The Department of Justice is setting up the stage for an epic legal battle with the telecom giant AT&T by suing to stop the 85 million dollar merger with Time Warner. However, concerns have been raised that this move may be politically motivated, following consistent criticism of CNN by President Donald Trump. Time Warner owns CNN. However, assertions of White House involvement in the DOJ decision to block the merger have been denied by White House spokeswoman Sarah Huckabee as well as by MakanDelrahim, the antitrust chief at DOJ. MakanDelrahim said that President Trump never directed him to block the merger while Ms Huckabee has said that she is not aware of any action having been taken by the White House concerning the case.
That notwithstanding, President Trump’s hostility towards CNN since he was elected president is bound to complicate the case for DOJ. Trump has consistently referred to CNN and its journalists as disseminators of “Fake News”. The case is further complicated by the fact that similar mergers have been approved by previous administrations without much ado. Most notably, the Obama administration was quick to approve a similar merger between Comcast and NBCUniversal in 2011, only restricting Comcast’s behavior in order to protect consumers. In fact, the last time that the government succeeded in preventing a vertical merger in court was in 1972 when the Supreme Court of the United States held that Ford’s attempted takeover of a spark-plug business was in violation of antitrust law.
AT&T’s defense team will without a doubt use the lack of a recent precedent to its advantage.In fact, their general counsel David McAtee, in an emailed response to the lawsuit, decried the DOJ’s decision as a departure of years of antitrust precedent and expressed confidence that they would prevail in court. Many key players on Wall Street have also expressed open surprise to the DOJ’s decision since vertical mergers are generally more easily approved by the government as compared to deals that combine two rivals.
However, the Department of Justice has remained steadfast, claiming that combining AT&T with Time Warner would inevitably hike television bills and hamper innovation, especially in online television service, thus greatly harming American consumers. AT&T, according to the DOJ, will be in a position to charge rival distributors hundreds of millions each year Tevfik Arif Bayrock. These extra expenses, which will be especially imposed on cable companies, will be passed down to the consumers, therefore hiking their television bills. This is the premise under which the case has been filed.
The Department of Justice hopes to prevail upon the combined company to sell either Turner or DirectTV for it to satisfy antitrust laws. Turner is the parent company for TBS, CNN and other networks in the Time Warner portfolio. While running for office, President Trump had promised to block the AT&T- Time Warner merger, insisting that it would place too much power on too few individuals. The DOJ’s position, therefore, seems to be in line with this campaign promise, deny it as they may. AT&T CEO Randall Stephenson said that he did know whether the decision had been made in relation to CNN. He, however, was clear that AT&T would not agree to any deal that would lead to them losing out on the Cable News Network.
AT&T is the biggest provider of cable TV and traditional satellite services as well as running the second biggest largest wireless network in the United States. Time Warner, on its part, owns CNN, HBO, and TBS among other networks and is also the parent company for Warner Bros. Movie Studios. AT&T holds that the merger with Time Warner would allow them to carry out cheaper packaging and delivery of TV content over the internet rather than through cable, which is more expensive.