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.
( Reuters) — AT&T Inc won court approval on Tuesday to buy Time Warner Inc for $85 billion, rebuffing an attempt by U.S. President Donald Trumps administration to block the deal and likely setting off a wave of corporate mergers. The deal, which could close next week, is seen as a turning point for a media industry that has been upended by companies like Netflix and Alphabets Google which produce content and sell it online directly to consumers, without requiring a pricey cable subscription. Cable, satellite and wireless carriers all see buying content companies as a way to add revenue. Trump, a frequent detractor of Time Warners CNN and its coverage, denounced the deal when it was announced in October 2016. U.S. District Judge Richard Leon found little to support the governments arguments that the deal would harm consumers, calling one position gossamer thin and another poppycock. The ruling could also prompt a cascade of pay TV companies buying television and movie makers, with Comcast Corps bid for some Twenty-First Century Fox Inc assets potentially the first out of the gate. The merger, including debt, would be the fourth largest deal ever attempted in the global telecom, media and entertainment space, according to Thomson Reuters data. It would also be the 12th largest deal in any sector, the data showed. In a scathing opinion bit.ly/2Jxx6qE, Leon concluded that the government had failed to show competitive harm and urged the U.S. government not to seek a stay of his ruling pending a potential appeal, saying it would be manifestly unjust to do so and not likely to succeed. Thats a legal shocker, said J.B. Heaton, an attorney and consultant on litigation and regulatory proceedings. I think well see now that companies will be much more confident about vertical mergers, he added, referring to deals where a company merges with a supplier. Shares of AT&T fell about 1.3 percent in after-hours trade following the decision, while Time Warner rose more than 5 percent. Twenty-First Century Fox jumped 7 percent in extended trade after the ruling on expectations that Comcast and Walt Disney Co could start a bidding war to acquire its media assets. Comcast and Walt Disney dropped 4.3 percent and 1.8 percent, respectively. Shares of other media and telecom companies also rose, including T-Mobile US Inc, Sprint Corp, CBS Corp, Dish Network Corp, Discovery Inc and Viacom Inc. This will be a blockbuster summer for media mergers, said Mary Ann Halford, senior adviser to OC&C Strategy Consultants. Shares of Express Scripts Holding Co, which is set to be bought by Cigna Corp for $52 billion, rose 4.8 percent, while shares of health insurer Aetna Inc, due to be acquired by CVS Health Corp for $69 billion, rose 3.6 percent. Opponents of the AT&T decision also predicted more deals. Consumers should fear a cascade of unchecked mergers and acquisitions to further consolidate the telecom industry resulting in less choice, fewer competitors and higher prices, Senator Richard Blumenthal, a Democrat, said in a statement. The Justice Department filed a lawsuit to stop the deal in November 2017, saying that AT&Ts ownership of both DirecTV and Time Warner would give AT&T unfair leverage against rival cable providers that relied on Time Warners content, such as CNN and HBOs Game of Thrones. Leaving the courtroom, Makan Delrahim, head of the Justice departments antitrust division, said that he would read the judges opinion before making a decision on an appeal. The Justice Department is not likely to be put off by the loss, said Amy Ray of the law firm Cadwalader, Wickersham & Taft LLP, noting it had prevailed in stopping other mergers between rivals. Put me on the side of the fence of thinking that AAG (Makan) Delrahim is interested in challenging the next problematic vertical transaction, she said. Cornell law professor George Hay added that the ruling found the governments evidence lacking, rather than a broader determination of how vertical mergers affected competition. AT&T in a six-week trial argued that the purchase of Time Warner would allow it to gain information about viewers needed to target digital advertising, much like Facebook Inc and Google already do. AT&T can use the content from Time Warner to fill its streaming services DirecTV Now and soon-to-be-launched AT&T Watch, which are cheaper online video packages with fewer channels. That could give it a leg up over rival live streaming platforms that do not own content, media analysts have said. AT&T applauded the courts decision and said it expected to close the merger before the June 21 contractual deadline. The government estimated costs to industry rivals, such as Charter Communications Inc, would increase by $580 million a year if AT&T owned Time Warner. Before the trial started, AT&T lawyers said the Time Warner deal may have been singled out for government enforcement but the judge rejected their bid to force the disclosure of White House communications that might have shed light on the matter. The deal cost AT&Ts top lobbyist, Bob Quinn, his job in May after it became public that AT&T had paid Trumps personal lawyer Michael Cohen $600,000 for advice on winning approval. Burns McKinney, a portfolio manager at Allianz Global Investors who owns AT&T, said he would not say the telecoms company had won a huge victory. Its more that they just didnt lose. You always wonder in these cases if theres a winners curse, given the risk (AT&T) cant get the desired synergies and theyre taking on a lot of debt with the merger, he said.
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.
He reportedly put no conditions on the deal. Last November, the Department of Justice slapped an antitrust lawsuit on AT&T's proposed acquisition of Time Warner and the trial resulting from that lawsuit wrapped up last month. The DOJ has maintained that merging the two companies as is would threaten competition, but AT&T has said the deal won't produce anticompetitive effects and moreover, that the DOJ hasn't effectively demonstrated that it would. Today, US District Judge Richard Leon has issued his ruling on the suit and has declared that AT&T can buy Time Warner. This has been a long-running issue, as AT&T first announced its plans to buy Time Warner for $85.4 billion in 2016. The companies then entered into discussions with the DOJ last year and rumors surfaced that the agency had suggested some divestitures in order for AT&T to avoid an antitrust lawsuit. But those conversations didn't work out in either group's favor and the DOJ went ahead with its suit. At the time, AT&T called the move a "radical and inexplicable departure from decades of antitrust precedent." When the trial ended, Judge Leon suggested the parties consider some remedies both could deal with depending on how he ruled. The DOJ said in its post-trial brief that most if its concerns stem from the combination of Turner -- which owns CNN, TBS and TNT -- with DirecTV and therefore they should be split in one way or another. It proposed that either AT&T not get Turner in the deal or that it should divest itself of DirecTV prior to acquiring Time Warner. AT&T wasn't on board, saying, "Divestitures here would destroy the very consumer value this merger is designed to unlock." AT&T CEO Randall Stephenson also said last year, "You shouldn't expect that we would sell something larger [than CNN] to get the deal done. It's illogical. It's why we did the deal." Judge Leon reportedly put no conditions on the deal and the result of this case stands to have far-reaching effects on the media landscape and other groups considering or seeking vertical mergers. Most immediately, Disney's bid to buy a chunk of 21st Century Fox may be impacted as the ruling could encourage Comcast to put forward a competing bid, as it has already announced it might do. Other deals on the line include the proposed T-Mobile and Sprint merger, CVS' purchase of Aetna and Cigna's acquisition of Express Scripts. JUST IN: Statement from U.S. Assistant Attorney General on AT&T/Time Warner decision. In response to the ruling, US Assistant Attorney General Makan Delrahim said, "We are disappointed with the court's decision today. 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." He added that the DOJ would consider its next steps, which could include an appeal. "We are pleased that, after conducting a full and fair trial of the merits, the court has categorically rejected the government's lawsuit to block our merger with Time Warner," AT&T's general counsel David McAtee said in a statement. The company will now work to complete the merger by June 20th.
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.