Justice Department's reported demand of CNN sale 'unusual': antitrust expert
The Justice Department has reportedly demanded that AT&T (T) and Time Warner (TWX) sell Turner Broadcasting — which includes CNN — before it will sign off on their $85.4 billion deal.
This requirement “would be unusual,” George Hay, a leading antitrust expert and professor at Cornell University Law School told Yahoo Finance in an email. “It would be less unusual if AT&T already controlled a competing news network like Fox or MSNBC but I’m not aware that such is the case.”
Last week, the Wall Street Journal reported that the Justice Department was considering blocking AT&T’s bid to buy entertainment powerhouse Time Warner — a development that antitrust expert Christopher Sagers called “a big surprise” since the two companies aren’t direct competitors.
Some have speculated that President Donald Trump was behind the regulator’s move because of his demonstrated animus against CNN. Last week, Sagers called that theory “pretty implausible.”
‘Not seeing the competitive rationale for insisting on a CNN divestiture’
To be sure, there are antitrust concerns tied to so-called vertical mergers like this one, which bring together companies on different parts of a supply chain. In this case, AT&T buys and distributes Time Warner content. The main antitrust concern in this scenario would be that AT&T would make that content more expensive for competitors like Comcast (CMSA).
Instead of blocking the deal outright, the Justice Department would typically require so-called behavioral remedies to eliminate these concerns — for instance, requiring AT&T to pledge not to make that content more expensive. However, the Justice Department typically doesn’t require divestitures in vertical mergers like the Time Warner/CNN deal, Sagers previously told Yahoo Finance.
Indeed, Herb Hovenkamp, an antitrust expert and professor at the University of Iowa College of Law, told Yahoo Finance in an email: “At this moment I’m not seeing the competitive rationale for insisting on a CNN divestiture.”
It’s possible that the Justice Department is simply using the threats of forcing a divestiture as a bargaining tactic, Hay told Yahoo Finance. A consent decree requiring behavioral changes might be the government’s ultimate “end game,” he said.
The Financial Times reported on the demands regarding CNN on Thursday, while The New York Times reported that the merger could also win approval if AT&T sold its DirecTV division.
Erin Fuchs is deputy managing editor at Yahoo Finance.
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