Antitrust Fight Looms for AT&T Deal 11/21 06:17
NEW YORK (AP) -- The Justice Department is suing AT&T to stop its $85
billion purchase of Time Warner, setting the stage for an epic legal battle
with the telecom giant.
It could also create a new headache for President Donald Trump, whose public
statements have raised suspicions that he might have interfered with the
department's decision, potentially undermining its legal case. DOJ's antitrust
chief, Makan Delrahim, has said the president did not tell him what to do.
White House spokeswoman Sarah Huckabee Sanders said Monday she wasn't aware of
any specific action related to the case taken by the White House.
In a press release, Delrahim said that a combined AT&T-Time Warner would
"greatly harm American consumers" by hiking television bills and hampering
innovation, particularly in online television service. The DOJ said AT&T would
be able to charge rival distributors such as cable companies "hundreds of
millions of dollars more per year" for Time Warner's programming --- payments
that would ultimately get passed down to consumers through their cable bills.
In an emailed statement Monday, AT&T general counsel David McAtee said the
lawsuit is a "radical and inexplicable departure from decades of antitrust
precedent" and that the company is confident that it will prevail in court.
AT&T runs the country's second largest wireless network and is the biggest
provider of traditional satellite and cable TV services. Time Warner owns HBO,
CNN, TBS and other networks, as well as the Warner Bros. movie studio.
The government's objections to the deal surprised many on Wall Street. AT&T
and Time Warner are not direct competitors, and "vertical" mergers between such
companies have typically had an easier time winning government approval than
deals that combine two rivals.
The last time the U.S. government won a court victory in a vertical merger
antitrust case was in 1972, when the Supreme Court said Ford's takeover of a
spark-plug business violated antitrust law.
Many had expected government approval of the deal because Obama-era
antitrust officials approved a similar deal --- Comcast's purchase of
NBCUniversal --- in 2011, after imposing restrictions on Comcast's behavior
that were meant to protect consumers.
As a candidate, however, Trump vowed to block the pending AT&T-Time Warner
deal because it would concentrate too much "power in the hands of too few." As
president, Trump has often blasted CNN for its coverage of him and his
administration, disparaging it and its reporters as "fake news."
At a press conference Monday, AT&T CEO Randall Stephenson addressed
speculation over whether the government's lawsuit was "all about CNN," saying,
"Frankly, I don't know." But Stephenson said AT&T would not agree to anything
that would result in it losing control of CNN.
A person familiar with the matter, who could not go on the record,
previously told the Associated Press that DOJ wanted the combined company to
sell either Turner --- the parent of CNN, TBS and other networks --- or DirecTV
to satisfy its antitrust concerns. A DOJ official, speaking on condition of
anonymity in order to discuss a pending legal case, said Monday that the
government is still willing to work with AT&T on "structural relief," or
selling off assets.
AT&T has argued that buying Time Warner would let it package and deliver
video more cheaply, over the internet, rather than in expensive cable bundles.
It already has a DirecTV Now streaming service, which puts popular live TV
networks online, and costs $35 a month and up, cheaper than traditional cable
Consumer advocates and some Democratic politicians applauded the lawsuit as
a blow against media consolidation. Consumers Union, an advocacy group that
opposes the deal, said there were "legitimate reasons" to block the deal to
protect consumers, but called reports of political pressure "concerning."
The consumer advocacy group Free Press likewise praised the DOJ action, but
its president, Craig Aaron, objected to Trump's "saber-rattling" against CNN
and other outlets that air criticism of the administration. Aaron called on the
Justice Department to demonstrate its independence by reviewing TV station
owner Sinclair's proposed takeover of rival Tribune. Sinclair is a
Delrahim, the antitrust chief, has previously expressed a preference for
requiring companies to sell off assets rather than allowing mergers to proceed
with conditions on the merged company's behavior.
Comcast has faced criticism for breaking some promises related to the
conditions on its NBCU deal. For example, the FCC fined Comcast $800,000 for
not doing enough to let customers know they could just get internet as a
standalone service. Bloomberg TV also complained that it was exiled in
Comcast's channel lineups far from other news and business networks. The FCC
The DOJ official said Monday that the AT&T merger was more harmful to
consumers than the Comcast-NBCU deal in part because DirecTV has customers
across the country. Comcast only operates in certain regions.
This isn't the first time that AT&T has faced pushback from the government
over an acquisition. The Justice Department also sued to block its $39 billion
bid of T-Mobile, a direct competitor, in August 2011. AT&T walked away months