AT&T-TW Brand Feds' Case Against Deal 'Pale & Thin'

AT&T and Time Warner made the case for their merger in a pre-trial brief filed Friday (March 9) with the U.S. District Court for the District of Columbia.

That includes signaling that their lawyers will tell the court--the arguments in court begin March 19--that the business is moving from a TV-centric to an online video-centric model, where its competitors are the vertically integrated online behemoths Netflix, Amazon, and Google, among others.

For example, "as of the end of 2017," the said, "Netflix had approximately 118 million global subscribers and nearly 55 million U.S. subscribers, more than the top six U.S. cable companies combined."

"The transaction before the Court is a vertical merger of two companies that operate in highly competitive environments, but do not compete against each other," the companies told the court....Modern antitrust law recognizes that mergers between suppliers, such as Time Warner, and distributors, such as AT&T, almost always create efficiencies and synergies that lead to lower consumer prices and greater innovation.....There is no fact-based evidence that this merger will harm competition. Nothing will be withheld from competitors; consumer prices will not go up. To the contrary, the government now concedes it would not be profitable for the new company to withhold its television networks from pay-TV distributors and that the new company’s prices to its own television customers will go down. As a result, the government’s suit to block this merger is not only baseless in fact, but it is affirmatively contrary to consumer welfare, making it difficult for the government even to allege a viable antitrust claim, much less prove one."

They assert that the government's own lead economic expert doesn’t think the combined company would withhold Turner networks from competitors because the lost licensing and d revenues would exceed the theoretical gains of denying rivals access to that programming and that the company will reduce its own prices for DirecTV because of the "otherwise unattainable" merger efficiencies.

Or put another way, as the companies do, quoting another case: "Now, what remains of the government’s case, 'like a Persian cat with its fur shaved, is alarmingly pale and thin.'" 

In the first big merger review under the Trump Administration, the Justice Department filed suit last fall to block AT&T's bid for Time Warner and its valuable programming assets in a deal valued at $108.7 billion including debt.

Retired: AT&T/Time Warner Merger Trial Takes Shape

According to Justice, the combined company would "use its control over Time Warner’s valuable and highly popular 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 combined company would also use its increased power to slow the industry’s transition to new and exciting video distribution models that provide greater choice for consumers, resulting in fewer innovative offerings and higher bills for American families."

Justice wants AT&T to spin off the Turner programming assets, arguing they give the combined company the incentive and opportunity to disfavor competitors.

AT&T and Time Warner have signaled such a spinoff is unnecessary and a nonstarter.

John Eggerton

Contributing editor John Eggerton has been an editor and/or writer on media regulation, legislation and policy for over four decades, including covering the FCC, FTC, Congress, the major media trade associations, and the federal courts. In addition to Multichannel News and Broadcasting + Cable, his work has appeared in Radio World, TV Technology, TV Fax, This Week in Consumer Electronics, Variety and the Encyclopedia Britannica.