The Department of Justice (DOJ) will bring a fair competition lawsuit against communications behemoths Time Warner and AT&T, assembling one of the largest antitrust cases in decades in a bid to stop an $85 billion merger between the two companies.
The announcement prompted speculation that the administration is punishing media organizations pushing unfavorable coverage of President Donald Trump. Turner Broadcasting, the parent company of CNN, Trump’s primary antagonist in the press. Thus far, however, there is little evidence to suggest that the Department is pursuing a political vendetta on the president’s behalf.
Still, the move is somewhat unusual, as antitrust cases are generally brought against rivals offering the same sort of products and services who conspire to dominate a market. AT&T and Time Warner aren’t quite competitors — where AT&T is a telecommunications firm which provides wireless service and broadcast subscription television (or, a distributor), Time Warner is an entertainment conglomerate which owns movie studios, cable networks, and publishing houses (or, a supplier). The fusion of distributors and supplier is often referred to as “vertical integration.”
In a statement issued Monday, AT&T said the Department’s decision has little precedent.
“Today’s DOJ lawsuit is a radical and inexplicable departure from decades of antitrust precedent,”said David McAtee, general counsel for AT&T. “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,” he added.
In a complaint filed Monday at a federal court in Washington, D.C., DOJ countered that the merger would inhibit fair competition, because the new mega-firm would charge rival video and television distributors higher prices for the rights to their programming, which ranges from marquee athletic events like the NCAA tournament to HBO classic “Game of Thrones.” Such price hikes, they predict, will likely be passed on to consumers.
“Accordingly, were this merger allowed to proceed, the newly combined firm likely would—just as AT&T/DirecTV has already predicted—use its control of Time Warner’s popular programming as a weapon to harm competition,” the complaint reads.
The lawsuit could also be part of a strategy to secure certain terms from the companies before the Department approves the merger.
Sources with knowledge of the Department’s plans previously told Financial Times and The New York Times early in November that DOJ’s antitrust division had informed both companies that they must sell either Turner Broadcasting or DirecTV in order to secure approval for the merger. The antitrust division is the DOJ unit charged with enforcing anti-monopoly laws and ensuring fair economic competition.
The potential merger has elicited intense opposition from consumer groups and anti-corporate activists, who fear most of the country’s broadcasting platforms and distribution networks are consolidating into sprawling, omnipotent conglomerates with which few rivals can effectively compete. The Time Warner/AT&T merger would give a single company control over such entities as CNN, DirecTV, HBO, and Warner Bros., as well as a significant share of all mobile phone services.
Ten Senate Democrats urged the Department’s antitrust division to scrutinize the deal in a June letter. Sen. Bernie Sanders of Vermont, who is an independent, also signed the letter.
Time Warner stocks fell 1.1 percent Monday once news of DOJ’s decision reached traders.
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