Fair Play: No Slam-Dunk for AT&T, Time Warner


Antitrust deciphered.


At first glance, AT&T Inc. and Time Warner Inc.’s proposed merger seemed relatively simple. Antitrust lawyers expected regulators’ concerns would be small and the deal would sail through. The merger doesn’t involve direct competitors, which is the usual red flag for antitrust violations.

But Democratic lawmakers and consumer advocates, concerned that the proposed telecom/media behemoth would exercise too much control over content, pleaded with the Justice Department to take a creative look at how the biggest media merger of the year would impact competition.

It appears that’s what’s happening.

Last week, multiple reports surfaced that the Justice Department was demanding Time Warner sell CNN, as part of Turner Broadcasting, or that AT&T slice off DirecTV, as conditions for the deal’s approval. Hot takes about corruption in the Justice Department flooded social media, pointing to President Donald Trump’s “fake news” war with CNN. Richard Painter, a former ethics officer for President George W. Bush, said on Twitter, “Use of antitrust power to punish CNN for exercise of First Amendment rights is an impeachable offense.” That was one of the tame ones.

Let’s take a deep breath and a step back. The Justice Department is independent from the White House, and reports from multiple reputable news outlets (including Bloomberg News) do not suggest Trump is trying to pressure the DOJ about this deal. The head of the antitrust division, Makan Delrahim, is barely a month into his job.

The talks are also private. At this stage of negotiations, there are many people in the room and all the talkers and listeners have a different account of what’s going down. Even AT&T’s CEO Randal Stephenson said he was concerned about the leaks coming from his company. “I believe a lot of people leapt to rumors and suspicion,” he said at the New York Times DealBook conference the day after the “sell CNN” story broke. Stephenson also addressed speculation that the White House was meddling in the review: “I have no reason to believe” that Trump is a factor, he said.

All drama aside, the reported requests from DOJ to spin off parts of one or the other merging party shows the government isn’t rubber-stamping the deal without asking the hard questions. That may be disappointing for AT&T and Time Warner, but it shows the staff is considering different competitive theories of harm.

The thinking behind the merger’s potential harm to competition goes like this: CNN, HLN, and other networks owned by Turner are some of the most popular programming on pay-TV, aside from HBO. Rival pay-TV companies to DirecTV, which AT&T owns, would need to buy that content. By owning those content creators via a Time Warner purchase, AT&T could withhold access or raise prices for these channels. That could hurt consumers by giving AT&T an unfair advantage. If DOJ’s leadership buys that argument, it would make sense for the department to ask for divestitures to fix the problem.

Keep in mind that the antitrust division also isn’t a monolith. Smart people work there, and questions about how antitrust law applies in an evolving economy aren’t settled. Debates are to be expected in a merger of this size. Differences of opinion between career staff and among leaders are common. It’s not unheard of for staff members to make a recommendation that political appointees at the top don’t follow to a tee.

What we do know is that people who have raised real questions about potential problems with this merger aren’t being ignored by regulators. They look like they’re doing their job.

What’s Happening

Antitrust lawyers will gather Thursday at the American Bar Association’s Fall Forum. Assistant Attorney General Makan Delrahim will deliver a keynote address.

Quote of the Week

“We have been working very diligently on a litigation strategy and a litigation plan,” said AT&T CEO Randall Stephenson.

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