U.S. Appeals Court Rejects Justice Department Antitrust Challenge to AT&T-Time Warner Deal

A federal appeals court on Tuesday rejected the Justice Department’s bid to roll back AT&T Inc.’s 2018 acquisition of entertainment company Time Warner, a second defeat for government antitrust enforcers who sought to sink the $80 billion-plus deal.

Source: WSJ - Brent Kendall | Published on February 26, 2019

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The U.S. Court of Appeals for the District of Columbia Circuit affirmed a trial judge’s ruling in June that found the deal was unlikely to harm competition.

The ruling could sweep away much of the legal uncertainty that has hung over AT&T as it has moved forward with the Time Warner assets. Though the telecom giant beat the Justice Department in a six-week trial last year, it had agreed to temporary rules, set to expire at the end of February, that would have made it easier to unwind the merger had the government appeal been successful.

The decision also cements one of the biggest losses for the Justice Department’s antitrust division in a generation. The DOJ lawsuit, filed in November 2017, was the first major antitrust action under the Trump administration, and the case marked the first time in 40 years the government fully litigated a case challenging a “vertical” merger that combined two companies that didn’t compete head-to-head.

The government argued that even though AT&T and Time Warner weren’t direct rivals, their combination would form an integrated giant with the power to force higher pay-TV prices. The Justice Department’s principal theory focused on the fact that a postmerger AT&T would be both a leading pay-TV service provider, including through its DirecTV subsidiary, and an owner of sought-after programming, via Time Warner’s portfolio, which included the Turner networks and HBO.

AT&T would be able to force rival pay-TV systems to pay more for Turner networks such as TNT and CNN after the acquisition, the department argued. AT&T disputed the claim, saying it wouldn’t have the leverage to raise prices because it would lose money if Turner didn’t appear widely on pay-TV lineups around the U.S.

From day one, the Justice Department struggled in litigating its case, drawing repeated fire from U.S. District Judge Richard Leon, who presided over the trial.

In his 172-page ruling, Judge Leon said a postmerger AT&T wasn’t likely to have anticompetitive leverage against its rivals or more muscle to force higher prices.

Justice Department officials continued to believe the lawsuit was justified, arguing Judge Leon ignored economics and common sense.

AT&T, for its part, has continued to question whether the department had political motivations for suing, in light of President Trump’s pledge as a candidate that he would block the deal if he won the White House. The Justice Department denied that politics played any role. That issue wasn’t part of the case, as Judge Leon cut off the company’s ability to raise it.