Published: Wed, June 13, 2018
Money | By Michele Stevens

Judge: Gov't evidence "too thin" in AT&T case

Judge: Gov't evidence

USA district judge Richard Leon dismissed the antitrust case brought by the justice department last November, the culmination of a 20-month ordeal that has seen the deal attacked by Donald Trump, critics of media consolidation and consumer groups.

"This decision from Judge Leon will have broad ramifications for the tech, telecommunications and media sector for decades to come", Daniel Ives, the chief strategy officer at GBH Insights, told Business Insider in an email before the decision was handed down. It argued a combined AT&T-Time Warner could act like an internet company and use consumer data to offer more targeted advertising, and adapt more easily to compete with Netflix and Amazon. The Justice Department could decide to appeal the ruling, however.

It's also worth noting that President Trump has been publicly opposed to the deal since he was on the campaign trail.

The AT&T-Time Warner hookup also conceptually validates Comcast-NBCU, said Elgin Thompson, managing director of Digital Capital Advisors.

But AT&T rejected that idea, stating in a court filing that, "Divestitures here would destroy the very consumer value this merger is created to unlock".

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AT&T would use its leverage over the must-have shows, in particular HBO's Game of Thrones or National Basketball Association games on TNT, to charge Comcast or Verizon more than it would charge itself for distributing Time Warner channels, giving itself a competitive advantage, the government claimed.

However, in Verizon's most recent quarterly earnings call, executives said they would rather sit out the current consolidation, and instead build out its content offerings through partnerships with independent media companies. The favorable decision, in a rebuke of the Justice Department's case opposing the deal, is viewed as a green light for other major M&A moves - and several scenarios are already in play. He said the merger "would unlawfully raise prices for cable-TV subscribers and harm online innovation".

Dallas-based AT&T's power flows from its position as a wireless, broadband and satellite behemoth that also became the country's biggest pay-TV provider with its purchase of DirecTV.

Leon's ruling could shape the government's future competition policy.

"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", he said in the statement. CNBC is reporting that Comcast will try to buy Twenty-First Century Fox if AT&T buys Time Warner. The ruling could open the floodgates to deal-making in the fast-changing entertainment and video-content worlds.

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Time Warner controls assets such as HBO, CNN and, most importantly, Warner Bros.

The companies' main economist, Dennis Carlton from the University of Chicago, refuted Shapiro's model as overly complicated and rejected his conclusions.

Time Warner's sale could shape how much U.S. consumers pay for streaming TV and movies.

AT&T, for its part, insists that legacy media companies can't compete with the rising titans of Amazon and Netflix unless they're allowed to bring content creation and distribution under the same roof. The combination would push technology forward and give consumers more choices, AT&T has promised. The 30-day waiting period needed for the deal to close will not begin until all the information has been obtained, and that process can take a while, Cantor said.

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