National Post (National Edition)
U.S. urges judge to stop AT&T bid for Time Warner
Deal must be altered if not cancelled: DOJ
WASHINGTON • In its final push, the U.S. Justice Department has urged a federal judge to stop AT&T Inc., which owns biggest pay TV provider DirecTV, from buying movie and TV show maker Time Warner Inc. ,orat least cut a big chunk out of the proposed US$85 billion transaction.
U.S. District Judge Richard Leon is expected to rule on the deal on June 12.
In filings sent to the court last week and unsealed on Tuesday, the Justice Department reiterated that if AT&T owned Time Warner it would have the incentive and opportunity to withhold CNN, HBO and live sports from pay TV companies like Charter Communications.
The government also said it would have the incentive to refuse to license its networks to cheaper online TV distributors, like Hulu since these cheaper services bite into pay TV revenues.
The government estimated the increased cost to industry rivals at US$580 million a year and asked in its post-trial brief that the deal be deemed illegal and stopped.
The government said Leon could order AT&T to sell an asset — either DirecTV, with more than 20 million subscribers, or Time Warner’s Turner channels.
“The evidence demonstrated that the bulk (though not all) of the anticompetitive effects flow from the combination of Turner with DirecTV,” the Justice Department said.
AT&T said in its final brief, which was available last week, that the judge should reject any request by the government to force it to sell DirecTV or Turner, claiming it would “destroy the very consumer value this merger was designed to unlock.”
AT&T and Time Warner also said the deal would help them compete with internet titans like Facebook and Netflix. “The government did not even begin to make a credible case that the merger would likely harm competition, substantially or even just a little,” AT&T said. “This is not a close case.”
AT&T argued that Time Warner’s licensing fees from pay TV and online distributors were too valuable for the company to forego.
AT&T also sought to assuage critics by offering to submit any disagreement with distributors over pricing for Time Warner’s networks to third-party arbitration and to promise not to black out programming during arbitration for seven years.
The government dismissed the offer as “halfbaked” since it covers only the Turner channels, not HBO.
Leon asked few questions during the trial, but asked witnesses several times if they felt the arbitration proposal was adequate.
The deal, announced in October 2016, was quickly denounced by Donald Trump, who as a candidate and later as president has been critical of Time Warner’s CNN.
Before the trial started, AT&T lawyers said the Time Warner deal may have been singled out for government enforcement but Leon rejected their bid to force the disclosure of White House communications that might have shed light on the matter.