Media Consolidation: United States v. AT&T and Implications for Future Transactions Page: 4 of 5
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Turning to the government's arguments, the court observed that the government had conceded that the
merger would create certain cost-savings that would benefit AT&T customers. Ultimately, the court
disagreed with the government that the evidence indicated that the anticompetitive costs of the transaction
would outweigh the predicted benefits. The court rejected the idea that Time Warner's content is "must-
have" in the literal sense, and instead found that distributors that lose the rights to Time Warner content
after the merger would nonetheless still be able to compete in the media market. Moreover, the court
noted that the government did not argue that any distributors would actually lose the rights to Time
Warner content after the merger, as the DOJ's expert predicted that long-term programming blackouts
were unlikely to occur. In contrast, the court accepted the defense's arguments that the merged entity's
incentives would be to distribute Time Warner's content as widely as possible, thus making it unlikely
that any distributors would lose the rights to Time Warner content after the merger. For those reasons,
among a few others, the court concluded that the government did not offer sufficient evidence that the
merger would raise prices paid by competing distributors for Time Warner content.
The court spent far less time dismissing the government's other two arguments against the deal.
Responding to the DOJ's assertion that the AT&T/Time Warner merger could harm competing streaming
companies like Sling TV, the court wrote that the benefits of consumers accessing Time Warner content
would accrue regardless of whether it was displayed by a competing provider and that streaming content
requires an Internet connection, such as AT&T's mobile platform, giving "the combined entity even more
reason to distribute Time Warner content as broadly as possible." Finally, in rejecting the possibility that
the AT&T/Time Warner merger could limit promotional partnerships between rival distributors and HBO,
the court found that such a limitation is antithetical to HBO's business model because the network does
not accept advertising, but rather earns money through subscription fees. Therefore, its success is
dependent upon the widest possible distribution.
The court ended its analysis by taking the relatively extraordinary step of advising the government not to
seek a stay of the court's decision pending appeal. The transaction, in the court's view, had been in limbo
far too long, and further delay would cause defendants great injury. Nonetheless, the court clarified that it
was in no way suggesting that the government should not seek appellate review of the case.
Implications and Congressional Considerations
The district court cautioned that "the temptation by some to view this decision as being something more
than a resolution of this specific case should be resisted by one and all!" Nevertheless, many industry
observers have predicted that participants in the media market will view the decision as giving a green
light to vertical transactions in the media business, with one former DOJ antitrust official predicting "an
avalanche" of new mergers. Indeed, the day after the decision, Comcast announced a bid for 21st Century
Fox to rival a bid already submitted by Disney, causing Disney to increase its initial bid, which has
already been approved by the DOJ. It is possible that the district court's decision in United States v. AT&T
may signal the beginning of a new era of mergers in the media industry. The AT&T/Time Warner merger
itself may not have immediately clear effects because AT&T has pledged that Time Warner's cable
networks would operate independently through February 2019.
The decision also could spark renewed conversations about industry consolidation on Capitol Hill.
Certain Members of Congress have expressed concerns about consolidation across numerous industries.
In December 2016, shortly after the merger was announced, the Senate Judiciary Committee's
Subcommittee on Antitrust, Competition Policy, and Consumer Rights held a hearing examining AT&T's
proposed acquisition of Time Warner. If the district court's ruling does trigger a wave of new transactions,
Congress might again exercise oversight over the industry to examine the competitive forces driving any
Congressional Research Service
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Ruane, Kathleen Ann. Media Consolidation: United States v. AT&T and Implications for Future Transactions, report, July 16, 2018; Washington D.C.. (https://digital.library.unt.edu/ark:/67531/metadc1228586/m1/4/: accessed April 19, 2019), University of North Texas Libraries, Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.