DOJ Proposes That AT&T Exclude DirecTV Or Turner From Time Warner Deal

Randall Stevenson Jeff Bewkes

In a government brief filed last week but just unsealed today, the Department of Justice reprised its overture that AT&T could win approval of its $85 billion Time Warner deal by leaving DirecTV or Turner out of the asset mix.

Otherwise, the DOJ’s antitrust team argues, the merger would jack up prices for rival programmers and therefore also hurt consumers. By its own estimates — which AT&T has vigorously disputed — the government says rival distributors would collectively pay $560 million more in programming fees.

In its own brief unsealed late last week, AT&T said the judge should reject the remedy of excluding DirecTV or Turner, a move it said would “destroy the very consumer value this merger was designed to unlock.” The DOJ, the brief added, “did not even begin to make a credible case that the merger would likely harm competition, substantially or even just a little.”

The government has dismissed the repeated claims of AT&T and Time Warner that they need the merger in order to compete with digital giants like Amazon, Google and Facebook. Merely the possibility that it might unduly leverage industry-leading scale across both distribution and programming is enough reason to shut down the deal, regulators said. “In the Cold War, the most destructive weapons were never used, yet the arsenals and defenses available to each side undeniably influenced every negotiation between East and West,” the DOJ wrote. “Leverage matters in video content negotiations because millions of dollars change hands depending on who blinks first.”

While AT&T first announced the deal in October 2016, it did not encounter any regulatory headwinds until the following autumn, when the DOJ started interfering and eventually filed suit. President Donald Trump also assailed the deal as anti-consumer and excessive in scale. CNN is a key unit of Turner, prompting speculation that Trump was merely punishing a longtime media foe by tangling up the merger in red tape. U.S. District Court Judge Richard J. Leon did not permit any evidence or testimony on the topic of CNN and the White House during the trial.

Regardless of the ultimate motivation, the 19-month slog through Washington has cost the companies tens of millions of dollars. They have set a June 21 deadline for completing the transaction. Leon, who is ruling on the case without a jury, has said he will deliver his decision June 12. There could be a small window for the losing side to appeal to him to set aside his ruling.

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