AT&T suit may signal a new antitrust era

Tali Arbel
Associated Press

New York — The Trump administration’s decision to oppose the $85 billion AT&T-Time Warner merger may be clouded by suspicions of political influence. But considered on its merits, it could mark a significant departure in antitrust policy, one that extends concerns about consumer harm to a broader set of mergers.

The move has disconcerted both Wall Street and the telecom and media industries, none of which expected it. Consumer groups, however are applauding, saying it’s a good step by the Justice Department to protect consumers from higher cable bills and ensure that web-based alternatives to TV aren’t stifled.

Matters, of course, are complicated by President Donald Trump’s long-running feud with CNN, a Time Warner company, which Trump regularly denigrates as “fake news” and “failing.” On Tuesday, Trump called the deal “not good for the country” and said he thought it would cause prices to go up.

The Justice Department has suggested that AT&T could resolve the case by selling off DirecTV or a Time Warner business that includes CNN, according to a person familiar with the situation who couldn’t go on the record. AT&T has rejected any option that would cause it to lose control of CNN.

AT&T says TV bills won’t go up and consumers will benefit from innovations in packaging video. The Justice Department and some experts argue the opposite.

For instance, MoffettNathanson analysts said in a note Tuesday that it was “in fact, very easy to imagine” how a company that both makes and distributes “must-have” news, sports and entertainment programming could use its power to thwart competitors by withholding it from rivals.

The government argues that AT&T could charge upstart streaming services prohibitively expensive fees for the rights to HBO or other channels, or even withhold them, making it harder to compete with AT&T’s services. AT&T has said it intends to broaden, not limit, distribution of Time Warner.

“The DOJ’s argument is simple: AT&T cannot lawfully be given this market power, because the incentives for them to abuse it are self-evident,” the analysts wrote. “It is simply not the case that this is a ‘novel’ legal theory.”

Antitrust enforcement used to be more aggressive. But starting in the 1980s, it became more focused on promoting consumer welfare than on ensuring competitive markets, Khan said. That made “vertical mergers,” where the companies in question weren’t direct competitors, more attractive, since regulators believed they created efficiencies without harming consumers.

For regulators to reject a vertical merger “represents a stark departure from the U.S. enforcement practice of the recent decades,” Columbia law professor Anu Bradford said in an email. The last time the U.S. government won a court victory in a vertical merger antitrust case was in 1972, when the Supreme Court said Ford’s takeover of a spark-plug business violated antitrust law.

The suit against AT&T could be the start of a new, more aggressive tack in antitrust by the Justice Department. But that depends on whether other considerations played a role.

“If it’s politically motivated because the president doesn’t like CNN, then it’s just a wild card,” said NYU law professor Eleanor Fox. “If this represents a change of heart, to be much more aggressive against mergers, it would be a game changer.”