Judge rules AT&T can purchase Time Warner

Fredrick Soto
June 13, 2018

U.S. 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.

The Justice Department rarely sues to block a "vertical merger" such as the AT&T and Time Warner because they are not considered as economically unsafe as "horizontal mergers" - or ones in which a companies buys direct competitors such as T-Mobile's pending deal for Sprint.

The ruling could also prompt a cascade of pay TV companies buying television and movie makers, with Comcast Corp's bid for some Twenty-First Century Fox Inc assets potentially the first out of the gate.

The District Court Judge Richard Leon determined that the USA government "failed to meet its burden of proof" in their case that this would lessen competition and that they should not seek a stay of his ruling because it would be "manifestly unjust" and unlikely to succeed. AT&T is a service provider buying up a content producer, making a single, stronger company that's better able to compete. Had Leon ruled in favor of the government, the consequences would have reached far beyond media, to tech, health care, finance and other major fields.

It is worth remembering that the Justice Department is reviewing the T-Mobile/Sprint combination, and the Justice Department did not approve AT&T's purchase of Time Warner.

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.

Still, at least one company, Comcast, the largest USA cable provider, had been waiting for the court decision before making any large M&A moves in media, sources have said. After all, Netflix and Amazon are already vertically integrated.

The ruling is also a major blow to Donald Trump's Justice Department. The ruling arrives after the Justice Department filed a lawsuit in November 2017 to try and stop the deal, which is valued at $85 billion.

"The government may very well argue that that will increase prices by diminishing choices for consumers", he said. Plenty more details are sure to be revealed in the coming days and we'll be sure to keep you up to date as new information is made available. But AT&T CEO Randall Stephenson remained at the company's headquarters in Dallas, and he learned of the ruling when AT&T general counsel David McAtee called him, a spokesperson said.

AT&T argued that the merger will help customers without harming AT&T's business rivals, and that the combined company wouldn't have enough market power to raise antitrust concerns. He vowed that his administration would oppose it, and as president, he has relentlessly attacked CNN for its news coverage.

"Completion of the transaction remains subject to customary closing conditions, including expiration of the federal Hart-Scott-Rodino antitrust waiting period and approvals of certain state departments of insurance and other regulators", Aetna said in a March release.

Shares of AT&T spiked immediately after the announcement and are now down about 2% in after-hours trading.

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