AT&T’s acquisiton of Time Warner would be harmful, government says

WASHINGTON—The U.S. government pleaded its case Monday for blocking AT&T from absorbing Time Warner, saying the combination would hurt consumers.

In the landmark antitrust trial’s last day in federal court, lead Justice Department attorney Craig Conrath argued that the $85 billion proposed merger “would have a massive effect on the structure of the pay-TV industry.”

The Trump Justice Department sued in November to block the deal, saying it would force consumers to pay hundreds of millions of dollars more to watch their favorite shows, whether on a TV screen, smartphone or tablet.

Conrath told U.S. District Judge Richard Leon that if he doesn’t block the merger outright, he should consider ordering other remedies such as “partial divestitures.” That could mean, for example, that AT&T wouldn’t be able to acquire key parts of Time Warner like Turner Broadcasting, which includes CNN, Conrath suggested.

“That is an effort to kill the deal,” Daniel Petrocelli, the companies’ lead attorney in defending the merger, countered later in his closing argument. “You take away those pieces and there is no deal.”

The Justice Department had suggested before the trial began that AT&T could gain approval for the merger by selling off DirecTV or Turner Broadcasting. But AT&T had rejected any option that would cause it to lose control of CNN.

Petrocelli said the government had failed to prove that the merger would dampen competition and raise prices for pay TV.

“This whole case is a house of cards,” he said. In fact, consumers could end up paying less after a merger—even $500 million less annually—Petrocelli suggested, trying to poke holes in the model presented by the government’s economist witness.

But Conrath said evidence presented by the government during the six-week trial showed that by hurting competition in that industry, the deal “would impose substantial harm on consumers” and raise prices.

The merger would combine the phone giant with the owner of CNN, HBO, the “Harry Potter” franchise and pro basketball. It would be one of the biggest media mergers ever. The outcome of the case could shape how consumers get—and how much they pay for—streaming TV and movies.

It wasn’t clear whether Conrath’s suggestion of alternatives to blocking the merger indicated the government may be anticipating that it could lose the antitrust suit. Separately, there was a sign that AT&T may be under increased pressure to achieve the deal: the announcement Sunday of a merger agreement linking T-Mobile and Sprint, the third- and fourth-largest U.S. wireless companies, giving them bulk to more tightly compete against industry leaders AT&T and Verizon.