As the third week of the Department of Justice-AT&T antitrust trial wound to a close, Time Warner stock posted an eighth straight day of gains, rising half a percentage point to finish the day at $96.39.
Many investors appear to have an optimistic takeaway from the trial thus far, pushing Time Warner stock to its highest level since January and within reach of its high-water mark of $103.90 before the DOJ suddenly threw a flag. The case pivots on the issue of whether AT&T, once it controls Time Warner’s powerful programming, could punish rivals and consumers by using it as unfair leverage. The DOJ cited that scenario as the main threat when it filed suit last November to block the companies’ $85 billion merger. The case is the first major antitrust trial with implications for media in a generation and the first trial over a vertical merger since the 1970s.
Comments from U.S. District Court Judge Richard J. Leon, who has become more vocal lately after letting lawyers and witnesses dictate the early flow, have gotten Wall Street’s attention. One such exchange came on Wednesday, according to reporters attending the trial, which is not being broadcast or streamed.
Leon asked Tom Montemagno, a government witness who is EVP of programming acquisition at cable operator Charter Communications, whether an arbitration offer extended by Turner could be tweaked to make it more equitable. Several witnesses have complained about the “baseball-style” arbitration, which they say could jeopardize their already precarious profit. “What if it were structured so it was mutually beneficial and mutually fair?” Leon asked, according to multiple press accounts.
Montemagno said he still considered arbitration a “last resort,” but agreed that modifications could make it more workable. He also said that arbitration has been an effective tool in Charter’s dealings with Comcast, the No. 1 cable operator, which has owned NBCUniversal for the past seven-plus years, giving it a structure similar to what AT&T would look like after adding Time Warner.
The government continued presenting its case today, reports said, calling AT&T vice president Timothy Gibson to the witness stand. He was shown 2016 emails among AT&T executives who fretted over the expiration of the consent decree designed to restrain Comcast’s market power. Without the decree, one email said, “NBCU can play hardball.” Another argued that the expiration means “no more conditions on how they behave in the marketplace.”
Gibson objected, saying execs were in an early phase of trying to understand the complexities of the consent decree.
Leon has imposed a Monday through Thursday schedule, so the courtroom action has concluded for today. Earlier this week, he admonished counsel for the sluggish pace of the trial and for their repetitious questioning. As the trial kicked off the week of March 19, he was projecting a six to eight week duration, but many observers see a longer road ahead. Looming just two and a half months from now is the June 21 deadline for completing the merger, set by AT&T and Time Warner. Already once they agreed to push back that date.
Time Warner’s stock is at its highest level since January. Of course, it stands to lose far less if the DOJ prevails in its lawsuit. Still an attractive acquisition target and a company continuing to post strong results, it could command an even higher premium from a new suitor, another speculative scenario on the lips of many media watchers.