After a six-week trial, Judge Richard Leon ruled that the government had
failed to prove that the deal violates antitrust law, and ripped apart its case
in his opinion.
Using unusually strong language, he discouraged the Justice Department
from asking him to put the ruling on hold while it considers an appeal. He said
such a stay would be "manifestly unjust" because it would have the
effect of killing the acquisition.
AT&T celebrated the ruling and vowed to close the deal by June 20 — meaning that HBO,
CNN, Warner Bros. and Time Warner's other brands will change hands next week.
The deal will unite Time Warner's TV shows and movies with AT&T's enormous
distribution system, including cell phone and satellite networks.
"This was a defining case for antitrust enforcement in the
US," former Justice Department antitrust attorney Ketan Jhaveri said.
"It does seem to be a complete and total victory for AT&T."
In a blunt statement after the ruling was issued, Time Warner (TWX) pointed the finger at President Trump, implying that
he influenced the DOJ's decision to bring the case. Time Warner said the
government's lawsuit was baseless, "political in its motivation," and
should have never been brought.
The DOJ and the White House have previously denied charges of political
interference. The Justice Department's top antitrust official, Makan Delrahim,
issued a sworn affidavit during the trial saying the decision to bring the case
was not influenced by the White House.
Trump spoke out against the deal when it was announced in October 2016.
He cited the size of the combined companies. The transaction is one of the
biggest in media and telecom industry history.
AT&T said it needed Time Warner to survive in a rapidly changing
media landscape, especially to compete against giants like Netflix and Amazon.
But the antitrust division of Justice Department sued in November 2017 to stop it,
arguing that the combination would harm competition and raise prices for
consumers.
The judge didn't buy that. He had the option of rejecting the deal outright or
demanding certain conditions, including that AT&T sell some of Time
Warner's assets. But he signed off on the deal with no conditions and knocked
down the government's contentions point by point.
"The Government has failed to meet its burden of proof to show that
the merger is likely to result in a substantial lessening of competition," he wrote in his ruling.
Delrahim said the government was disappointed in the ruling and would
"consider next steps."
"We continue to believe that the pay-TV market will be less
competitive and less innovative as a result of the proposed merger between
AT&T and Time Warner," he said in a statement.
Daniel Petrocelli, lead attorney for AT&T and Time Warner, speaks
outside the court house.
AT&T and Time Warner's lead lawyer, Daniel Petrocelli, said outside
the courthouse that the companies were gratified and relieved.
The judge's ruling is being seen by tech and telecom giants as a green
light to pursue a slew of major media acquisitions.
Comcast is widely expected to bid within days for part of 21st
Century Fox. (FOX) That would set up a showdown
with Disney, (DIS)which has already put in a bid for those assets. Fox stock
jumped more than 6% in after-hours trading following the ruling.
"Brian Roberts and Team Comcast are cleared to bid," BTIG
Research analyst Rich Greenfield told CNNMoney after the ruling. "The
question is whether Disney is ready."
A Comcast spokesperson declined to comment.
The larger business world was also watching Tuesday's announcement very
closely. Companies in many industries may feel more free to strike deals as a
result of Leon's ruling.
"It's open season for vertical mergers," said Chris Sagers, an
antitrust law professor at the Cleveland-Marshall College of Law. "The
fact is that they've gotten a little easier, and we'll see a big flurry of
deals."
Some of AT&T's top executives traveled to Washington for the
announcement. Leon, living up to his old-school reputation, read part of the
ruling aloud and didn't allow anyone to report the news until he finished
speaking.
AT&T CEO Randall Stephenson remained at company headquarters in
Dallas, and he learned of the ruling when AT&T general counsel David McAtee
called him, a spokesperson said. Stephenson was relieved. So was outgoing Time
Warner CEO Jeff Bewkes, who also learned the news from a phone call.
The deal could still be imperiled if the Justice Department convinces a
circuit court to issue a stay pending appeal. But Leon's comment discouraging a
stay makes that outcome seem unlikely.
Otherwise, AT&T will take control of the Time Warner assets in about
a week. John Stankey will become the executive in charge of the assets,
succeeding Bewkes.
AT&T announced plans to acquire Time Warner on October 22, 2016.
That same day, Trump, then a candidate for president, pledged that his
administration would block the deal.
"As an example of the power structure I'm fighting, AT&T is
buying Time Warner and thus CNN, a deal we will not approve in my
administration because it's too much concentration of power in the hands of too
few," he said.
When the government sued a year later, it alleged that a combined
AT&T-Time Warner would have too much leverage in negotiations with
television distributors, which would hurt competitors, harm innovation and
could lead to increased cable prices for consumers.
AT&T and Time Warner say the combined company can leverage viewer
data to make better content to sell more targeted ads, which they claim could
help lower prices for consumers.
Initially, the companies planned to use a "selective
enforcement" defense, alleging that the administration was blocking the
deal because of Trump's disdain for CNN. But Leon blocked discovery on certain
White House communications that AT&T and Time Warner were seeking, and the
companies dropped that defense, choosing to litigate the case on pure antitrust
grounds.
And ultimately that's what worked.
"The case stands as a testament to the wisdom of this combination
of these two great companies, and how it will benefit consumers for generations
to come," Petrocelli told reporters afterward.
"We're disappointed that it took 18 months to get here," he
added, "but we are relieved that it's finally behind us."
Click here for the original article from CNN.