DOJ Faces Challenges In Renewed Case Against AT&T/Time Warner Merger

The US Department of Justice (DOJ) came up against stout opposition in its renewed case arguing against this year's acquisition of Time Warner by AT&T, Bloomberg reports. The DOJ was represented by Michael Murray, who fought to show that there was a clear error in the decision to allow the merger. Mr. Murray was backed up by Eric Citron, working on behalf of 26 antitrust law scholars and Nobel Prize-winning economist Joseph Stiglitz, and presented arguments centered around the findings of UC Berkeley economist Professor Carl Shapiro. The model used by Professor Shapiro was presented as evidence that the merger will result in profit-driven practices that would only serve to raise prices for every consumer involved. AT&T lawyer Peter Keisler, supported in counter-arguments by Andrew Pincus on behalf of 37 economists and lawyers, disagreed. Mr. Keisler argued that the method used to gauge the probability and rate of price hikes was flawed but that the increases would equate to only around one percent even with proper inputs. AT&T further argued that number is simply insignificant and that if the input figures were incorrect, they could easily turn against the company's favor.

Following 90-minutes of arguments, a significant portion of the challenge faced by the DOJ appears to stem from the three-judge panel presiding over the matter -- including Judges Judith Wilson Rogers, David Sentelle, and Robert Wilkins. Judges Rogers and Sentelle criticized the efforts of the DOJ's counsel, with Judge Rogers asking to see where the claimed 'clear error in judgment could be found. Judge Sentelle went further, agreeing with AT&T's representatives that the numbers used in determining the likely impact of the merger weren't necessarily shown to be accurate but that the entire argument hinged on those figures. Finally, Judge Wilkins noted that none of the arguments from the DOJ seemed to support that the initial ruling allowing the merger was made in "clear error."

Each judge appears to uphold the original ruling, for the time being, which granted the merger to ensure that the large companies to compete in their respective markets amid growing competition from cord-cutting services. While the DOJ recognizes that increased competition in the market does exist, Mr. Murray argued that the incentives for operations remain unchanged and that AT&T will use the benefits of the merger to pursue maximized profits over consumers. Judge Wilkins responded to that by pointing to an enforceable agreement made by AT&T stating that it would not pull programming from competitors and that it would proceed to arbitration where a resolution could not be reached.

Background: This round in this ongoing case began back in July when the DOJ filed a formal appeal of the approved merger between the telecom and content distributor. The arguments made by the department don't appear to have changed much since that appeal was filed, following a DOJ decision not to delay the merger with an immediate challenge. It also follows comments made by the FCC -- which remains neutral in the decision -- that claim the statements made by AT&T to the FCC in the years leading up to the months-long proceedings should not have been ignored. Those statements were not clarified but were said to be important the then-ongoing merger case, arguably adding strength to the DOJ case against the deal. The $85 billion acquisition of Time Warner by AT&T was initially filed in late 2016 but wasn't approved until June of this year by U.S. District Judge Richard Leon.

Impact: Although the DOJ appears to be having a lot of difficulty in appealing to the courts, it isn't immediately clear whether the arguments heard this week account for the only case it plans to bring to bear. The current expectation set by Bloomberg Intelligence Analyst Jennifer Rie is that the appeals will not be brought to a conclusion until some time in February. That's also the point at which an agreement for AT&T to hold Time Warner's Turner Broadcasting division as a separate entity is set to expire.

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