US court overrules DoJ concerns to approve AT&T's Time Warner takeover
A planned takeover of Time Warner, the US media giant that owns TV networks including HBO and CNN, by telecoms giant AT&T, looks set to go ahead after a US district court overruled the US Department of Justice, which had filed a lawsuit claiming that the $85.4-billion merger, one of the largest media deals ever announced, would reduce competition and lead to higher consumer prices.
However, the court ruling could still be subject to an appeal by the DoJ.
In its ruling, the district court judge appeared most influenced by the argument that, far from creating a dominant force in the market, the combination of AT&T and Time Warner would be worth $300 billion, compared with the combined value of $3 trillion of the technology giants Facebook, Apple, Amazon, Netflix and Google. The duo argued that the merger would only enable them to catch up with the competition, albeit they would still be chasing “tail lights.”
The judge said the US government had failed to show how the merger would “substantially lessen competition.”
The DoJ’s lawsuit came amid reports of possible political interference after Donald Trump, the US president who has been a critic of CNN, objected to the deal during the presidential campaign, saying that it would not be approved “in my administration because it's too much concentration of power in the hands of too few.”
The DoJ had claimed that the deal would harm US consumers, saying: “It would mean higher monthly television bills and fewer of the new, emerging innovative options that consumers are beginning to enjoy.”
However, AT&T called the lawsuit “a radical and inexplicable departure from decades of antitrust precedent,” with David McAtee, its general counsel, adding: “Vertical mergers like this one are routinely approved because they benefit consumers without removing any competitor from the market. We see no legitimate reason for our merger to be treated differently.”
Under the merger plan, AT&T adds Time Warner’s premium content, including live sport, to its distribution network of 130 million mobile phone customers and 25 million pay-television subscribers.
Time Warner’s assets include television channel TNT, which holds live rights to the National Basketball Association until the end of the 2024-25 season, TBS, which shows Major League Baseball games in a deal running to 2021, and HBO, which offers pay-per-view boxing.
In addition, Time Warner subsidiary Turner Sports owns Bleacher Report, the sports news portal which operates the official websites of the NBA, the PGA of America and the National Collegiate Athletic Association.
In 2015, AT&T paid $48.5 billion to acquire DirecTV, the satellite television broadcaster, which owns the Sunday Ticket package of rights to NFL American football games in a deal worth $12 billion over eight years.
The merger is the latest development in an international wave of media consolidation, which includes last week’s news that the UK government has cleared the way for a potential bidding war for Sky, the pay-TV operator, after it announced that it would not intervene in two proposed bids for the pay-TV operator.
Fox had previously agreed a deal worth £11.7 billion ($15.6 billion) to acquire the 61 per cent of Sky it does not already own, but it was awaiting regulatory clearance in the UK after the Competition and Markets Authority provisionally blocked the takeover on the grounds of media plurality.
The UK government also announced that a separate bid for Sky from fellow media giant Comcast would not require regulatory approval in the UK.
Comcast, which is the world’s largest broadcasting and cable TV company by revenue, has offered an all-cash bid of $60 billion for most of the assets of 21st Century Fox, including Sky, if AT&T’s acquisition of Time-Warner is approved.