AT&T, Time Warner merger would create giant new media company

Eileen GuzmanJun 13, 2018

The Justice Department had argued that AT&T's acquisition of Time Warner would allow it to charge premium prices to rivals who relied on its Turner and HBO channels to woo customers to their cable plans, potentially giving it an unfair advantage in the pay-TV market.

The fate of the AT&T-Time Warner merger, a massive media deal opposed by the government that could shape how much consumers pay for streaming TV and movies, rests in the hands of a federal judge. A looming example is the pending merger of Sprint and T-Mobile, a $26 billion combination of the country's third and fourth-largest wireless companies. Instead, a rush to consolidate is likely.

A federal judge has approved AT&T's merger with Time Warner.

A U.S. district court judge has cleared the merger of telecoms giant AT&T and media firm Time Warner, in a major defeat for government regulators.

The ruling is expected to lead to other mergers and acquisitions.

"In short, despite the Government's efforts to paint a contrary picture, this is not a case containing direct, probative evidence of anticompetitive intent on the part of high-level executives within the merging company", wrote Judge Leon, an appointee of President George W. Bush.

U.S. District Court Judge Richard J. Leon expressed surprisingly similar opinions, noting from the bench, "the cost to the defendants and the government has been staggering" and strongly warning DOJ lawyers to not ask for a hold on the merger from him if they planned an appeal, according to CNN reporter Hadas Gold.

U.S. District Judge Richard Leon rejected the government's argument that the AT&T-Time Warner combination would hurt competition in pay TV and cost consumers hundreds of millions of dollars more to stream TV and movies. He cited the size of the combined companies.

Halford, from OC&C added, "All I know is that this will be a blockbuster summer for media mergers!"

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"This decision will have an outsized effect because there are so few antitrust trials that challenge vertical mergers", said Michael Carrier, a Rutgers University law professor specializing in antitrust. AT&T did not immediately respond to a request for comment.

"Common sense tells you that this degree of concentrated power isn't right", wrote Zephyr Teachout, a candidate for attorney general of NY, wrote immediately following the judge's ruling.

Before the trial started, AT&T lawyers said the Time Warner deal may have been singled out for government enforcement but Judge Leon of the US District Court for the District of Columbia rejected their bid to force the disclosure of White House communications that might have shed light on the matter.

The Writers Guild of America West called Leon's decision a "blow to consumers, content creators and competition".

Other analysts maintained that because it is a "vertical" tie-up of two companies without overlapping operations, it should pass muster based on legal precedent for the past three decades.

The mega-merger is a high-stakes bet by AT&T Inc. on the synergy between companies that produce news and entertainment and those that funnel it to consumers - who spend more time watching video on phones and tablets and less time on traditional live TV on a big screen.

The Justice Department, which had sued to block the purchase, has the option of appealing the decision.

Their concerns only grew heightened after Monday, with the official end of federal net neutrality rules that required broadband providers, including AT&T, to treat all web traffic equally - and not prioritize their TV, movie or other content offerings over competitors. Comcast and Verizon are also jockeying for position in the new landscape. Time Warner said the government's lawsuit was baseless, "political in its motivation", and should have never been brought.

AT&T and Time Warner say the combined company can leverage viewer data to make better content to sell more targeted ads, which they claim could help lower prices for consumers. The companies' CEOs, AT&T's Randall Stephenson and Jeffrey Bewkes of Time Warner Inc., testified in support of the deal.

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