US sues to block AT&T’s $85-bn bid for Time Warner
The Justice Department sued to block AT&T’s $85.4 billion bid for Time Warner on Monday, setting up a showdown over the first blockbuster acquisition to be considered by the Trump administration and drawing limits on corporate power in the fast-evolving media landscape.
By challenging the deal, the Justice Department is taking an approach to antitrust issues that is starkly different from the Obama administration’s. In 2011, for instance, the department approved a similar deal — Comcast’s acquisition of NBC Universal — after imposing numerous conditions on the transaction.
If AT&T’s bid for Time Warner were to go through, the merger would create a media and telecommunications behemoth. By itself, AT&T is one of the nation’s largest internet and telephone providers. With its 2015 acquisition of DirecTV, the country’s largest satellite company, it also became the largest television distributor in the United States.
The combined company would have an unrivaled ability to reach consumers through news and entertainment programming. Among Time Warner’s properties are HBO, the home to “Game of Thrones”; Warner Bros, the studio behind blockbusters like “Wonder Woman” and the Harry Potter film series; and Turner Broadcasting, which includes the news channel CNN and the sports-heavy TNT network. Makan Delrahim, the Justice Department’s top antitrust regulator, said a union of the two companies would harm consumers and weaken competition.
“This merger would greatly harm American consumers,” Delrahim, the assistant attorney general for antitrust, said in a statement. “It would mean higher monthly television bills and fewer of the new, emerging innovative options that consumers are beginning to enjoy.”
AT&T said it would defend the proposed deal in court, arguing that companies don’t directly compete against each other and that the government hasn’t challenged a similar kind of merger in decades.
“It defies logic, and it’s unprecedented,” AT&T’s chief executive, Randall L Stephenson, said in a news conference on Monday after the suit was filed.
The complaint was filed in Federal District Court for the District of Columbia against AT&T, DirecTV and Time Warner.
In a call with reporters on Monday, a Justice Department official said the agency remained open to negotiating a settlement. To gain favour with the antitrust division, the official said, the companies would have to sell off some of their assets.
During the news conference, Stephenson said that the Justice Department had a long history of approving similar mergers and that the company was not willing to part with any assets to get the deal approved. In its complaint, the Justice Department said consumers would most likely face higher prices for cable or satellite television subscriptions because AT&T would be able to charge more for licensing of valuable programming like the NCAA men’s basketball tournament, which is broadcast in large part on Turner networks.
The government argued further that AT&T’s acquisition of Time Warner would stifle innovation from online streaming firms like Sling TV, which competes with AT&T’s DirecTV Now service. AT&T could withhold programs from those online providers. A combined AT&T and Time Warner, the complaint said, would be more harmful to consumers and larger in scope than Comcast-NBC Universal. Comcast’s cable and broadband service reaches more than one-third of the nation.
“Both AT&T/DirecTV’s video distribution services and Time Warner’s TV networks are available nationwide, so the harm would occur throughout the country,” the Justice Department said in its complaint.
Stephenson has argued that AT&T needs media content in order to compete against internet firms like Google and Facebook for digital advertising dollars. With a big stock of television programming, it would also compete more effectively for subscribers against companies like Comcast and Verizon, which both own content.