Antitrust Lawyer Blog Commentary on Current Developments

Articles Tagged with AT&T

On November 21, 2017, the U.S. Department of Justice (“DOJ”) filed a lawsuit to block AT&T Inc.’s acquisition of Time Warner Inc. The vertical merger, which combines AT&T’s video distribution platform with Time Warner’s programming, could be the first such deal litigated in almost 40 years.

According to the DOJ, the proposed acquisition will result in higher prices for programming, thus harming consumers. The DOJ’s complaint alleges that the merged firm will have the increased ability and incentive to credibly threaten to withhold or raise the price of crucial programming content – such as Time Warner’s HBO, TNT, TBS, and CNN – from AT&T’s multi-channel video programmer distributor (“MVPD”) rivals. At present, Time Warner negotiates with an MVPD to reach a price that depends on each party’s willingness to walk away. But the transaction would change the bargaining leverage such that AT&T/Time Warner would have less to lose from walking away. Or so the DOJ alleges. According to this reasoning, post-merger, if the merged firm and an MVPD are unable to reach an agreement, some customers would switch from their current MVPD to AT&T/DirecTV in order to obtain the sought-after Time Warner content. In addition, the DOJ alleges that AT&T/DirecTV has approximately 25 million subscribers and that there are 18 Designated Marketing Areas (“DMAs”) – out of 210, nationwide – where AT&T/DirecTV has approximately 40% share of the local MVPD market.

However, AT&T’s response indicates that the DOJ’s complaint is a misguided effort to block a pro-competitive deal that poses no real threat to consumers. The DOJ’s theory betrays a lack of understanding of the current and rapidly evolving market for content and distribution. The merged firm will still have a strong financial incentive to license Time Warner’s programming to as many outlets as possible. Because local cable monopolies dominate local markets through the bundling of broadband and MVPD services, AT&T does not have a clear economic incentive to cut off rival video distributors. After all, such a strategy is risky because AT&T might lose more than it gains with only the possibility that a small number of subscribers would switch to AT&T/DirecTV. In fact, consumers are increasingly willing to cut the cord entirely as they look to virtual MVPDs like Sling TV as well as subscription video on demand services (“SVODs”) such as Amazon Prime (80 million U.S. subscribers) and Netflix (109 million subscribers worldwide), demonstrating that the video distribution and content markets have become ever more dynamic – and competitive. And the lines between MVPDs, virtual MVPDs and SVODs are blurring as Amazon Prime recently carried the Titans/Steelers game live. AT&T called out the DOJ for not providing any market analysis or empirical evidence to support its theory that consumers would be harmed.

On November 20, 2017, the U.S. Department of Justice (“DOJ”) filed a civil antitrust lawsuit to block AT&T Inc.’s (“AT&T”) proposed acquisition of Time Warner Inc. (“Time Warner”).

The vertical merger, which combines AT&T’s video distribution platform with Time Warner’s programming, could be the first such deal litigated in almost 40 years.

According to the DOJ’s Antitrust Division, the acquisition would substantially lessen competition by resulting in higher prices for programming, thus harming consumers. The DOJ’s complaint alleges that the merged firm will have the increased ability and incentive to credibly threaten to withhold or raise the price of crucial programming content – such as Time Warner’s HBO, TNT, TBS, and CNN – from AT&T’s multi-channel video programmer distributor (“MVPD”) rivals.

On March 23, 2017, the U.S. Department of Justice (“DOJ”) announced that it reached a settlement that will prohibit DIRECTV Group Holdings, LLC (“DirecTV”) and its parent corporation, AT&T Inc. (“AT&T”), from illegally sharing confidential, forward-looking information with competitors.

On November 2, 2016, the DOJ’s Antitrust Division filed suit alleging that DirecTV was the ringleader of a series of unlawful information exchanges between DirecTV and three of its competitors – namely, Cox Communications Inc. (“Cox”), Charter Communications Inc. (“Charter”) and AT&T (before it acquired DirecTV) – during the companies’ negotiations to carry the SportsNet LA “Dodgers Channel.”

SportsNet LA holds the exclusive rights to telecast almost all live Dodgers games in the Los Angeles area.  According to the complaint, DirecTV’s Chief Content Officer, Daniel York, unlawfully exchanged competitively-sensitive information with his counter-parts at Cox, Charter and AT&T while they were each negotiating with SportsNet LA for the right to telecast the Dodgers Channel.  Specifically, the complaint alleges that DirecTV and each of these competitors agreed to and exchanged non-public information about their companies’ ongoing negotiations to telecast the Dodgers Channel, as well as their companies’ future plans to carry – or not carry – the channel. The complaint also alleges that the companies engaged in this conduct in order to unlawfully obtain bargaining leverage and to reduce the risk that they would lose subscribers if they decided not to carry the channel but a competitor chose to do so. The complaint further alleges that the information learned through these unlawful agreements was a material factor in the companies’ decisions not to carry the Dodgers Channel. The Dodgers Channel is still not carried by DirecTV, Cox or AT&T. The DOJ allegations make out a buyer conspiracy case that violate Section 1 of the Sherman Act.  The DOJ further claims that the illegal information sharing corrupted the competitive bargaining process and likely contributed to the lengthy blackout.

About a week before taking office, President-elect Trump had two high level meetings with CEOs of companies that are involved in significant acquisitions currently under antitrust review by the Department of Justice’s Antitrust Division.  The meetings raise questions about the integrity and independence of the DOJ’s merger reviews going forward under a Trump administration. 


AT&T/Time Warner

On January 12, 2017, AT&T Inc. (“AT&T”) Chief Executive Officer Randall Stephenson said that in his meeting with President-elect Donald Trump they touched on job creation, investment and competition, but he noted that AT&T’s merger with Time Warner Inc. (“Time Warner”) did not come up.  We find that hard to believe given President-elect Trump’s open reservations about the transaction and his ongoing battle with CNN.