Noticeably absent in AT&T’s filing was an earlier argument it had made: that the government singled out the company’s deal because of presidential politics. President Trump was a vocal critic of the deal during his presidential campaign, and while in office, he has consistently blamed CNN, a channel owned by Turner and part of Time Warner’s television business, for unfair coverage of his administration.
AT&T originally argued to the court that the Justice Department’s suit was a case of “selective enforcement” — that the government was essentially blocking the deal because the president was against it.
But late last month, Judge Richard J. Leon, who is overseeing the trial, rejected demands by AT&T for detailed email and phone logs between the White House and the Justice Department related to the deal. AT&T and Time Warner has dropped “selective enforcement” as a defense, according to the new filings.
Even absent the question of presidential interference in the deal, the trial is pivotal for the telecom and media industries, providing a clue about the chances of other industry deals, like Disney’s bid for 21st Century Fox. AT&T’s chief executive, Randall Stephenson, and Time Warner’s chief executive, Jeffrey Bewkes, are expected to take the stand.
“This is the single most important decision this year” for technology, telecom and media firms, said Amy Young, a research analyst at Macquarie Group in New York. “It will frame regulation and mergers and acquisitions going forward and raise questions about all the consolidation in the past, too.”
If the judge sides with AT&T and Time Warner, he would usher in the creation of a new kind of corporate behemoth — one with nationwide reach via wireless and satellite television service that would also have control over a movie studio and channels like HBO, CNN and TNT, which has valuable basketball sports rights.
The company would have a leading position to negotiate licensing deals with rival telecom and media firms. It would also be in a stronger position against fast-growing streaming video services like Netflix and Amazon Prime Video.
If the Justice Department prevails in this suit, it would signal a new era of scrutiny for the media and telecom industries. In 2011, Comcast won approval for its purchase of NBCUniversal that also created an enormous telecom and media company. The Justice Department insisted on several conditions that restricted Comcast from anti-competitive business practices.
The trial will also reveal much about the state of the industry. Rivals such as Comcast, Dish and Sony are expected to be called as witnesses to reveal details about their business dealings with AT&T and Time Warner in the past. The Justice Department is expected to argue that a combined AT&T and Time Warner would have the incentive to make it harder for competing media companies to distribute their programming through AT&T, and for Time Warner brands to limit their distribution outside of AT&T.
The Justice Department will also present economic analysis suggesting that the new company is likely to raise prices for consumers.
“As will be shown at trial, the government is challenging this merger to address the real concerns of real people who populate the real marketplace today,” the Justice Department said in its brief.
AT&T said it would challenge the government’s arguments that the merger would increase consumer prices and hamper competition by raising licensing fees for Time Warner content. The company said it would argue that the merger of two companies that do not compete would be a stronger competitor in a market that had many new companies from Silicon Valley, like Facebook and Netflix.
“As will be demonstrated at trial, the new video revolution is defined by the spectacular rise of Netflix, Amazon, Google, and other vertically integrated, direct-to-consumer technology companies as market leaders in both video programming and video distribution,” AT&T said in its brief.