DOJ Suing Time Warner/AT&T in Attempt to Block Merger


fourth estate newThe Department of Justice filed a lawsuit on Monday to stop Time Warner and AT&T from merging, as the Department of Justice believes the merger will significantly lower competition in the marketplace and increase prices for millions of American citizens. AT&T is currently recognized as the largest telecommunications company based on revenue, and its status as DirecTV’s parent company is one of the main reasons the merger is being challenged. The Department of Justice said in a press release, “The combined company would use its control over Time Warner’s valuable and highly popular networks to hinder its rivals by forcing them to pay hundreds of millions of dollars more per year for the right to distribute those networks.”

Time Warner currently owns such popular networks as TNT, CNN, TBS, Cartoon Network, and HBO. The Department of Justice writes, “As AT&T itself has expressly acknowledged, distributors with control over popular programming ‘have the incentive and ability to use . . . that control as a weapon to hinder competition.'”

AT&T, in response to the proposed lawsuit by the Department of Justice, has released its own statement. David R. McAtee II, Senior Executive Vice President and General Counsel, AT&T Inc., stated:

“Today’s DOJ lawsuit is a radical and inexplicable departure from decades of antitrust precedent. 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… Our merger combines Time Warner’s content and talent with AT&T’s TV, wireless and broadband distribution platforms. The result will help make television more affordable, innovative, interactive and mobile. Fortunately, the Department of Justice doesn’t have the final say in this matter. Rather, it bears the burden of proving to the U.S. District Court that the transaction violates the law. We are confident that the Court will reject the Government’s claims and permit this merger under longstanding legal precedent.”

Many analysts expected that the acquisition would have clear sailing because it is a vertical merger meaning that no specific industry would see less competition. However, news broke last week that the Department of Justice was weighing a challenge to the deal, forcing AT&T to sell off either Directv or Turner Broadcasting, the parent company of cable channels like CNN, HLN, TBS, and TNT.

Randall Stephenson, the CEO of AT&T, has publicly said that he will not agree to any outcome that results in AT&T giving up CNN and he doubled down on that during a press conference on Monday.

When the deal was announced in the midst of the 2016 election, then-candidate Donald Trump railed against it, calling it “a deal we will not approve in my administration because it’s too much concentration of power in the hands of too few.” As a result, AT&T and others have alleged that President Trump might have politically interfered in the matter because of his dislike of CNN. However, there is no evidence to currently support that claim.

Assistant Attorney General Makan Delrahim stated of the merger:

“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… AT&T/DirecTV’s combination with Time Warner is unlawful, and absent an adequate remedy that would fully prevent the harms this merger would cause, the only appropriate action for the Department of Justice is to seek an injunction from a federal judge blocking the entire transaction… The merger would also enable the merged company to impede disruptive competition from online video distributors, competition that has allowed consumers greater choices at cheaper prices.”

When reached for comment, a Time Warner spokesperson referred TKNN to AT&T’s statement.

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