Coverage: Government sues to block AT&T-Time Warner

The U.S. Department of Justice sued AT&T Inc. on Monday to block its $85.4 billion acquisition of Time Warner Inc., saying the deal could raise prices for rivals and pay-TV subscribers while hampering the development of online video.

Diane Bartz and David Shepardson of Reuters had the news:

The lawsuit is the first major challenge to a merger by the administration of U.S. President Donald Trump, who has repeatedly criticized Time Warner’s CNN news unit and announced his opposition to the deal before the election last year, saying it would concentrate too much power in AT&T’s hands.

The Justice Department is arguing that AT&T would use Time Warner’s films and movies to force rival pay-TV companies to pay “hundreds of millions of dollars more per year for Time Warner’s networks” in the lawsuit filed late Monday in federal court in Washington.

The government cited documents where AT&T and its satellite broadcast unit DirecTV described the traditional pay-TV model as a “cash cow” and “golden goose,” suggesting customers were at risk of price hikes.

The 23-page complaint also said the deal would slow the industry’s transition to online video and other new distribution models.

Brian Stelter of CNNMoney.com reported that AT&T disputed the claims:

David McAtee II, AT&T’s general counsel, said in a statement: “Today’s DOJ lawsuit is a radical and inexplicable departure from decades of antitrust precedent. Vertical mergers like this one are routinely approved because they benefit consumers without removing any competitor from the market. We see no legitimate reason for our merger to be treated differently.”

In a press conference Monday, AT&T CEO Randall Stephenson sharply criticized the DOJ’s decision.

“I’ve done a lot of deals in my career, but I’ve never done one where we have disagreed with the Department of Justice so much on even the most basic of facts,” Stephenson said. “The rule of law is at issue here,” he added later.

Stephenson also addressed the speculation that the Trump administration’s opposition to the deal stems from President Trump’s feelings about what he believes is CNN’s unfair coverage of him.

Sara Forden and David McLaughlin of Bloomberg News reported that the government’s case will be hard to win:

It marks a departure from decades of Justice Department practice of approving deals that unite a supplier of content and a distributor in a so-called vertical transaction. That’s led some observers to say the government will have a hard time convincing a judge that the deal harms competition and should be blocked.

“This will not be an easy case for the government to win,” said Andrew Jay Schwartzman at Georgetown University’s Institute for Public Representation. “That is all the more reason to applaud the decision to file suit in the face of strong legal and political opposition.”

The challenge threatens a deal that appeared to be sailing toward approval as recently as a month ago. That was before Delrahim took up his position and took over the investigation. During negotiations he pushed for the companies to sell the Turner broadcasting unit or DirecTV, a request that AT&T rejected. The parties continued to talk as recently as last week.