United States District Court Judge Richard J. Leon has ruled in favor of AT&T in the governments antitrust suit to block AT&Ts proposed merger with Time Warner . That decision matches word on the street over the past few weeks, and delivers a stern rebuke to the Trump administration, which had opposed the deal from its earliest days. The decision was made following the close of markets in New York, and after-hours trading was muted to the decision. In light of todays decision, Comcast, which has been eyeing its own content creator takeover of 21st Century Fox, will likely move forward with a bid as early as tomorrow. In October 2016, AT&T announced its plan to acquire Time Warner for $85.4 billion, and a total of $108 billion with debt. The DOJ moved to block the merger in March, arguing that the merger would reduce competition and hurt consumer choice. The nuances of this case are important, as the implications of this decision reach far beyond the individual businesses of AT&T and Time Warner to the vast media landscape as a whole. First off, its worth noting that the overall goal of antitrust regulations is to protect the consumer from unfair business practices that may arise from a consolidation of power within a single company. But size isnt necessarily whats most important in these types of cases. In fact, sometimes a merger can help competition and consumer choice, as is more often the case with vertical mergers. A vertical merger is when two companies who provide different or complementary offerings join forces, giving consumers access to a more comprehensive set of services, at a lower price, while still generating profits. Thats not to say that vertical mergers get through regulatory approval free and clear — the FTC has fought 22 vertical mergers since 2000 — but they receive less scrutiny than horizontal mergers. AT&T-Time Warner is considered a vertical merger, as AT&T is a content distributor and Time Warner is a content creator. But the overall landscape complicates the decision a great deal. There are only a handful of companies in this space, and they are some of the most powerful companies in the world. AT&T itself is the largest telecom provider in the world, and via DirecTV, it is also the largest multichannel video programming distributor in the U.S. Time Warner, meanwhile, owns channels like TBS and TNT, HBO and Warner Bros., not to mention the assets to live sports and news orgs such as the NBA, MLB, NCAA March Madness and PGA. The DOJ has argued that this type of consolidation would give the merged AT&T-Time Warner the ability to raise prices, thwarting the competitions ability to compete by forcing them to raise prices to maintain carriage rights. The government has also argued that the newly rolled back net neutrality rules would no longer protect AT&T from, say, throttling Netflix if it didnt purchase and distribute Time Warner content. On the other side, AT&T and Time Warner (big as they may be) face steep competition from the FAANG companies (Facebook, Apple, Amazon, Netflix and Google), all of whom have made video a top priority. In fact, CNNMoney reported that AT&T-Time Warners counsel Daniel Petrocelli made the argument that traditional media orgs have already been left behind in the digital revolution. From the report: Petrocelli told Judge Leon that their estimates show FAANG is worth $3 trillion collectively, while an AT&T-Time Warner entity post-merger would be worth $300 billion. Were chasing their tail lights, Petrocelli said. Its also worth noting that President Trump has been publicly opposed to the deal since he was on the campaign trail. Remember, Time Warner owns CNN, which is the object of some of Trumps most focused hatred. At a campaign rally in 2016, Trump said his administration would not approve the deal, raising concerns over political interference. The government has argued that Trump did not communicate with antitrust officials over the deal and that their choice to fight the merger was not influenced by the White House.
Judge rejects DOJ case against merger, says AT&T can buy Time Warner. AT&T has won a court ruling allowing it to complete its purchase of Time Warner Inc. The ruling (PDF) by US District Judge Richard Leon went entirely in AT&T's favor. The Department of Justice had sued AT&T to block the merger, but the judge's ruling, pending a possible appeal, would let AT&T complete the purchase without spinning off any subsidiaries. The government can appeal the decision, but Judge Leon reportedly said that he would reject any government motion for a stay that would further delay the deal. The case was held in US District Court for the District of Columbia. The government failed to prove that the merger would substantially lessen competition or that AT&T would use its ownership of premium content to harm rival TV providers, Leon wrote. "We are pleased that, after conducting a full and fair trial on the merits, the Court has categorically rejected the government's lawsuit to block our merger with Time Warner," AT&T General Counsel David McAtee said. AT&T said it intends to close the merger by June 20. It's not yet clear whether the government will appeal. " The Justice Department's antitrust chief, Makan Delrahim, said he was disappointed and will consider the government's next steps," Bloomberg reported. As the owner of Time Warner, AT&T would be able to set the price that other cable or satellite companies must pay for a large quantity of TV programming. The Federal Communications Commission under Chairman Ajit Pai allowed AT&T to skip a lengthy public-interest review. But the Department of Justice sued to block the $108 billion merger in November 2017, saying the deal is likely to raise consumers' TV bills. The DOJ argued that buying Time Warner and its stable of popular TV programming would give AT&T too much control over programming and distribution. "AT&T/DirecTV would hinder its rivals by forcing them to pay hundreds of millions of dollars more per year for Time Warner's networks, and it would use its increased power to slow the industry's transition to new and exciting video-distribution models that provide greater choice for consumers," the DOJ said in its complaint. " The proposed merger would result in fewer innovative offerings and higher bills for American families. " AT&T disputed the government's math and tried to prove that President Trump meddled in the government's merger review. Trump had pledged to block the deal when he was campaigning for president. But AT&T failed to provide any evidence suggesting that the DOJ's prosecution of the merger had "discriminatory effect and discriminatory intent," Leon said in a ruling earlier in the trial. AT&T argued that the merger will help customers without harming AT&T's business rivals and that the combined company wouldn't have enough market power to raise antitrust concerns. Customers will benefit from new bundles and offerings made possible by the merger. The combined company, AT&T argued, will "develop new ad-supported video models that shift more costs to advertisers and off consumers. " Consumer advocacy group Public Knowledge was disappointed by today's ruling. "This is a disappointing result, and we expect the government will appeal," Public Knowledge Senior Counsel John Bergmayer said. "In the meantime, not only may consumers be harmed directly by the anticompetitive harms that this merger will cause, such as higher bills and fewer choices of programming and provider, but also by the many other mergers it will encourage." US Sen. Amy Klobuchar (D-Minn.) urged the DOJ to appeal. She said: Allowing this merger to proceed raises serious concerns for consumers and the future of American media, and also sends a troubling signal to others that its open season for vertical mergers that could allow a company to raise the cost of essential products and services that its rivals need to compete, leading to higher costs for consumers and less innovation... I urge the Justice Department to take swift action to appeal this judgment to ensure that competition and consumers are protected.