In what could be one of the most consequential antitrust decisions in recent memory, a judge has ruled that AT&T and Time Warner can merge, despite a lawsuit from the Justice Department arguing that the deal would be anti-competitive.
While the Justice Department could still appeal, the decision clears the way for a new telecom behemoth, combining AT&T’s paid-TV subscribers with Time Warner’s content, which includes HBO, CNN, and Warner Bros. The federal judge ruling on the case did not impose any conditions on the deal as part of the decision, handing AT&T a clear victory in the dispute, while delivering a major blow to the Justice Department’s antitrust enforcers and telegraphing a green light to other companies with similar merger plans.
The ruling, in fact, may have been more closely watched for its effect on future deals. The battle has been seen as a bellwether for other vertical mergers, where a distributor and content producer are looking to combine forces. Now that the AT&T-Time Warner deal has been given a stamp of approval, it’s all but certain more deals are on the way. Those agreements were lining up even before today’s decision: Comcast reportedly planned to make a formal offer to buy 21st Century Fox the day after the ruling, if the judge in the AT&T case approved, an announcement the public can now watch for. The Walt Disney Company is also in the bidding for the company.
The AT&T decision is a culmination of intense legal wrangling since the $85 billion takeover announcement in October 2016, and it follows a six-week trial. Early on, questions were raised about whether President Trump, a vocal critic of CNN, was an unseen force in the Justice Department’s decision to intervene. But after a decision preventing the AT&T-Time Warner team from digging into the theory, the trial focused on a more traditional question: would the merger harm competition in the marketplace?
The Justice Department argued that the major new entrant would be powerful and ubiquitous enough to dictate unfair terms in the marketplace, and it used expert testimony to highlight potential economic perils. AT&T, for its part, has said the merger is necessary for the company to compete against the major tech industry players and would even result in better terms for consumers.
Judge Richard Leon did not make it obvious during the trial how he would rule, and any of a number of scenarios were possible. While he might have approved or blocked the deal outright, he also could have made a conditional decision, requiring AT&T to make some sort of concession as a requirement for the merger. Instead, the judge allowed the decision to move through without conditions. It’s unclear whether the Justice Department will appeal the decision.
In his encyclopedic, 172-page written opinion, Leon rejected the Justice Department’s theories of consumer harm, ruling that the agency failed to meet the legal burden showing competition would be substantially lessened by the merger.
“We are disappointed with the Court’s decision today,” Assistant Attorney General Makan Delrahim said in a statement. “We continue to believe that the pay-TV market will be less competitive and less innovative as a result of the proposed merger between AT&T and Time Warner. We will closely review the Court’s opinion and consider next steps in light of our commitment to preserving competition for the benefit of American consumers.”
“We are pleased that, after conducting a full and fair trial on the merits, the Court has categorically rejected the government’s lawsuit to block our merger with Time Warner,” AT&T General Counsel David McAtee said in a statement. “We thank the Court for its thorough and timely examination of the evidence, and we compliment our colleagues at the Department of Justice on their dedicated representation of the government. We look forward to closing the merger on or before June 20 so we can begin to give consumers video entertainment that is more affordable, mobile, and innovative.”
The deadline for the deal is set for later this month, and as part of the judge’s overwhelming decision against the Justice Department, he wrote that he believed the government would be unlikely to succeed on an appeal, adding that granting a temporary stay of his ruling that scuttled the deal would be “unjust.”