Issue of the week: media merger wars

Attempts to block AT&T’S giant merger with Time Warner have opened a political and commercial can of worms

President Donald Trump has missed few opportunities to lay into CNN, said Dominic Rushe in The Guardian. He was at it again on his tour of Asia, tweeting that the global news network is “bad” and “FAKE”. That history of animosity is now under close scrutiny owing to the news that the US Department of Justice (DOJ) “has moved to block” AT&T’S $85bn takeover of CNN’S owner Time Warner – “one of the largest media deals ever announced” – on grounds that it would substantially reduce competition. Critics, who dismiss these concerns as nonsense, reckon “the deal is being held hostage because of Trump’s antipathy towards CNN”. AT&T’S boss, Randall Stephenson, thinks it’s a factor: he has described Trump’s opposition as “the elephant in the room” and AT&T has signalled it will go to court if the deal is blocked. Get ready for “one of the biggest corporate merger legal battles in decades”.

Time Warner, which also owns HBO, Warner Bros. and other bigname media brands, does not compete directly with AT&T, the world’s largest telecommunications company. But the DOJ argues that the companies’ combination of assets in a so-called “vertical merger” (combining the means of distribution with the generation of content) could harm consumers. The companies argue that this claim “stretches antitrust law beyond the breaking point”. And they have a point, said the FT. “The DOJ will have to argue its case in the shadow of the 2011 Comcast-nbcuniversal merger – a distribution-content deal that was allowed to go through.” This ruling is a mess. More to the point, “the DOJ looks like it is fighting the last war”. It is the digital giants – Google, Facebook, Amazon and Apple – that now dominate the industry. “The DOJ has decided that content producers and distributors are a threat to the competition” at the very moment when their “grip on the consumer is finally loosening”.

The DOJ now stands accused of pursuing, for political reasons, a risky case that it’s likely to lose, said David Mclaughlin on Bloomberg. All eyes will be on the outcome – which will be regarded as a bellwether for future deal-making at a critical moment for the media industry. The prospect of “a bidding war” for Rupert Murdoch’s prized 21st Century Fox TV, film and distribution businesses is also now in train, with suitors including Comcast, Verizon and Sony reportedly expressing interest, said James Dean in The Times. Big mergers always “go hand in hand with scrutiny by competition regulators”. But this week’s upset has really thrown the cat among the pigeons. If the DOJ succeeds in blocking AT&T’S bid for Time Warner, what are the chances that 21st Century Fox, which made its own unsuccessful tilt for the company in 2014, launches a fresh bid?