HBO, CNN, Warner Brothers, DC Comics, and the rest of the Time Warner empire will soon be owned by AT&T thanks to a decision by by a federal judge Tuesday to approve the telecommunications giant’s $85 purchase of the media conglomerate.
The Department of Justice filed suit to stop the merger last November, arguing that the merger would lead to higher television prices and fewer choices for consumers. US District Judge Richard J. Leon rejected that argument, allowing the deal to proceed without conditions.
“We look forward to closing the merger on or before June 20 so we can begin to give consumers video entertainment that is more affordable, mobile, and innovative,” AT&T General Counsel David McAtee said in a statement.
The deal will unite the nation’s second-largest mobile phone provider, third-largest home broadband provider and second-largest pay-TV provider with a deep well of content, including Turner Broadcasting, which owns rights to basketball’s March Madness, plus NBA and major-league baseball playoffs. Opponents of the deal said it will further consolidate the nation’s telecommunications and media landscape, leading to higher prices and fewer choices for consumers.
The deal raises questions whether AT&T might reserve some of Time Warner’s content for its own services. When Comcast acquired NBC Universal in 2011, the company was subjected to a number of conditions as part of an agreement with the DOJ and the Federal Communications Commission, including a requirement that Comcast license NBC content to rivals, agree to arbitration in the event of licensing fee disagreements, and follow the principles of net neutrality.
AT&T argued that acquiring Time Warner will help it compete with streaming video companies like Netflix, Hulu, and Amazon, all of which have invested in original programming that they don’t have to license to competitors.
The decision will likely be seen as good news for other pending and potential mergers, including T-Mobile’s plan to acquire Sprint, bids by Disney and Comcast for 21st Century Fox, and Sinclair Broadcast Group‘s purchase of the Tribune Company. However, each of those cases involves companies that compete directly in so-called horizontal mergers. AT&T-Time Warner was considered a vertical merger, because the companies are in different parts of the media food chain, so the ruling may not be a reliable indicator for those deals.
Instead of imposing conditions on the AT&T-Time Warner merger, the DOJ instead tried to block the deal after AT&T reportedly rejected the idea of selling or spinning off Turner Broadcasting. The FCC declined to review the deal. Leon could have imposed conditions as part of his decision, but did not.
AT&T has long argued that the merger will be good for consumers because it will enable the company to create new video offerings. But if the Comcast/NBC merger is any indication, the deal could be a wash at best for consumers.
“This is a disappointing result, and we expect the government will appeal,” said John Bergmayer, senior counsel at the advocacy group Public Knowledge. He said the merger will lead to higher bills and fewer choice of programming, and encourage other mergers among media and telecom companies.
The deal, announced in October 2016, was controversial from the beginning. Then candidate Donald Trump spoke out against the proposal, saying it would lead to “too much concentration of power in the hands of too few.” It was hard not to see a political motivation in the opposition, however, given the president’s well known criticism of CNN.
AT&T argued that the government’s opposition was politically motivated. That claim was given weight by the DOJ’s antitrust chief Makan Delrahim’s apparent flip-flop on the deal: before he was nominated to the DOJ, Delrahim told the Business News Network that he saw no problem with the AT&T-Time Warner merger. Leon rejected AT&T’s efforts to argue during the trial that it was being targeted for political reasons.
At trial, the DOJ focused its case primarily on the idea that AT&T, which owns the satellite and streaming TV service DirecTV, could charge rivals more to access content from HBO or CNN, and withhold those channels, leading to “blackouts” for consumers if rivals refused to pay the higher prices. The DOJ argued that AT&T could, in theory, offset any lost revenue from withholding content by selling DirecTV service to customers in affected regions. AT&T argued that the department’s economic models were flawed. Leon ruled that the DOJ had failed to prove that the combined company would have more leverage in negotiations, and that there was insufficient evidence to suggest that AT&T would have the incentive to stop licensing Time Warner to its rivals.
The DOJ’s attempt at blocking the deal broke with decades of precedent in vertical mergers involving companies that don’t compete directly. Had Leon upheld the DOJ’s decision, it could have signalled that other big mergers would face similar trouble.
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This article was syndicated from wired.com