Justice Department Sues To Block AT&T's Merger With Time Warner
Their union would create one of the largest media monopolies in U.S. history.
WASHINGTON ― The Department of Justice filed a lawsuit Monday to block AT&T’s proposed purchase of Time Warner. The suit is the first major antitrust action by the Justice Department since President Donald Trump took office ― and that may cloud some people’s perception of what’s going on.
Trump has repeatedly criticized CNN, which is owned by Time Warner, as “fake news.” He even retweeted an altered video of himself body-slamming a person with the CNN logo for a head. It was initially rumored ― and denied by the Justice Department ― that the department’s antitrust lawyers had demanded Time Warner divest itself of the cable news channel in order to win approval for the merger. This rumored pressure was widely seen as an attempt by Trump to punish CNN.
But that’s not why the Justice Department is suing to block the merger in the U.S. District Court for the District of Columbia. The department says it is taking legal action because the combination of AT&T and Time Warner would create one of the biggest media monopolies in American history.
If the purchase were to be approved, AT&T ― which already controls a vast video distribution platform through cell phones and ownership of DirecTV ― would also own such powerhouse producers of content as the Warner Bros. film and television studios, DC Entertainment, CNN, TBS, TNT, Cartoon Network, HLN, TruTV, Adult Swin and HBO. The programming runs the gamut from the DC superhero movie universe and the hit series “Game of Thrones,” to NCAA’s March Madness and major deals for NBA and MLB broadcasts. As Reuters previously noted, the deal would be the first combination of “a major U.S. media company with a wireless network, satellite TV distributor, and high-speed Internet service provider.”
That level of media integration would allow AT&T to limit competition and raise prices on consumers, the Justice Department complaint argues. AT&T could force current rivals to pay hundreds of millions of dollars more to place its new channels on their platforms, a cost that would likely be pushed off onto consumers. The company could also increase prices on subscription services like HBO. (Yes, HuffPost is owned by another vertically integrated media giant, Verizon.)
“This merger would greatly harm American consumers. It would mean higher monthly television bills and fewer of the new, emerging innovative options that consumers are beginning to enjoy,” Assistant Attorney General Makan Delrahim, head of the Justice Department’s Antitrust Division, said in a statement Monday. “AT&T/DirecTV’s combination with Time Warner is unlawful, and absent an adequate remedy that would fully prevent the harms this merger would cause, the only appropriate action for the Department of Justice is to seek an injunction from a federal judge blocking the entire transaction.”
Delrahim also contended that the merger would prevent the emergence of new media infrastructure, including the shift to online video distributors.
David R. McAtee II, senior executive vice president and general counsel for AT&T, called the lawsuit “a radical and inexplicable departure from decades of antitrust precedent.”
While the Obama Justice Department allowed a similar merger between Comcast and NBCUniversal to go ahead in 2011, there is a long history of antitrust legal thought to back up arguments against AT&T buying Time Warner. The department recognized this when it threatened to block Comcast from taking over Time Warner in 2014. Comcast ultimately dropped its attempted acquisition.
The Trump administration has not exactly been consistent on the dangers of media mergers. Just last week, the Federal Communications Commission voted to dramatically loosen local media ownership laws, which will allow the conservative Sinclair Broadcasting to gobble up television and radio stations in the same markets.
But the merger of AT&T and Time Warner is not solely opposed by Trump, whatever his reasons may be, or his administration. Sens. Elizabeth Warren (D-Mass.), Al Franken (D-Minn.), Tim Kaine (D-Va.) and Bernie Sanders (I-Vt.) have all criticized the proposed purchase. Advocacy organizations like the online consumer nonprofit Free Press and the antitrust group Open Markets have publicly opposed it. The New York Times editorial board has questioned the merger as well.
AT&T vows that it will defeat the Justice Department in court. “We are confident that the Court will reject the Government’s claims and permit this merger under longstanding legal precedent,” McAtee said.