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Justice Department Urges Judge to Block AT&T-Time Warner Merger

Justice Department Urges Judge to Block AT&T-Time Warner Merger
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Thursday, 22 March 2018 03:36 PM

President Donald Trump’s administration urged a federal judge on Thursday to block AT&T Inc.’s proposed $85 billion merger with Time Warner Inc., saying the deal would hand the company a “weapon” to harm competition and raise consumer prices.

During opening statements in one of the most closely watched U.S. antitrust trials in years, Justice Department lawyer Craig Conrath said the deal would hike prices for consumers by more than $400 million annually, or an average of $0.45 a month for pay TV subscribers.

AT&T lawyer Daniel Petrocelli, in his opening statement, ridiculed the Justice Department’s case and suggested the administration was “fundamentally stuck in the past” and that its arguments were “divorced from reality.”

Petrocelli said the deal would actually lead to a 50-cent decrease in prices for pay TV subscribers, citing a number of errors in a government expert’s model of how the transaction would impact future prices.

But Conrath said AT&T would be able to use content from movie and TV show maker Time Warner, including its Turner unit, to prevent innovation. The merger would hurt 90 million U.S. pay TV subscribers, Conrath added.

“This is a weapon to harm competition,” Conrath told U.S. District Judge Richard Leon, who will decide the case after a trial expected to last six to eight weeks.

“Time Warner would be a weapon for AT&T because AT&T’s competitors need Time Warner,” Conrath added.

The Justice Department, Petrocelli said, “cannot meet their burden of proof. They cannot prove that this would lessen competition.”

The merger is about the companies trying to better compete with technology businesses like Alphabet Inc, Amazon.com Inc and others that are changing how people watch television, Petrocelli said.

Petrocelli added that the combined company would have a better ability to use data from users to target advertising. Companies like General Motors Co and Mastercard In will pay more for higher quality advertising and consumers will pay less, he said.

The Justice Department filed suit in November to stop AT&T, which has some 25 million pay-TV subscribers, from closing the deal. AT&T says a merger would benefit consumers by creating efficiencies. AT&T is the biggest pay-TV provider via subsidiary DirecTV.

Opening statements were delayed one day by bad weather in Washington.

Conrath suggested that AT&T would be able to hike fees that Turner charges for its content by about 10 percent if the merger were approved and that the company could withhold content from rival distributors. He referenced an internal email from Turner executives that Dish Network Corp’s Sling service would be “crap” without Turner content, as he paraphrased the stronger language in the email.


Trump publicly criticized the deal as a candidate and as president, and the Republican president often has excoriated Time Warner’s CNN news network.

If the administration loses, that could open up the field for similar tie-ups between distributors and content providers. But a win could strengthen the hand of antitrust regulators looking at other, similarly structured mergers.

AT&T and Time Warner are not direct competitors, making the deal a so-called vertical merger between companies on the same supply chain. The vast majority of challenged mergers involve one rival buying another.

The merger would hand AT&T, if it becomes the new owner of Time Warner, the motive and opportunity to refuse to license March Madness NCAA basketball tournament games, along with premium cable channel HBO and other content, to pay-TV rivals and online distributors, the Justice Department has said.

Petrocelli had asked for access to communications between the White House and Justice Department about the deal, but the judge denied the request. Trump’s opposition to the merger did not come up during opening statements. AT&T lawyers have previously said the Time Warner deal may have been singled out for enforcement, citing Trump’s statements that the deal was bad for consumers and the country.

If the government loses, Verizon Communications Inc. and Charter Communications Inc. could strike deals to buy movie or television makers and squeeze smaller pay-TV providers.

AT&T has said the merger would result in more than $2.5 billion in annual cost savings by 2020. It argues that the deal is crucial to compete with companies like Facebook Inc., Alphabet Inc., Amazon.com Inc. and Netflix Inc.

The internet companies pose two challenges to pay TV. They either compete with cable and satellite television for ad dollars or provide cheaper online video that has hurt pricey pay-TV. Some do both.

© 2019 Thomson/Reuters. All rights reserved.

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President Donald Trump's administration urged a federal judge on Thursday to block AT&T Inc.'s proposed $85 billion merger with Time Warner Inc., saying the deal would hand the company a "weapon" to harm competition and raise consumer prices.
future, tv, at&t, time warner, merger
Thursday, 22 March 2018 03:36 PM
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