One of the most high-stakes antitrust battles in recent memory is about to unfold in court, as AT&T argues its case for buying Time Warner, despite objections from the Justice Department. If approved, the purchase will create an outsized media behemoth that combines AT&T’s 25 million paid TV subscribers with media giants like HBO, CNN, and Warner Bros. movie studios. This, the Justice Department argues, is a company so large that it could stifle competition. Meanwhile, AT&T insists that the merger is critical if it has any hope of competing in a marketplace increasingly driven by streaming media. Both sides are making their opening statements in a DC court today. Here’s what to watch for during the trial.
IS TRUMP OUT OF THE PICTURE?
AT&T insists that the merger is critical
Before the trial, a major question hung over the Justice Department’s decision to intervene in the merger: did the Trump administration have its thumb on the scales? Trump has a well-documented feud with CNN, a Time Warner property, and the Justice Department reportedly demanded that AT&T divest from Turner Broadcasting, CNN’s parent company, as a condition of the deal. Critics of the intervention suggested that Trump pushed for the Justice Department to step in in an effort to punish the news network.
AT&T and Time Warner lawyers suggested this could be the case and asked the Justice Department to force the White House to turn over any communication that could prove it. But a judge ruled the companies had fallen “far short” of the legal bar to receive those documents, ending that potential legal argument. The Justice Department has denied any improper actions all along, insisting that the issue at hand solely pertained to antitrust concerns.
Expect the trial to focus on arguments over competition. The Justice Department sued to block the merger, it said, because the new telecom giant it creates would add to an anti-competitive environment for consumers — an argument that some groups that normally oppose the Trump administration have been sympathetic to.
On the other side, AT&T CEO Randall Stephenson has argued that the deal will result in competition, enabling the newly merged company to compete with the likes of Netflix and Amazon, which both produce and distribute content. “With 50 years of legal precedent, it’s the type of business combination that the government has consistently approved with appropriate conditions,” he’s said. AT&T has already teased some of its argument in court, as its litigators argued in an early hearing that tech giants are dominating the content industry.
The proposed merger is a vertical one
Furthermore, the proposed merger is a vertical one — that is, AT&T and Time Warner are not rivals. That could weaken the Justice Department’s call for antitrust action. A similar merger between Comcast and NBCUniversal was approved without a lawsuit in 2011, although Comcast agreed to a consent decree forbidding it from treating NBCU content more favorably than competitors on its network.
As The New York Times points out, both Stephenson and Time Warner chief Jeff Bewkes are set to testify, in what will likely be highlights. The trial will last about six to eight weeks in all. The first witness up, according to the New York Post: a Cox Communications executive expected to testify about how the merger could harm AT&T’s rivals.
WHAT IT ALL MEANS
Whatever the decision, the trial will turn out to be massively important: should the $85 billion deal go through, it will create a new telecom behemoth. AT&T will gain control of HBO and CNN, among other properties, and will use its distribution powers to relay that content widely.
But if the merger is ultimately blocked, the decision could have a chilling effect on other potential content creator and distributor mergers, as companies wonder whether they, too, would face Justice Department intervention.