TRIAL WITH FAR-REACHING IMPACT

Judge’s decision in high-profile case may set benchmark for future tie-ups and antitrust enforcement

WITH a judge set to rule in the trial over the merger of AT&T and Time Warner, any decision could have a farreaching impact on the media and communications sector and the future course of antitrust enforcement.

The United States District judge Richard Leon is set to announce his verdict tomorrow in the US$85 billion (RM338.3 billion) merger of wireless and broadband giant AT&T with media-entertainment conglomerate Time Warner.

The case, heard here over seven weeks, is the most high-profile antitrust trial since the effort to break up Microsoft in the 1990s.

The outcome may set a benchmark for other tie-ups in the sector and how far antitrust enforcers can go in blocking big mergers.

Notably, this is the first trial in decades involving a “vertical” merger of companies that don’t have overlapping operations, but which operate in the same sector.

“This decision will have an outsized effect because there are so few antitrust trials that challenge vertical mergers,” said Michael Carrier, a Rutgers University law professor specialising in antitrust.

“If AT&T wins, it makes it easier for other companies to say they should be able to merge.”

AT&T, the largest US pay-TV operator and the second-largest wireless phone carrier, is seeking the deal with Time Warner, owner of premium channel HBO, the Warner Bros studios, Cartoon Network and CNN.

The deal comes with other big tie-ups pending in the sector — Walt Disney Co is seeking to buy film and television operations of rival 21st Century Fox, and mediacable giant Comcast is expected to make a bid for the same assets.

The companies argue they need more scale to compete against fast-growing rivals Netflix and Amazon, and Silicon Valley giants Apple and Google that are pushing into the sector, with the advantages of data gleaned from the online platforms.

The Justice Department sued to block the deal, saying the tieup could hurt consumers by raising prices and giving the combined firm an unfair advantage over rivals.

Television industry analyst Alan Wolk said traditional operators like Time Warner were hurting because they lacked precise data about customers that would allow them to pitch programmes, packages and advertising to specific viewers and groups.

“If the deal is quashed, Time Warner will probably be sold off for parts,” said Wolk.

Blair Levin, a former Federal Communications Commission staff lawyer, said the government faced an uphill battle in proving the deal would likely harm competition.

“For the government to win, the judge would have to lower the bar on the meaning of ‘likely’,” said Levin, who is now a Brookings Institution fellow and adviser to New Street Research.