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The Justice Department can still try to unwind AT&T’s $85.4 billion purchase of Time Warner Inc. via an appeal of the court decision rejecting its objections, but it’s a high hurdle, antitrust and telecommunications attorneys told Bloomberg Law.
The two companies completed their transaction June 14 after the DOJ said it wouldn’t seek a stay to halt the deal.
The DOJ’s decision not to seek a stay acknowledged a warning from U.S. District Court for the District of Columbia Judge Richard Leon, who said he would deny such a request. Leon ruled in favor of AT&T-Time Warner on June 12, concluding that the vertical transaction merging the two companies across different markets didn’t pose anticompetitive threats as the DOJ alleged.
“I don’t think the DOJ has a good chance on appeal,” Blair Levin, a policy adviser to New Street Research and a former chief of staff at the Federal Communications Commission, told Bloomberg Law.
Even if the DOJ managed to prevail on appeal, Levin said it’s likely that AT&T and Time Warner would take the case to the U.S. Supreme Court. The last vertical merger antitrust case the Supreme Court heard was Ford Motor Co. v. U.S. in 1972, in which the justices said Ford couldn’t buy Autolite, a spark plug manufacturer, because the deal was anticompetitive.
The DOJ has 60 days to appeal Leon’s ruling to the U.S. Court of Appeals for the District of Columbia Circuit to unwind the AT&T-Time Warner merger. The government is still deciding on a possible appeal, Bloomberg News reported.
Leon’s opinion was fact-specific, which makes it difficult to overturn, Fiona Schaeffer, an international antitrust partner at Milbank, Tweed, Hadley & McCloy in New York, told Bloomberg Law. “I wouldn’t say it’s appeal-proof, but it is such a fact-intensive opinion that it is tough for an appellate court to conclude Leon committed a legal error.”
“If there was a case to appeal on vertical mergers, I don’t think this is it,” she added.
AT&T and Time Warner agreed to a series of conditions to close, such as a firewall between both companies and a promise to keep Turner assets, which include channels such as CNN and HBO, in a separate unit. That setup leaves open the possibility that AT&T-Time Warner can be untethered if an appeals court orders it, Bloomberg Intelligence analysts Jennifer Rie and Sophia Isnai said in a June 15 report.
Turner assets will be held separate until Feb. 28, 2019, or until a successful DOJ appeal, according to an AT&T filing.
Leon has more decisions overturned on appeal than many federal judges. In the past five years, 213 of his decisions were appealed and more than half (56.3 percent) were completely affirmed, according to Bloomberg Law’s Litigation Analytics. Sixty-one of his decisions (28.6 percent) were completely reversed, and 32 (15 percent) were affirmed in part and reversed in part.
Leon has presided over only one other antitrust case, involving a professional standards organization for financial planners. That case was appealed and affirmed.
Other judges sitting on the same bench have lower rates of being overturned. Decisions by Judges Thomas Hogan and Ellen Huvelle have been overturned 14.8 percent and 15.3 percent of the time, respectively. More than 70 percent of Hogan and Huvelle’s decisions in the past five years were completely affirmed on appeal.
The DOJ will be closely scrutinizing the merged AT&T-Time Warner entity to see if the companies can deliver on the cost savings and efficiency benefits they made in court, Schaeffer said.
The government “will certainly challenge” any anticompetitive practices it sees post-merger, Levin added. Those allegations would be brought forth in a new lawsuit.
Despite the legal blow, the DOJ must remain a proactive enforcer, Schaeffer said. “The U.S. needs to continue to play a leading role in shaping 21st-century antitrust law,” she said. “Otherwise, other jurisdictions with more radical perspectives will fill the void.”
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