Charter-Time Warner Merger Sparks Univision Licensing Fee DisputePrint Article
- Posted on: Jul 20 2016
After a merger, which agreement controls when both companies have pre-existing contracts with a common third party?
In May 2016, Stamford-based Charter Communications Inc. (“Charter”) completed its acquisition of Time Warner Cable (“TWC”), making it the second largest cable provider behind Comcast Corporation.
At the time of the acquisition, TWC was the larger of the two companies. As such, TWC was able to negotiate more favorable rates and terms on carriage agreements with programmers than the then-smaller Charter. One programmer, common to both TWC and Charter, was Univision Communications Inc. (“Univision”), the nation’s largest Spanish language broadcaster.
Univision’s contract with TWC does not expire until June 2022, and provides for licensing fees at a much cheaper rate than the Charter agreement. Univision’s contract with Charter was set to expire on June 30, 2016.
Beginning in March 2016, Univision tried to renegotiate its agreement with Charter. Those efforts were rebuffed by Charter, which claimed that the TWC agreement governed the payment of licensing fees through June 2022. Univision contends that Charter is acting in bad faith by “resorting to transparently constructed, pretextual arguments … to unilaterally impose license fees [negotiated by TWC] that are dramatically below current market license fees.” In support, Univision relies on a provision in its contract with Charter which provides that in the event Charter acquires a company with a pre-existing Univision carriage agreement, the licensing fee rates of the acquired company may only remain in effect until the expiration of the calendar year when the acquisition occurred — which in this case would be December 2016. Univision claims the provision was expressly designed to address and avoid the kind of licensing fee dispute that has now come to pass.
Univision also maintains that Charter’s position is contradictory to public statements that Charter executives made to secure approval of the acquisition — namely that it would be Charter, not TWC, management who would control the operations of the combined company after the acquisition. According to Univision, these statements formed the basis upon which “the Federal Communications Commission, the U.S. Department of Justice, the New York State Public Service Commission, and the California Public Utilities Commission each approved the Acquisition.”
Univision filed suit against Charter in New York Supreme Court (Index No. 653568/2016) this month for breach of contract related to the licensing fees dispute.
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