The US Justice Department (DOJ) is suing AT&T to stop its $US85 billion purchase of Time Warner, setting the stage for an epic legal battle with the telecom giant.
- Makan Delrahim said AT&T-Time Warner merger would hike television bills and hamper innovation
- AT&T said buying Time Warner would let it package and deliver video more cheaply
- Consumer advocates applauded the lawsuit as a blow against media consolidation
It could also create a new headache for President Donald Trump, whose public statements have raised suspicions he might have interfered with the department’s decision, potentially undermining its legal case.
DOJ antitrust chief Makan Delrahim said the President did not tell him what to do.
White House spokeswoman Sarah Huckabee Sanders said she was not aware of any specific action related to the case taken by the White House.
In a press release, Mr Delrahim said a combined AT&T-Time Warner would, “greatly harm American consumers” by hiking television bills and hampering innovation, particularly in online television service.
The DOJ said AT&T would be able to charge rival distributors such as cable companies, “hundreds of millions of dollars more per year” for Time Warner’s programming — payments that would ultimately get passed down to consumers through their cable bills.
In an emailed statement, AT&T general counsel David McAtee said the lawsuit was a, “radical and inexplicable departure from decades of antitrust precedent” and the company was confident it would would prevail in court.
AT&T runs the country’s second largest wireless network and is the biggest provider of traditional satellite and cable TV services.
Time Warner owns HBO, CNN, TBS and other networks, as well as the Warner Bros movie studio.
The Government’s objections to the deal surprised many on Wall Street.
AT&T and Time Warner are not direct competitors, and “vertical” mergers between such companies have typically had an easier time winning government approval than deals that combine two rivals.
The last time the US government won a court victory in a vertical merger antitrust case was in 1972, when the Supreme Court said Ford’s takeover of a spark-plug business violated antitrust law.
AT&T chief does not know if lawsuit was about CNN
AT&T CEO Randall Stephenson, left, said AT&T would not agree to anything that would result in it losing control of CNN.
(AP: Evan Vucci, file)
Many had expected government approval of the deal because Obama-era antitrust officials approved a similar deal — Comcast’s purchase of NBCUniversal — in 2011, after imposing restrictions on Comcast’s behaviour that were meant to protect consumers.
As a candidate, however, Mr Trump vowed to block the pending AT&T-Time Warner deal because it would concentrate too much, “power in the hands of too few”.
As president, Mr Trump has often blasted CNN for its coverage of him and his administration, disparaging it and its reporters as “fake news”.
At a press conference on Monday, AT&T CEO Randall Stephenson addressed speculation over whether the Government’s lawsuit was, “all about CNN,” saying: “Frankly, I don’t know.”
But Mr Stephenson said AT&T would not agree to anything that would result in it losing control of CNN.
A person familiar with the matter, who could not go on the record, previously told AP the DOJ wanted the combined company to sell either Turner — the parent of CNN, TBS and other networks — or DirecTV to satisfy its antitrust concerns.
A DOJ official, speaking on condition of anonymity in order to discuss a pending legal case, said on Monday the Government was still willing to work with AT&T on “structural relief,” or selling off assets.
Consumer advocates applaud lawsuit
Makan Delrahim said a combined AT&T-Time Warner would “greatly harm American consumers”. (AP: Cliff Owen, file)
AT&T had argued buying Time Warner would let it package and deliver video more cheaply, over the internet, rather than in expensive cable bundles.
It already has a DirecTV Now streaming service, which puts popular live TV networks online, and costs $US35 a month and up, cheaper than traditional cable bundles.
Consumer advocates and some Democratic politicians applauded the lawsuit as a blow against media consolidation.
Consumers Union, an advocacy group that opposes the deal, said there were “legitimate reasons” to block the deal to protect consumers, but called reports of political pressure “concerning”.
Consumer advocacy group Free Press likewise praised the DOJ action, but its president, Craig Aaron, objected to Mr Trump’s “saber-rattling” against CNN and other outlets airing criticism of the administration.
Mr Aaron called on the Justice Department to demonstrate its independence by reviewing TV station owner Sinclair’s proposed takeover of rival Tribune. Sinclair is a conservative-leaning company.
AT&T argued that buying Time Warner would let it deliver video more cheaply. (AP: Mark Lennihan, file)
Mr Delrahim previously expressed a preference for requiring companies to sell off assets rather than allowing mergers to proceed with conditions on the merged company’s behaviour.
Comcast faced criticism for breaking some promises related to the conditions on its NBCU deal.
For example, the FCC fined Comcast $800,000 for not doing enough to let customers know they could just get internet as a standalone service.
Bloomberg TV also complained it was exiled in Comcast’s channel line-ups, far from other news and business networks. The FCC agreed.
The DOJ official said on Monday the AT&T merger was more harmful to consumers than the Comcast-NBCU deal, in part because DirecTV has customers across the country. Comcast only operates in certain regions.
This isn’t the first time AT&T has faced pushback from the government over an acquisition.
The Justice Department also sued to block its $US39 billion bid of T-Mobile, a direct competitor, in August 2011. AT&T walked away months later.