A federal judge will soon decide the future of the media industry in the United States, when a ruling is issued on the mega merger of AT&T and Time Warner.
Federal Judge Richard Leon, senior judge of the U.S. District Court for the District of Columbia, is presiding over the groundbreaking case — a merger valued at $108.7 billion, which would pair a major content content distributor (AT&T) with a top video content producer (Time Warner).
Not since 1977, during the Carter administration, has the U.S. Department of Justice sued to block a merger between two companies that are not competitors — also known as a vertical merger — making the case one to watch, The Hill reported.
The United States v. AT&T and Time Warner will test the fidelity of the Trump administration’s approach to antitrust policy and enforcement, and will provide a bellwether for future mergers and acquisitions.
Antitrust experts contend that the DOJ does not appear to have a sound legal basis for the lawsuit, according to traditional standards. A vertical merger has not been prohibited by the government since 1972, during the Nixon administration. Hundreds of such mergers have been approved since then, including one between Comcast and NBCU in 2011.
The government is basing its case on established antitrust law, which allows non-competing companies from different industries to combine unless each is so dominant in its sphere that merging would disallow competition. According to The Hill, “The DOJ argues that distributors who control programming will have the incentive and ability to use that control as a weapon to hinder competition. Thus, it concludes that the combined company would force rivals to pay millions more for Time Warner content, resulting in higher prices for consumers.”
AT&T argues that competition in the video market is rampant, but the merger with Time Warner will not eliminate any competitors. The company also contends that the government has to prove that the two merging companies have sufficient market power in their respective spheres to cause antitrust concerns — and it has not met this burden of proof.
The ruling of Leon, a George W. Bush appointee with a distinguished record of high-level congressional investigations and a reputation for staunch independence, will be referenced for its impact on businesses beyond AT&T and Time Warner.
The trial is scheduled for March 19.