Donald Trump’s Justice Department Files Suit To Block AT&T-Time Warner Deal – Update
UPDATED with more details: The U.S. Department of Justice filed suit today to block the AT&T-Time Warner merger, saying the combination of the nation’s largest distributor of television programming and one of the leading studios would harm consumers and competition.
The Justice Department, in its complaint, argues that the combination of AT&T/DirecTV’s vast video distribution infrastructure and Time Warner’s popular television programming would be one of the largest mergers in American history — bringing together such brands as TBS, TNT, CNN, Cartoon Network, HBO and Cinemax. Its programs would include come of the most sought-after content on TV: from Game of Thrones to the NCAA’s March Madness.
AT&T could have incentive to use this content “as a weapon to hinder competition,” the Justice Department argued in its suit, forcing competitors to pay hundreds of millions of dollars more per year for the right to distribute those networks. This power could slow the industry’s transition to new video distribution models that provide greater choice for consumers, the suit maintains, resulting in fewer choices for consumers — and higher bills.
“This merger would greatly harm American consumers. It would mean higher monthly television bills and fewer of the new, emerging innovative options that consumers are beginning to enjoy,” said Assistant Attorney General Makan Delrahim of the Department’s Antitrust Division.
The action would officially draw a line in the sand that the government has been threatening for months.
Delrahim recently articulated a philosophy that calls for added scrutiny of the “behavioral remedies” that allowed comparable deals like Comcast-NBCUniversal to go through under President Barack Obama. Although the situation has been shrouded in confusion, his department has reportedly communicated to AT&T that it would have to ditch Turner Broadcasting, including CNN, or DirecTV, in order to gain approval.
AT&T issued a statement strongly criticizing the DOJ’s actions, arguing that the combination of AT&T’s television, wireless and broadband businesses with Time Warner’s content would ultimately benefit consumers.
“Today’s DOJ lawsuit is a radical and inexplicable departure from decades of antitrust precedent,” said AT&T General Counsel David R. McAtee II. “Vertical mergers like this one are routinely approved because they benefit consumers without removing any competitor from the market. We see no legitimate reason for our merger to be treated differently.”
Philosophy isn’t the operative word for President Donald Trump’s view of the $85 billion deal. He has long assailed CNN as “fake news” and has spoken publicly against the combination, and is seen as a potential factor in foiling the deal, even though the news network will continue to report on his administration regardless of its corporate ownership.
Time Warner shares slipped 1% to $87.69 as the news hit Wall Street, while AT&T actually gained a fraction to finish at $34.65.
The regulatory uncertainty has cast a pall over bidding for Fox, which has talked with Disney and also may find a dance partner long-term in Comcast, Verizon and Sony, all of which are among interested suitors.
Telecommunications industry analyst Chetan Sharma said the antitrust division’s actions may chill any potential combinations of big-media and distribution companies for the foreseeable future — at least until the lawsuit is resolved. Indeed, the DOJ’s evolving in how to preserve competition may even have been a factor in the collapse of T-Mobile-Sprint merger talks.
“It might also put a bigger lens on the Internet players and how “markets” are defined to assess “competition” in a highly converged and complex ecosystem,” Sharma said.
Deadline’s Dominic Patten contributed to this report.
Related stories
AT&T Boss In Wake Of DOJ Lawsuit: Any Deal Harming CNN Is "A Non-Starter"
Forget That Tweet: Donald Trump Was "Happy" To Intervene On Behalf Of UCLA Players
Get more from Deadline.com: Follow us on Twitter, Facebook, Newsletter
