Antitrust Lawyer Blog Commentary on Current Developments

Fake News: The DOJ/AT&T Trial Will Start on Time as Scheduled

On March 15, Judge Richard Leon said “Fake News” to a report that the trial will start on Wednesday, the 21st.  It will start on Monday at 10:30.  The first couple of days will be devoted to evidentiary objections.  Opening arguments will be on Wednesday and the Judge thinks the trial will take 6-8 weeks.

On March 13, 2018, Judge Leon denied the DOJ’s motion to limit the defendants from presenting evidence regarding Time Warner’s irrevocable offer to distributors that it would go into “baseball-style” arbitration in any carriage disputes over Turner networks and promise not to engage in any blackout of channels during arbitration for a period of 7 years.  AT&T simply had the better of the arguments with respect to the commitment.  Of course it is relevant and the DOJ had sufficient notice – it was in the Answer – and has had the opportunity to conduct discovery related to the commitment.  The time for the DOJ to make this argument was early on before discovery started.

AT&T made a good case that Professor Shapiro’s failure to account for this commitment in his models may have been tied with the DOJ’s motion to have the Arbitration Offer removed from consideration.  Apparently, Shapiro acknowledged that the commitment would benefit distributors in negotiations and that his bargaining model does not account for this market reality in deposition testimony.  A major limitation of the DOJ’s otherwise very good pre-trial brief is that its arguments are theoretical and not based on the facts.  It is somewhat difficult to get a handle on the strength of the DOJ’s arguments in its pre-trial briefs because many passages and key quotations are redacted.  On the whole, AT&T’s pre-trial brief is stronger.  It certainly appears that AT&T is poised to punch holes in the DOJ’s experts’ theories and bargaining model.

It appears that the DOJ will attempt to make the case that the merger will drive up prices for distributors, costs that will ultimately be passed on to consumers and to make out a coordinated effects case suggesting that the vertically integrated AT&T/Time Warner would coordinate with Comcast/NBCU to harm virtual MVPDs.  These theories make sense.  But, a lot depends on the strength of the redacted information and AT&T documents in DOJ’s Pre-trial brief, third party witness testimony, and DOJ’s experts. It remains unclear what the redacted information may say, when the cited comments were made, and in what context.  The DOJ appears to have documents related to what AT&T’s plans are to fend off virtual MVPDs to protect its MVPD business.  If so that could be damaging to AT&T’s defense.  The DOJ will put on witnesses that will say that they pay a premium for Time Warner content and how the content is “must have”.  On the other hand, AT&T has come out swinging with suggestions that it has already punched holes into the DOJ’s experts and theories (bargaining model, price increase estimates, and the inputs to the bargaining model related to subscriber loss rates, gross margin data, and diversion of customers).

This should be a fun one.  As Judge Leon says, the trial starts on March 19th.