AT&T is trying to undercut the government’s witness in the trial
WASHINGTON: An economist retained by AT& T took aim at key government arguments last Thursday in the landmark antitrust trial involving Time Warner that’s now in its fourth week.
With the Justice Department’s top anti-trust attorney, Makan Delrahim, looking on from the government’s table, AT& T’s witness claimed that regulators’ economic analysis of the Time Warner deal is “theoretically unsound” and riddled with inaccurate assumptions.
“The evidence doesn’t support the government’s claim that this transaction will harm consumers,” said Dennis Carlton, an economist from the University of Chicago’s Booth School of Business.
His own competing study, he said, found that consumers could end up facing lower prices, not higher.
Carlton’s testimony threatens to undercut that of the government’s own star witness, Carl Shapiro, economist at the University of California, Berkeley.
As Carlton criticised Shapiro’s economic model as “very complicated,” US District Court Judge Richard Leon interrupted to agree with that description. “It’s like a Rube Goldberg contraption,” he said, reflecting scepticism about a core piece of the Justice Department’s case.
Leon welcomed Delrahim into his Washington courtroom. Although the assistant attorney general has occasionally shown up to view the proceedings, last Thursday marked the first time that he participated in the trial by sitting at the litigators’ table and announcing himself to the court.
“My goodness gracious!” Leon said as Delrahim approached the podium. “Honoured to have you.”
“Honoured to Delrahim replied.
Carlton took aim at a number of what he called “simplifying assumptions” by Shapiro that invalidate the government’s analysis.
Because Shapiro tried to simulate what would happen if a cable company were unable to air Time Warner’s content for an extended period rather than for only one or two months - as most “blackouts” have been known to last - the model fails to predict anything useful, Carlton said.
“The central element of his model doesn’t apply . . . to this transaction,” said Carlton.
Carlton said Shapiro’s analysis also ignored the programming contracts that lock in and help stabilise content prices.
Carlton also highlighted significant declines in industry be here,” profit margins and subscriber numbers that he said Shapiro overlooked.
Those dynamics, Carlton claimed, mean that AT&T would have less to gain (and rivals would have less to lose) in the event of a programming dispute with Time Warner and another cable company..
What’s more, Carlton said, Shapiro failed to account for the price drops - and thus, benefits to consumers - that would occur in an extended blackout.
Carlton used the example of a dispute between Time Warner and Comcast. — WP-Bloomberg