- The Justice Department wants to block a potential merger between AT&T and Time Warner if the two companies do not agree to sell Turner Broadcasting, which includes the CNN news network.
- Legal experts say the department would have a difficult time defending any decision to block the merger over its demand to spin off Turner.
The Department of Justice is threatening to reject the proposed merger of AT&T and Time Warner if the companies do not agree to sell Turner Broadcasting, the group of channels that includes CNN.
The Financial Times first reported on Wednesday that the DOJ was demanding the sale of CNN, before other outlets reported that the department has demanded the sale of Turner or DirecTV before approving the $US85.4 billion deal. Officials told the FT they suspect the demand stems from President Donald Trump’s antipathy to CNN over the network’s aggressive coverage of his campaign and administration.
AT&T and Time Warner reportedly have no plans to sell the network, and they intend to challenge the DOJ if it rejects the proposed merger.
Legal experts argued that the DOJ’s argument would be easier to make if it was against Turner, as opposed to CNN.
Cornell Law School Senior Professor George A. Hay, a former DOJ official, cautioned that the news reports were “maddeningly imprecise,” saying that at the moment, he saw “no basis for an assertion that DOJ is demanding divestiture of CNN per se as opposed to the Turner assets.”
He explained that antitrust officials could make a strong argument that AT&T could leverage the Turner networks like CNN, Cartoon Network, and others to give itself an edge over competing distributors.
“There would be a logical basis for demanding divestiture of programming assets to insure that AT&T can’t use its control of those assets to disadvantage its distribution competitors (such as a cable network that competes against DirectTV),” he said.
“The question remains as to why this couldn’t be handled by some sort of behavioural remedy such as in the original TW-Turner merger but again a plausible case can be made that behavioural remedies are a second-best.”
“None of this rules out a political motive but if the story weren’t reported as ‘divest CNN’ it would be easier to have an intelligent discussion,” he said.
Other experts argued that it would be a difficult case for the DOJ to win, according to The New York Times:
To block the deal, Justice Department lawyers would have to successfully show that these effects would hurt consumers in the form of higher prices or fewer choices, antitrust lawyers said.
‘Because this is a vertical merger that combines distribution with content, the DOJ would have to show that a combined entity has the incentive as a vertically integrated company to foreclose rival content producers and/or rival distributors from access to content,’ Diana Moss, president of the American Antitrust Institute, said.
Others weren’t as sure that the case was open-and-shut.
“That is a difficult question,” Eleanor Fox, a professor of trade regulation at New York University, said in an email.
“The grounds for intervention are not in the traditional (laissez faire) mode but activists are arguing for a more expansive role for antitrust, especially regarding huge media concentrations that give the merger partners opportunity to favour their own product.”
Media reporter Peter Kafka argued that more broadly, the move could have a chilling effect on organisations that stand up to the Trump administration.
Though Trump voiced doubt about the merger on the campaign trail in 2016, the president has frequently criticised the network during his time in office over its coverage of his administration.
Chilling for business leaders who have been able to get by so far by grinning and griping with Trump, and telling him how great he is in public. Randall Stephenson did that, too. https://t.co/fvPJpZy7rr
— Peter Kafka (@pkafka) November 8, 2017
And most obviously, chilling for news organisations that cover Trump critically (and accurately): Trump is now threatening their owners directly. https://t.co/ILmOruiAvT
— Peter Kafka (@pkafka) November 8, 2017
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