District Judge Richard Leon delivered the long-awaited, much-anticipated decision allowing the $85 billion deal between AT&T and Time Warner to move forward with no conditions. This, after a six-week trial that found no antitrust violations and could be seen as the key to the future of the media industry.
By the end of the one-judge, no-jury trial, the odds appeared to be in favor of AT&T prevailing, as many who followed the case reported that the DOJ simply did not have enough evidence. Judge Leon specifically addressed the issue and told the courtroom that the government failed to prove that the merger would lead to higher prices and other harm to consumers. He described the government’s evidence as “too thin a reed for this court to rely on.”
AT&T’s case focused on the impending threat from tech companies who use the internet to circumvent the traditional methods of media distribution. Thus, leaving media companies scrambling to stockpile the most sought-after content and develop their own internet-based distribution services if they want half a chance to compete with the likes of Netflix, Amazon, and Google.
DECISION OPENS FLOODGATES FOR OTHER MERGERS
The result of this decision will create a media and telecommunications mega-giant while opening the floodgates to other consolidation deals within the rapidly-transforming entertainment and video streaming arenas. Waiting in the wings are potential mega deals including Verizon and CBS, T-Mobile and Sprint, and 21st Century Fox and Disney. Cable, satellite, and phone companies have been scurrying to find ways to compete in the entertainment world with the big tech companies.
The decision comes as a major blow to the Department of Justice Antitrust Division, who argued vehemently that this deal was not a “vertical merger” and would result in sky-rocketing prices to consumers. The DOJ contended that AT&T-Time Warner would use its increased leverage by charging higher carriage fees for channels like HBO, TBS, TNT, and CNN.
DOJ COULD APPEAL, BUT IT WON’T BE EASY
The DOJ could decide to appeal the ruling, but that doesn’t necessarily mean it would prevent the merger from happening before the deadline. Gene Kimmelman, President and CEO of the public interest group Public Knowledge, told Yahoo Entertainment: “To stop the merger from going forward pending an appeal, the government would likely have to prove that there was a good chance they will succeed in their case and the merger moving forward would cause irreparable harm.”
Judge Leon rejected the concept of temporarily suspending the merger for a possible appeal. This makes the drop-dead date of June 21 crucial for AT&T to get the deal done. Once the merger takes place, the appeal by the DOJ, if it were successful, would require a complicated unwinding of the efforts put forward by both AT&T and Time Warner to consummate the deal. As it stands now, if the merger is not wrapped up by the June deadline, either company could walk away, and AT&T would have to pay a $500 million breakup fee.
David McAtee, AT&T General Counsel, said: “We are pleased that, after conducting a full and fair trial on the merits, the Court has categorically rejected the government’s lawsuit to block our merger with Time Warner.” He also made it clear that AT&T plans to close the deal on or before the June deadline.
We live in a world in which scale drives profit. As consumers of all types of goods and services, we better get used to it; the name of the game is mega-mergers. They say it won’t be harmful to competition, that it is all about free enterprise, yet the choices are fewer and the prices are higher.