Justice Department Sues To Block AT&T's Merger With Time Warner

Nov 21, 2017
Originally published on November 21, 2017 12:27 pm

The Department of Justice is suing to block AT&T's purchase of Time Warner, legally challenging a $85 billion deal that would give the telecom giant control of a media empire including CNN, Warner Brothers, HBO, and other major media brands.

The DOJ's case against the merger suggests that together, the companies would control so much of both what people watch and how they watch it, that they could push both competitors and consumers to pay more. AT&T owns nationwide satellite provider DirecTV; Time Warner's channels also include TBS, TNT, Cartoon Network and HBO.

The DOJ is filing a lawsuit in the U.S. District Court for the District of Columbia, meaning the fate of the merger now rests with a judge.

Earlier this month, reports suggested that the DOJ was pushing AT&T to sell off either DirecTV or Turner Broadcasting, which houses CNN, in order to get the green light for the merger. AT&T CEO Randall Stephenson said at the time that his company would not sell any assets and would fight the DOJ in court.

DOJ officials on Monday said that they couldn't agree with the companies on an "adequate remedy" that would make the merger less anti-competitive.

"This merger would greatly harm American consumers," Assistant Attorney General Makan Delrahim of the DOJ's antitrust division said in a statement. "It would mean higher monthly television bills and fewer of the new, emerging innovative options that consumers are beginning to enjoy."

AT&T has argued that the deal should be approved because it combines two companies that don't directly compete against each other, resulting in a so-called vertical merger. Historically, it's rare for the government to successfully block vertical mergers.

On Monday, AT&T's general counsel David McAtee called the DOJ lawsuit "a radical and inexplicable departure from decades of antitrust precedent." At the same time, the DOJ argues that the proposed merger is unprecedented in its size and harm.

As NPR's David Folkenflik has reported, the DOJ's anticipated lawsuit had "triggered concerns" within CNN that the Trump administration was "taking action against a media outfit simply because it has angered the president with its coverage, raising First Amendment implications."

President Trump has previously indicated he might seek to thwart the AT&T-Time Warner deal over antitrust concerns, but has also specifically targeted CNN with angry criticism.

DOJ officials on Monday said that nothing the president has done influenced their review, referring to the idea as sand in the eyes of umpires being thrown by the companies that want to merge.

Consumer advocates have also been advocating against the approval of the merger, warning about the harms of continued consolidation in the telecom and media industries. "It is an insult to the career attorneys in the Justice Department to suggest that the decision to bring this suit was not based on the merits of the case," said Andrew Jay Schwartzman, veteran telecom observer now with the Georgetown University Law School.

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STEVE INSKEEP, HOST:

OK, so the Justice Department is suing to stop AT&T from buying Time Warner. It's the first antitrust case of the Trump administration. And one of the companies is of special interest to the president. NPR's Alina Selyukh reports.

ALINA SELYUKH, BYLINE: If there's one company that's been around the block on antitrust, it's AT&T. In fact, AT&T itself is a product of a landmark anti-monopoly case in the '80s when the Justice Department broke up the Bell System.

The telecom giant's biggest merger moments in recent history include, first, a failed attempt to acquire rival T-Mobile in 2011 and the successful purchase of the satellite company DirecTV in 2015. And the man who brought both of those bids to the DOJ for review is CEO Randall Stephenson.

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RANDALL STEPHENSON: I've done a lot of deals in my career, but I've never done one where we have disagreed with the Department of Justice so much on even the most basic of facts.

SELYUKH: That's Stephenson talking about AT&T's proposal to buy the media company Time Warner for $85 billion. The DOJ is asking a federal court to block this deal.

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STEPHENSON: When we announced this deal, the best legal minds in the country agreed that this transaction would be approved since our companies don't even compete with each other. But here we are. The government has filed a lawsuit.

SELYUKH: And it's unusual because it's a media company plus a telecom company, which is known as a vertical merger. It does not get rid of a direct competitor, which is normally the big antitrust red flag. But the DOJ says the two companies together would control too much of both what we watch and how we watch it - news network CNN, popular channels like HBO, plus a movie studio, plus Internet and pay TV. The government says this will raise prices for consumers and hurt competitors.

In theory, AT&T could appease the government by getting rid of a major element in the deal, like DirecTV or Turner Broadcasting. AT&T says it won't. And like many things these days, the issue is also political.

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PRESIDENT DONALD TRUMP: CNN, fake.

Or CNN, which is so bad and so pathetic and their ratings are going down.

We don't want fake news.

Very faked.

SELYUKH: President Trump's dislike of CNN is well known, and CNN is part of the merger. This week, Justice Department officials said Trump's opinion of CNN had no impact on the antitrust review. But AT&T is quite likely to bring up Trump's remarks in court where the government has to make the case against the merger. In that, the DOJ will have the support of many consumer advocates who have fought to stop the deal. Alina Selyukh, NPR News.

(SOUNDBITE OF OCHRE'S "BLUE HOURS") Transcript provided by NPR, Copyright NPR.