INSUBCONTINENT EXCLUSIVE:
United States District Court Judge Richard J
Leon has ruled in favor of ATT in the government antitrust suit to block ATT proposed merger with Time Warner .
That decision matches word
on the street over the past few weeks, and delivers a stern rebuke to the Trump administration, which had opposed the deal from its earliest
The decision was made following the close of markets in New York, and after-hours trading was muted to the decision.
In light of today
decision, Comcast, which has been eyeing its own content creator takeover of 21st Century Fox, will likely move forward with a bid as early
as tomorrow.
In October 2016, ATT announced its plan to acquire Time Warner for $85.4 billion, and a total of $108 billion with debt
The DOJ moved to block the merger in March, arguing that the merger would reduce competition and hurt consumer choice.
The nuances of this
case are important, as the implications of this decision reach far beyond the individual businesses of ATT and Time Warner to the vast media
landscape as a whole.
First off, it worth noting that the overall goal of antitrust regulations is to protect the consumer from unfair
business practices that may arise from a consolidation of power within a single company
But size isn&t necessarily what most important in these types of cases
In fact, sometimes a merger can help competition and consumer choice, as is more often the case with vertical mergers.
A vertical merger is
when two companies who provide different or complementary offerings join forces, giving consumers access to a more comprehensive set of
services, at a lower price, while still generating profits
That not to say that vertical mergers get through regulatory approval free and clear — the FTC has fought 22 vertical mergers since 2000
— but they receive less scrutiny than horizontal mergers.
ATT-Time Warner is considered a vertical merger, as ATT is a content distributor
and Time Warner is a content creator
But the overall landscape complicates the decision a great deal.
There are only a handful of companies in this space, and they are some of
the most powerful companies in the world
ATT itself is the largest telecom provider in the world, and via DirecTV, it is also the largest multichannel video programming distributor
Time Warner, meanwhile, owns channels like TBS and TNT, HBO and Warner Bros., not to mention the assets to live sports and news orgs such as
the NBA, MLB, NCAA March Madness and PGA.
The DOJ has argued that this type of consolidation would give the merged ATT-Time Warner the
ability to raise prices, thwarting the competition ability to compete by forcing them to raise prices to maintain carriage rights
The government has also argued that the newly rolled back net neutrality rules would no longer protect ATT from, say, throttling Netflix if
it didn&t purchase and distribute Time Warner content.
On the other side, ATT and Time Warner (big as they may be) face steep competition
from the FAANG companies (Facebook, Apple, Amazon, Netflix and Google), all of whom have made video a top priority
In fact, CNNMoney reported that ATT-Time Warner counsel Daniel Petrocelli made the argument that traditional media orgs have already been
left behind in the digital revolution.
From the report:
Petrocelli told Judge Leon that their estimates show FAANG is worth $3 trillion
collectively, while an ATT-Time Warner entity post-merger would be worth $300 billion
‘We&re chasing their tail lights,& Petrocelli said.
It also worth noting that President Trump has been publicly opposed to the deal since
he was on the campaign trail
Remember, Time Warner owns CNN, which is the object of some of Trump most focused hatred
At a campaign rally in 2016, Trump said his administration would not approve the deal, raising concerns over political interference
The government has argued that Trump did not communicate with antitrust officials over the deal and that their choice to fight the merger
was not influenced by the White House.
