AOL deal with Time Warner faces US hurdles

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The Independent Online

US anti-trust regulators are threatening to block America Online's purchase of Time Warner, it emerged yesterday, unless major changes are made to the deal. A flurry of reports out of Washington said that the Federal Trade Commission feared the concentration of market power in cities where Time Warner has cable systems, and that it would insist on far-reaching safeguards.

US anti-trust regulators are threatening to block America Online's purchase of Time Warner, it emerged yesterday, unless major changes are made to the deal. A flurry of reports out of Washington said that the Federal Trade Commission feared the concentration of market power in cities where Time Warner has cable systems, and that it would insist on far-reaching safeguards.

Separately, executives from Warner Music and EMI are due to meet competition officials in Brussels today to discuss the implications of the proposed merger between the two music labels. The Commission is concerned that the merger of the two groups, combined with the AOL-Time Warner deal, would give the business a dominant position in the downloading of digital music via the internet.

In the US, one of the conditions the FTC is likely to set is that the merged AOL-Time Warner should allow internet competitors to use its high-speed lines in those cities. A Time Warner spokesman said that the company was "fully committed" to open access to its cables and cited a recent agreement with an independent online provider, Juno Online Services, as evidence of its goodwill. The FTC, however, appears likely to insist on more than a declaration of intent.

The combined company may also need to break existing agreements with AT&T - the largest US cable operator - as well as restricting dealings with the company in future. Time Warner is currently the second-largest cable operator in the US and the regulator wants to ensure continued competition between the two. AOL-Time Warner could also be told to sell its $1.5bn stake in the satellite company, Hughes Electronics.

The competition concerns are said to reach up to the chairman of the FTC, Robert Pitofsky. But he would need the support of a majority of the five-member commission to reject the merger. More likely is a period of hard-bargaining that could delay the deal from the planned autumn completion.

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