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"It would be inconsistent with sound administrative procedure and unfair to the parties for the FCC to rush to a decision under these circumstances."
——FCC Chairman William Kennard

AOL-TW MERGER HITS
REGULATORY SNAG

FTC Wants More From Companies: Trinkets, Baubles, Frankincense, Myrrh, PS2
America Online and Time Warner's hopes for a swift approval of their proposed merger were dashed, as regulators sent them away for up to three more weeks to come back with more concessions.

As expected, the Federal Trade Commission sought stiffer conditions from AOL and Time Warner for approval of their $115 billion merger plan and officially signaled for the first time that regulators would seek to block the deal unless antitrust concerns were addressed.

At a closed 2 1/2-hour meeting Thursday (11/9) afternoon, the five-member commission voted unanimously to postpone legal action against the merger for "not more than three weeks" to give the companies more time to forge a settlement, according to numerous published reports.

In its first public statement on the deal, the FTC said "the parties have committed in the last 24 hours to offer new proposals to address competitive issues in connection with the proposed merger," the Wall Street Journal reports.

The companies had reached a framework with the FTC staff for providing access to Internet competitors over TW's cable lines. Now, commission members are demanding that the staff agreement go further—that the companies negotiate a signed contract with a national Internet service. Without at least one such contract, the companies won't be permitted to close the merger.

Spokesmen for the companies said after the FTC statement that talks with the agency were "constructive and continuing." But other company officials expressed rising anxiety about the long and fractious settlement talks, and investors were jolted.

Shares of the proposed merger partners dipped due to concerns the completion of the deal may take longer than hoped. AOL shares fell $1.97, to $50.71 and shares of TW dropped $2.49, to $76.35 in Friday (11/10) trading.

Meanwhile, the head of the Federal Communications Commission, in a letter to lawmakers Friday, said that discussions between antitrust officials at the FTC and the two companies could significantly change the structure of the merger still under review.

"It would be inconsistent with sound administrative procedure and unfair to the parties for the FCC to rush to a decision under these circumstances," FCC Chairman William Kennard wrote to two top antitrust lawmakers.

"For example, if AOL and TW change their proposal with respect to the access issue in significant ways, it is not clear why it makes sense for the FCC to rule on whether their application, as it now stands, is in the public interest," Kennard wrote to Sen. Mike DeWine, R-OH, Chairman of the Senate Judiciary Committee's antitrust panel, and Sen. Herb Kohl of Wisconsin, the subcommittee's top Democrat.

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