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August 7, 2018

U.S. DoJ Says Ruling Approving AT&T-Time Warner Merger Ignored ‘Fundamental Principles of Economics and Common Sense’

by John_A

The U.S. Department of Justice today filed an appeal with the District of Columbia Appeals Court protesting the June ruling that allowed the merger between AT&T and Time Warner to move forward, reports The Washington Post.

In the filing, the DoJ says the district court approved the merger after “erroneously ignoring fundamental principles of economics and common sense” and that it used a “deeply flawed assessment of the government’s evidence” to reach its decision.

According to the DoJ, AT&T’s access to Time Warner’s content, including the highly important Turner Broadcasting System, which includes CNN, Cartoon Network, TBS, TNT, and other networks, gives it bargaining leverage over rivals, which could drive up access fees, ultimately resulting in higher prices for consumers.

The original ruling approving the merger, says the DoJ, ignored key documents from AT&T on the competitive harm of vertical mergers, limited expert economic testimony, and refused to close the courtroom to allow for testimony related to confidential business information. Further, the DoJ insists the original ruling ignored the economics of bargaining and did not consider corporate profit maximization.

The government established a reasonable probability that the AT&T-Time Warner merger would increase Time Warner’s bargaining leverage and, thus, substantially lessen competition, in violation of Section 7 of the Clayton Act.

The district court’s contrary conclusion rests on two fundamental analytical errors: it discarded the economics of bargaining, and it failed to apply the foundational principle of corporate-wide profit maximization. These errors colored the court’s view of the facts, leading to a decision that is clearly erroneous in light of the evidence presented at trial.

The Department of Justice is asking the appeals court to vacate the district court’s ruling and remand the matter for further proceedings.

AT&T and Time Warner completed their merger in June following the judge’s ruling that the merger was legal. The Justice Department said at the time that it was disappointed in the court’s ruling and would consider its next steps, but allowed the merger to move forward and did not file an emergency stay.

While the merger is finished, the Department of Justice remains able to appeal the judge’s ruling and first announced plans to do so back in mid-July.

Shortly after acquiring Time Warner, AT&T announced a new WatchTV service allowing AT&T wireless subscribers with new “AT&T Unlimited &More” and “AT&T Unlimited &More Premium” plans access to more than 30 live channels and 15,000 TV shows and movies on demand.

AT&T’s plans are more expensive than previous unlimited wireless plans, but they include WatchTV, which AT&T charges $15 per month for on a standalone basis.

Though AT&T said that its prices would not increase following the merger, it raised prices on its DirecTV Now plans by $5. AT&T also recently raised its administrative fees for postpaid wireless subscribers to $1.99, which some analysts have speculated is to make up for the expense of the Time Warner purchase.

Tags: AT&T, Time Warner
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