In order to close its suddenly less-than-certain, $85 billion deal to acquire Time Warner, AT&T would have to carve out CNN, all of Turner Entertainment or DirecTV, according to divergent reports this afternoon.

CNN
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The Justice Department’s ultimatum to sell CNN was reported by the Financial Times. A separate account by CNBC described two scenarios presented by the DOJ to AT&T: ditching all of Turner, which includes CNN, or cut loose DirecTV.

Time Warner shares have dropped 6% to $88.91, while AT&T’s have managed a nearly 1% gain, to $33.33.

In August, Deadline reported that there had been rumblings at the highest executive levels that AT&T’s top executives were considering divesting some Time Warner assets — including news organization CNN and celebrity gossip site TMZ — after any merger. Until today, the companies had expected DOJ approval of the join-up by year’s end.

It has been nearly 50 years since a vertical merger was blocked by federal regulators over anti-trust concerns. Thus far, the only grounds for the DOJ requirements seems to be the sheer scale of the proposed combination and the amount of real estate the new company would occupy in the media business, with vast distribution married to a deep well of content.

But that wariness of scale is at odds with the vocally free-market, anti-regulatory tone set by the Trump Administration in all sectors, but especially media. The Republican-controlled FCC is chipping away at rules and next Thursday will vote on important limits to broadcast ownership that could speed final approval of Sinclair Broadcast Group’s purchase of Tribune Media, which would create a local TV colossus.

Absent a clear philosophical root, the posture of the DOJ is being interpreted as payback by Trump, who has long derided CNN. He spoke out once saying he would consider blocking the deal because it would create too large a company, but has not weighed in for nearly a year. Should this guidance stand, not only would a legal war result but those invested in a robust M&A market in all sectors will have a lot of questions about this left turn.