June 21, 2018

The ripple effect of the AT&T merger lawsuit

24 November 2017, 01:04 | Lionel James

DOJ poised to sue AT&T to stop Time Warner merger: report

U.S. sues to stop AT&T buying Time Warner says would hike rates for rivals and subscribers

The bottom line: Despite the intrigue about White House influence, the antitrust case will rest exclusively on the competitive effects of the deal, said Gene Kimmelman, CEO of Public Knowledge and a former DoJ antitrust official.

The DOJ's press release cites a DirectTV document claiming the post-merger company "can much more credibly threaten to withhold programming from rival [distributors]" and can "use such threats to demand higher prices and more favorable terms".

David McAtee, AT&T's general counsel called the suit "a radical and inexplicable departure from decades of antitrust precedent".

Asked about when the company would cut its losses and walk away from the deal, Stephenson said "quitting isn't in our vocabulary".

AT&T's deal to buy Time Warner is in jeopardy.

In 2011, Obama-era antitrust regulators waved through Comcast's acquisition of NBC Universal - a deal that, like the current one, brought together a major provider of television and internet service and an entertainment conglomerate. The Department of Justice has chose to go forward with a lawsuit to block the merger.

The president has been highly critical of CNN, which is owned by Time Warner, and White House officials have reportedly discussed the merger as a way to obtain leverage over the network.

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AT&T hosted a press conference shortly after the DOJ lawsuit was announced, vigorously disputing the government's assertions.

Stephenson has said that DoJ's move "defies logic, and it's unprecedented", and that the deal had been on a good path until recently.

Our merger combines Time Warner's content and talent with AT&T's TV, wireless and broadband distribution platforms. "It won't bode well for the government if it does", said Dan Petrocelli, a lawyer representing AT&T.

Matters, of course, are complicated by President Donald Trump's long-running feud with CNN, a Time Warner company, which Trump regularly denigrates as "fake news" and "failing". As Reuters previously noted, the deal would be the first combination of "a major USA media company with a wireless network, satellite TV distributor, and high-speed Internet service provider". Just last week, the Federal Communications Commission voted to dramatically loosen local media ownership laws, which will allow the conservative Sinclair Broadcasting to gobble up television and radio stations in the same markets. "We are confident that the Court will reject the Government's claims and permit this merger under longstanding legal precedent", McAtee said.

'We'll look at breaking that deal up and other deals like that.

"We believe and our investigation has found, that the merger would harm competition, resulting in higher bills and less innovation for millions of American consumers", a senior DOJ official told reporters. Comcast only operates in certain regions.

For its part, AT&T sharply rejected the USA government's claims. The over $100 billion merger with AT&T would connect that content empire with the country's largest telecom company and also DirectTV, the country's largest satillite network, which AT&T already owns, creating the potential to increase the costs for competitors that also use Time Warner's content. AT&T walked away months later.

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