviewed the case they had very little to do with the end result. However, in August, FCC regulator Mignon Clyburn had a ceremonial dinner in her honor, in which Comcast Corporation swiftly shelled out 110,000 dollars to be the top sponsor of the event. This along with the large amount of money Comcast spent on lobbyists raised ethical concerns regarding bribery to potentially get a favorable advantage in the ruling. 
Ultimately, in early April 2015, it was known that the US Department of Justice was preparing an Anti-Trust Lawsuit against Comcast. The pending merger would allow Comcast to control one third of the American Cable market's customers which is dangerously high. On April 24th, Comcast officially withdrew the proposal. Perhaps the most disappointed person out of that deal was Robert Marcus, CEO of Time Warner who would have received an 80 million dollar severance as a result of the merger.


This merger had a major impact on all people that were connected to the company, either as customers or as shareholders or as workers. The main stakeholders affected in this case are the customers and shareholders of Comcast and Time Warner. This merger would have had a very large impact on all of the stakeholders if the proposal had went through. Customers of Comcast and Time Warner would most likely face a monopoly and would have to pay higher prices for lower quality service. Since Comcast would have such a stranglehold on the market, customers really would have nowhere to go if cable and internet prices began to increase. However, the shareholders of Time Warner and Comcast were supporters of the merger. Comcast shareholders supported the merger because it would bring large increases in revenue and profits which would be beneficial to them. The Time Warner shareholders were offered 2.875 shares of Comcast stock for each share of Time Warner stock. Both CEO's constantly argued on behalf of the merger, saying how it would be beneficial for all stakeholders. However, aside from the shareholders, a vast majority of customers opposed the merger and were not sad to see the federal ruling on the case.
Protesters stand gather in Philadelphia 
to protest the Time Warner Comcast Merger

From an ethical standpoint, this case can be analyzed using four different theories, Individualism, Utilitarianism, Kantianism and the Virtue Theory. These theories add guidelines to determine if the case is ethical or unethical.

Individualism is an ethical theory based off of Milton Friedman ethical and economic theories. With Individualism, the only goal of a company is to profit, and if it is a public owned company it is the responsibility of the CEO to maximize profits for the shareholders. However, this has to be done within the constraints of the law. Friedman would have most likely supported the merger since it would have maximized profits for the shareholders of the company. However, since it violated Anti-Trust Laws and brought up a potential lawsuit from the Department of Justice, Friedman would say that this practice is unethical because even though it would raise profits for the shareholders, it is an unlawful practice, and to be ethical it must not break any laws.

While Individualism focuses on raising profits for the shareholders, Utilitarianism focuses on maximizing happiness. For a case to be ethical under Utilitarianism, that case needed to maximize happiness for the majority of stakeholders. Although it was said before that this merger would be beneficial to Comcast, Time Warner and its shareholders, it would most likely not be beneficial for customers who would end up paying higher rates if it turned into a monopoly. Since Comcast is the largest cable and broadband provider in the world, a vast majority of the stakeholders are the customers who aren't happy by this merger. Therefore, since it didn't maximize happiness for the majority of the stakeholders, the merger would have been concluded as unethical.

David Cohen (left) of Comcast and 
Robert Marcus (right) of Time Warner at Capitol Hill
Kantianism on the other hand is an ethical theory based on making rational decisions to live sound ethical lives. Immanuel Kant believed that the key for stability and happiness in a society or a business was through rational thinking and decision making. Kant also believed that people should help others to make rational decisions, and not to mislead them. The Comcast Time Warner merger would have overtaken the cable market and forced customers to pay higher prices denying their ability to rationally choose a provider that best suits them. Comcast also tried to bribe FCC regulators by paying over 100,000 dollars to be a top sponsor for a dinner on behalf of the official. This merger would be seen as unethical by a Kantian because a monopoly takes away from the freedom of customers to make rational decisions. On top of that, a Kantian would say that bribing the official was unethical because it is trying to gain an advantage and keep the judges from making a rational decision.

Virtue Theory

Finally, the Virtue Theory is an ethical theory based off of Aristotle that states that people must be rational to function well and if they function well they will live good lives. The Virtue Theory is based off of four main virtues, honesty, courage, temperance and justice. If a case violates these virtues then it would be deemed unethical. This merger is not honest with its intentions, which includes trying to control a large portion of the market. Courageousness isn't truly a factor in this case, and one could argue that Comcast didn't show temperance by pulling the trigger on such a large deal. But what this case comes down to is justice, and this merger would not be just to the other companies and consumers because it would create a monopoly that would eliminate competition and trap customers. So this case would be unethical according to the Virtue Theory.

Justified Ethics Evaluation
Overall, this case is slightly different than most ethical controversies because it was stopped before it could really do any damage. However, the repercussions of a deal this big in a single market would have been highly controversial and many questions would have been raised about how ethical that merger was and why it was allowed to happen. According to the four ethical theories I would have to say that this merger proposal was unethical, as it failed to comply with the laws of any of the ethical theories. The deal would have most likely lead to an economic disaster in the cable market, a disaster that the United States government has attempted to prevent since Teddy Roosevelt was president. It would have benefited a few immensely, but it would have been detrimental for many more. Even as this proposal moves back into history especially with Time Warner planning to merge with Charter Communications, we are left to wonder what the impact would be if we let one of the most controversial merger proposals go into fruition.


Stout, Hilary “Comcast-Time Warner Cable Deal’s Collapse Leaves Frustrated Customers Out in the Cold” New York Times 26 April 2015 Web 21 October 2015

Fung, Brian “The Latest Time Warner Cable Merger Isn’t Comcast All Over Again, Execs Argue” Washington Post 26 May 2015 Web 21 October 2015

Roof, Katie “Will the Comcast-TWC Merger Happen in 2015?” Fox Business 23 December 2014 Web 23 October 2015

Falchek, David “Comcast Accused Of Ethical Problems” The Times-Tribune 17 August 2014 Web 21 October 2015

Moritz, Scott “Time Warner Cable Shareholders Approve Sale to Comcast” Bloomberg Business 9 October 2014 Web 23 October 2015

Brodkin, John “Comcast/TWC merger may be blocked by Justice Department” Technica 17 April 2015 Web 21 October 2015

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