For months now people wondered if AT&T would be allowed to complete its takeover of Time Warner. The cost was $84.5 billion, but there was a question of whether or not the merger would negatively impact the competition in the media world.
Time Warner owns big brands including Warner Bros., HBO and CNN, and the fear is that being bought by AT&T would lead to a less competitive field and thus, higher prices for consumers. That led to the Justice Department filing a suit last November to block the deal.
AT&T and Time Warner, however, argued that they needed to merge in order to compete with other tech giants who are in the streaming business. The case went before U.S. District Judge Richard Leon, who on Tuesday made his ruling.
The sale can go on
The decision was announced from the bench around 4:40 p.m. ET and across 172 pages, Leon explained that the government failed to meet its burden in establishing that the proposed merger would substantially lessen competition.
Along with that, Leon did not place any restrictions on the merger going forward.
Leon’s decision does not necessarily have to be final, though he implored the Justice Department not to stay his decision, saying there is “grave and understandable fear on the part of the defendants” that the Government “will now seek to do indirectly what it couldn’t accomplish directly.”
That, Leone wrote, “would cause irreparable harm to the defendants in general, and AT&T in specific.”
Not surprisingly, while AT&T and Time Warner celebrated the ruling, the other side was left disappointed.
In a statement, the Department of Justice said it “continues to believe the pay-TV market will be less competitive and less innovative as a result of the proposed merger” and that they will “closely review the Court’s opinion and consider next steps in light of our commitment to preserving competition for the benefit of American consumers.”
In other words, while the judge made his ruling this case does not appear to be settled just yet.
In the meantime, what’s next?
To be fair, we can’t quite be sure. Obviously both AT&T and Time Warner are pleased with the ruling, which paves the way for the merger to be closed on or before June 20.
David McAtee, AT&T’s general counsel, said at that point the company “can begin to provide consumers video entertainment that is more affordable, mobile, and innovative.”
That means Time Warner’s stations will soon have access to AT&T’s wide distribution system, which includes cellular and satellite networks.
As for what kind of precedent the ruling could set, it reaffirms the idea of vertical mergers being OK; that, two companies who do not compete with each other can join and it will be legal. Assuming this stands, it could pave the way for more similar mergers, as companies continue to try and keep up with each other.
When it comes to us, the consumer, so much remains to be seen. Fears over prices going up are legitimate, but nothing is guaranteed to happen.
At any rate, the ruling is viewed as a significant defeat for the Trump Administration’s Justice Department, who pursued the case only to come up short. It was at the time a curious decision, if only because history has shown mergers between companies like this — and not direct competitors — was legal.
Still, the AT&T and Time Warner deal was a topic during Trump’s presidential campaign, as back in October 2016 he said his administration would not approve the merger “because it’s too much concentration of power in the hands of too few.”
Why is the ruling such a big deal? Kim breaks it all down here: