US sues to block merger of Time Warner, AT&T

(UN)PRECEDENTED::AT&T says the merger would be ‘vertical,’ without overlap in competition, while critics say it would give one firm the power to raise prices


Wed, Nov 22, 2017 - Page 10

The US government on Monday filed suit to block AT&T Inc’s merger with Time Warner Inc, setting up the biggest antitrust court clash in decades over the US$85 billion tie-up.

The deal announced more than a year ago would merge vast content of Time Warner units like premium cable channel HBO and news channel CNN with the massive Internet and pay TV delivery networks of AT&T.

“This merger would greatly harm American consumers. It would mean higher monthly television bills and fewer of the new, emerging, innovative options that consumers are beginning to enjoy,” US Assistant Attorney General for the Antitrust Division Makan Delrahim said.

Delrahim said AT&T with its DirecTV satellite operations and Time Warner’s content “would have the incentive and ability to charge more for Time Warner’s popular networks and take other actions to discourage future competitors from entering the marketplace altogether.”

Critics of the deal have said it would give too much power over the media industry to a single firm and enable AT&T to withhold key content from rivals or raise prices.

AT&T said it plans to challenge the government’s lawsuit, arguing that it was seeking a “vertical” merger without competitive overlap, which should be approved based on legal precedent.

AT&T chairman and chief executive Randall Stephenson said the antitrust enforcers are ignoring “decades of clear legal precedent” and failed to take into account the “radical change” in the sector in which Internet platforms like Netflix are transforming how media is consumed.

The deal has also stirred up political concerns: Reports earlier this month said the government was prepared to approve the deal if AT&T would divest CNN, which has been a frequent target of US President Donald Trump, who has called the network “fake news.”

During the election campaign last year, Trump vowed to blocked the merger that would have about 142 million subscribers and a vast catalog of television, film and sports content.

Stephenson at a news conference reaffirmed his opposition of divesting CNN to win approval.

“There’s been a lot of reporting and speculation whether this is all about CNN and frankly I don’t know, but nobody should be surprised that the question keeps coming up, because we have witnessed such an abrupt change in the application of antitrust law,” he said.

Stephenson has said he would have preferred a negotiated settlement with the US Department of Justice, but that any deal would not involve the divesting of CNN or the HBO premium video channel.

That is because AT&T — one of the largest telecom and pay TV operators — wants to boost its ability to marry content and advertising and better compete with the likes of Facebook, Google and Netflix.

“That’s where the synergies come from,” Stephenson said last week.

AT&T has also said its merger would mirror a similar merger between cable giant Comcast Corp and media-entertainment group NBCUniversal, which won approval with certain conditions.

However, Delrahim said in a speech last week that he wanted to avoid “behavioral” remedies in mergers, saying: “Antitrust is law enforcement, it’s not regulation.”