AT&T-Time Warner Merger Upheld by Us Appeals Court

A US appeals court Tuesday affirmed the mega-merger of wireless and broadband giant AT&T with media-entertainment powerhouse Time Warner, rejecting an effort by the administration of President Donald Trump to block the deal.

In a unanimous ruling, the three-judge appellate panel said the government’s case failed to consider that the industry had become “dynamic in recent years” with the emergence of online services such as Netflix and Hulu.

The $85 billion deal brings together AT&T’s wireless and broadband networks and its DirecTV subscription service with the media assets of Time Warner, which include CNN and other Turner cable channels, the Cartoon Network, premium channel HBO and the Warner Bros. movie studio.

Remember when Trump had “his” Justice Department try to block the AT&T-Time Warner merger because he was pissed off at Time Warner subsidiary CNN’s coverage. Twice. This is authoritarianism. Fortunately he lost.https://t.co/INE9HDatJe

— Amy Siskind 🏳️‍🌈 (@Amy_Siskind) February 26, 2019

The government brought the high-profile antitrust case, claiming the deal would give AT&T too much power in the market for pay television and home entertainment. But US District Judge Richard Leon ruled last year that the government had failed to show the deal would harm competition.

The appellate court opinion by Judge Judith Rogers affirmed that decision, saying the industry is undergoing massive changes led by on-demand video services and rivals offering small packages of channels — known as “skinny bundles.” The appeals court also rejected claims that the lower court misunderstood and misapplied economic arguments in the case.

AT&T, which completed the tie-up last year and renamed the entertainment unit as WarnerMedia, welcomed Tuesday’s ruling. “The merger of these innovative companies has already yielded significant consumer benefits, and it will continue to do so for years to come,” David McAtee, AT&T’s general counsel, said in a statement.

AT&T and others had argued the government brought the case because of President Donald Trump’s dislike of CNN — a frequent target of White House claims of “fake news” — but the courts declined to hear any evidence on political bias.

The case had been closely watched as setting a benchmark for other big corporate mergers, especially in the media and communications sector. The tie-up comes amid a shifting media landscape, including a mega-deal that gives Walt Disney Co. the main media-entertainment assets of 21st Century Fox. AT&T argued that the deal should not raise antitrust concerns because it was a “vertical” merger of companies not competing against each other, and thus not impacting market share.

The government argued that AT&T and Warner would have the power to deny key programs to rival and ultimately increase prices to consumers. The lower court ruling said the government’s claim that pay TV costs would rise from the tie-up was based on “speculative” logic and that its study from an expert witness was contradicted by other evidence from the government.

The Justice Department had no immediate comment on the ruling. It could ask for an additional ruling by the appeals court with a so-called “en banc” appeal and potentially seek a decision from the US Supreme Court.