May 23, 2018

AT&T-Time Warner in jeopardy as DOJ blocks deal

24 November 2017, 01:04 | Kenneth Drake

DOJ poised to sue AT&T to stop Time Warner merger: report

US Justice Dept. to sue AT&T over Time Warner merger

The US Department of Justice has filed a lawsuit to block AT&T's planned $85.4bn (£64.5bn) takeover of CNN-owner Time Warner, citing concerns over higher prices for pay-TV subscribers. And many sources described a tense meeting between DOJ officials and AT&T executives in early November.

Even the USA government's leading antitrust enforcer - Makan Delrahim, a competition lawyer who arrived at the DOJ this summer - at first expressed an openness to the merger. A White House spokeswoman said Monday she wasn't aware of any efforts to influence the case.

Makan Delrahim, the assistant attorney general for the Department for Justice's antitrust division, said: "It would mean higher monthly television bills and fewer of the new, emerging innovative options that consumers are beginning to enjoy".

Specifically, DOJ said it had no choice but to sue because it believes AT&T would "use its control over Time Warner's popular and valuable networks to hinder its rivals by forcing them to pay hundreds of millions of dollars more per year for the right to distribute those networks", the official explained.

David McAtee, AT&T's general counsel, said: "Vertical mergers like this one are routinely approved because they benefit consumers without removing any competitor from the market". Despite President Trump's campaign-trail criticism of the deal, it was widely expected to win government approval from a Republican Justice Department. 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. "We are confident that the Court will reject the Government's claims and permit this merger under longstanding legal precedent". At one point, the DOJ stressed on its call Monday these so-called behavioral remedies had failed to address the feds' concerns following Comcast's purchase of NBC Universal in 2011.

Asked about when the company would cut its losses and walk away from the deal, Stephenson said "quitting isn't in our vocabulary". He also said at his confirmation hearing that he would not allow political interference in merger reviews.

In a press conference after the lawsuit filing, Stephenson remarked, "I'm surprised we're here and troubled by it".

Stephenson said the deal had "the whole world" questioning what the justice department "can and cannot do". A person familiar with the matter, who could not go on record, had previously told the AP that DOJ wanted the company to sell either Turner, the parent of CNN, TBS and other networks, or DirecTV. "It won't bode well for the government if it does", said Dan Petrocelli, a lawyer representing AT&T.

But the merger of AT&T and Time Warner is not exclusively opposed by Trump, whatever his reasons may be, or his administration.

21 released a draft that aims to end net neutrality regulations, or the requirement that internet service providers treat all web traffic equally.

Consumer advocates and some Democratic politicians applauded the lawsuit as a blow against media consolidation.

Wall Street has expressed increasing doubts about AT&T closing the Time Warner acquisition, with the latter's shares falling 15 percent in less than a month.

The consumer advocacy group Free Press likewise praised the DOJ action, but its president, Craig Aaron, objected to President Trump's "saber-rattling" against CNN and other outlets that air criticism of the administration. Sinclair is a conservative-leaning company.

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