The U.S. District Court for the District of Columbia ruled Tuesday that AT&T’s $85.4 billion acquisition of Time Warner can move forward.
The decision will likely encourage other companies to pursue similar vertical mergers, according to analysts. For example, Comcast is expected to formalize its bid to acquire most of 21st Century Fox given the court’s blessing of the AT&T deal.
AT&T is the U.S.’s largest provider for pay television, the second-largest for wireless, and the third-largest for home internet.* Time Warner owns a prodigious number of prominent media properties such as CNN, TBS, HBO, Warner Brothers, DC Comics, and Cartoon Network. The merged company could have the power to raise prices on competitors and consumers. The DOJ reportedly pressured the two companies to sell either Time Warner–owned Turner Broadcasting or AT&T-owned DirecTV so that the merged company would not have an unfair competitive advantage. The companies refused to comply with these terms, which led to the suit.
Over the course of the six-week trial, prosecutors argued that the deal would curb competition and add more than $400 million to TV bills every year. They asserted that giving AT&T control over Time Warner’s media properties essentially allows the company to be the gatekeeper for content that competing providers need to attract customers. The DOJ’s lead attorney, Craig Conrath, said during his opening statement, “This merger will take a tool [that AT&T’s rivals] need to compete and turn it into a weapon.”
Lawyers and executives for the AT&T and Time Warner, on the other hand, characterized the merger as a strategic move to compete with big tech companies like Facebook, Amazon, Netflix, and Google for consumers and targeted advertising. They also claimed that TV prices would not go up, and even if they did, the annual increase per customer would be roughly the same as an upscale cup of coffee, according to the government’s estimates. “The government has managed to string out this merger for 18 months … based on a case that never should have been brought in the first place,” said Daniel Petrocelli, lead attorney for the two companies, during the closing arguments. “We have a complete failure of proof.”
When the Justice Department initially filed the suit in the fall, there was much speculation as to whether Trump’s animosity towards CNN was driving the legal action. Though the White House denied that the administration was interfering with the DOJ’s investigation, Trump did say during a rally in 2016, “AT&T is buying Time Warner, and thus CNN, a deal we will not approve in my administration because it’s too much concentration of power in the hands of too few.”
Correction, June 12, 2018: This post originally stated that AT&T’s acquisition of Time Warner would create the nation’s second-largest cable operator. Time Warner Cable, which is actually the nation’s second-largest cable operator, had in fact been sold by Time Warner in 2016.