WASHINGTON -- The Justice Department is dropping its objections to a proposed merger of the Movie Channel and Showtime, clearing the way for the second and third largest pay television services to be combined.
The department announced Friday that Viacom International Inc., owner of Showtime, and the American Express Co. and Warner Communications Inc., joint owners of the Movie Channel, can go ahead with plans for the merger.
As recently as July 28, the government had threatened to challenge the deal in court because of the way the companies had structured the transaction to involve three large movie distributors. Together, the three control 50 percent of the movie market.
But the companies won Justice Department approval by amending their plans and deleting two of the motion picture distributors from the deal.
The government had been concerned that with only seven major movie distributors in the entire market, the involvement of three of them in a new movie channel would give 'too much incentive to raise the prices' of movies licensed for viewing on pay TV, said spokesman Mark Sheehan.
Under the current merger proposal, only Warner Bros., a motion picture distributor and subsidiary of Warner Communications, will be involved in the new movie channel.
Viacom and Warner Amex each would control 50 percent of the new pay TV network.
Wayne Collins, deputy assistant attorney general in the antitrust division, said the Justice Department sees no antitrust problems with merging Showtime and the Movie Channel, which are surpassed in popularity only by Home Box Office.
Even with the merger, 'it's very easy' for new movie networks to jump into the market and 'prevent anti-competitive effects,' Collins said.