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.
In what could be one of the most consequential antitrust decisions in recent memory, a judge has ruled that AT&T and Time Warner can merge, despite a lawsuit from the Justice Department arguing that the deal would be anti-competitive. While the Justice Department could still appeal, the decision clears the way for a new telecom behemoth, combining AT&Ts paid-TV subscribers with Time Warners content, which includes HBO, CNN, and Warner Bros. The federal judge ruling on the case did not impose any conditions on the deal as part of the decision, handing AT&T a clear victory in the dispute, while delivering a major blow to the Justice Departments antitrust enforcers and telegraphing a green light to other companies with similar merger plans. The ruling, in fact, may have been more closely watched for its effect on future deals. The battle has been seen as a bellwether for other vertical mergers, where a distributor and content producer are looking to combine forces. Now that the AT&T-Time Warner deal has been given a stamp of approval, its all but certain more deals are on the way. Those agreements were lining up even before todays decision: Comcast reportedly planned to make a formal offer to buy 21st Century Fox the day after the ruling, if the judge in the AT&T case approved, an announcement the public can now watch for. The Walt Disney Company is also in the bidding for the company. The AT&T decision is a culmination of intense legal wrangling since the $85 billion takeover announcement in October 2016, and it follows a six-week trial. Early on, questions were raised about whether President Trump, a vocal critic of CNN, was an unseen force in the Justice Departments decision to intervene. But after a decision preventing the AT&T-Time Warner team from digging into the theory, the trial focused on a more traditional question: would the merger harm competition in the marketplace? The Justice Department argued that the major new entrant would be powerful and ubiquitous enough to dictate unfair terms in the marketplace, and it used expert testimony to highlight potential economic perils. AT&T, for its part, has said the merger is necessary for the company to compete against the major tech industry players and would even result in better terms for consumers. Judge Richard Leon did not make it obvious during the trial how he would rule, and any of a number of scenarios were possible. While he might have approved or blocked the deal outright, he also could have made a conditional decision, requiring AT&T to make some sort of concession as a requirement for the merger. Instead, the judge allowed the decision to move through without conditions. Its unclear whether the Justice Department will appeal the decision. In his encyclopedic, 172-page written opinion, Leon rejected the Justice Departments theories of consumer harm, ruling that the agency failed to meet the legal burden showing competition would be substantially lessened by the merger. We are disappointed with the Courts decision today, Assistant Attorney General Makan Delrahim said in a statement. We continue to believe that the pay-TV market will be less competitive and less innovative as a result of the proposed merger between AT&T and Time Warner. We will closely review the Courts opinion and consider next steps in light of our commitment to preserving competition for the benefit of American consumers. We are pleased that, after conducting a full and fair trial on the merits, the Court has categorically rejected the governments lawsuit to block our merger with Time Warner, AT&T General Counsel David McAtee said in a statement. We thank the Court for its thorough and timely examination of the evidence, and we compliment our colleagues at the Department of Justice on their dedicated representation of the government. 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. The deadline for the deal is set for later this month, and as part of the judges overwhelming decision against the Justice Department, he wrote that he believed the government would be unlikely to succeed on an appeal, adding that granting a temporary stay of his ruling that scuttled the deal would be unjust.