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The U.S. Justice Department on Monday sued to block AT&T Inc.'s $85.4 billion takeover of Time Warner Inc., delivering a blow to the carrier's bid to create a media and telecommunications empire.

"This merger would greatly harm American consumers. It would mean higher monthly television bills and fewer of the new, emerging innovative options that consumers are beginning to enjoy," said Makan Delrahim, the head of the department's antitrust division.

The dispute surrounding the deal now shifts to the courtroom, where the Justice Department will make its case for why the deal harms competition and will ask a judge to block the tie-up.

"Today's DOJ lawsuit is a radical and inexplicable departure from decades of antitrust precedent," AT&T said in a statement. "We are confident that the Court will reject the Government's claims and permit this merger under longstanding legal precedent."

A representative for Time Warner couldn't immediately be reached for comment.

The challenge threatens a deal that had appeared to be sailing toward approval as recently as a month ago. That was before Delrahim took up his position and took over the investigation.

The parties continued to talk as recently as last week. During negotiations, Delrahim pushed for the companies to sell Time Warner's Turner broadcasting unit or AT&T subsidiary DirecTV, a request that AT&T rejected.

U.S. antitrust officials, who have blocked many mergers between direct competitors, rarely step in to stop so-called vertical deals like the Time Warner takeover, which unites a distributor and supplier.

Vertical deals are often viewed as pro-competitive, which has prompted some observers to argue that Delrahim is venturing onto shaky legal ground.

When enforcers have challenged similar transactions, like Comcast Corp.'s purchase of NBCUniversal, they have often negotiated behavioral conditions that set requirements for how companies conduct business.

Delrahim, however, doesn't favor behavioral fixes, saying that they turn law enforcers into regulators.

"Instead of protecting the competition that might be lost in an unlawful merger, a behavioral remedy supplants competition with regulation," Delrahim said Thursday during a speech in Washington.

President Donald Trump's repeated denouncements of CNN as fake news and criticism of the deal as being anti-competitive has sparked a chorus of accusations that the lawsuit is politically motivated.

White House spokesman Sarah Huckabee Sanders said Monday that she's "not aware of any specific action taken by the White House" related to the lawsuit.

AT&T is bound to put up a fight in court, and in the event of a trial, it's likely to seek court permission for access to communications between the White House and the Justice Department about the takeover.

Blocking the deal will ultimately be up to a federal judge who will weigh the government's case against AT&T's claim that the acquisition will benefit consumers. The two sides could still negotiate a settlement that would allow the merger to move forward.

While AT&T can go to court to fight for the deal, a defeat would be a major setback to the media makeover strategy of the company, which is contending with stalling growth in wireless and TV. A rejection could also slam the brakes on further consolidation in the media and telecommunications industry.

The lawsuit marks the second time in six years that AT&T Chief Executive Officer Randall Stephenson has found himself facing government opposition over a deal.

In 2011, AT&T dropped its $39 billion bid to acquire T-Mobile US Inc. after the Justice Department sued to block that merger and the Federal Communications Commission said the tie-up wasn't in the public interest. Stephenson kept his job but took a $2.08 million pay cut that year for failing to successfully complete the deal.

The proposed Time Warner purchase is a move by Stephenson to expand into media and entertainment as his company's wireless, Internet and pay-TV services businesses mature. Gaining premium cable channels such as HBO and CNN and adding the Warner Bros. studio would make AT&T a media and distribution powerhouse with an arsenal of news and entertainment properties including Game of Thrones and Wonder Woman.

The proposed takeover is part of a trend of megadeals sweeping across industry lines, including Comcast's $3.8 billion purchase of DreamWorks Animation and the cable giant's plunge into TV programming with the NBCUniversal deal. Verizon Communications Inc., AT&T's closest peer, has opted to buy online properties like AOL Inc. and Yahoo Inc. in an attempt to expand beyond its slow-growing mobile service.

The AT&T-Time Warner combination doesn't reduce the number of news outlets because it only shifts ownership of CNN from one company to another. CNN's main competitors are MSNBC, owned by Comcast, and Fox News, which is owned by Rupert Murdoch's 21st Century Fox Inc.

AT&T's scale, with national wireless and pay-TV networks, is one reason its deal has drawn even more scrutiny.

A trial may reveal whether CNN's coverage of Trump was another reason. Attorney General Jeff Sessions was asked last week during a House hearing whether anyone from the White House contacted the Justice Department to interfere with or discuss the AT&T deal.

Sessions said he was unable to comment on "conversations or communications that Department of Justice top people have with top people in the White House."

But Trump isn't the only politician who has criticized the deal. Democratic lawmakers including Sens. Al Franken of Minnesota and Elizabeth Warren of Massachusetts told Sessions in June that the merger would lead to higher prices, fewer choices and worse service for consumers.

While it isn't illegal for Trump to make his views known to the Justice Department, the White House has traditionally stayed at arm's length from merger reviews. Trump told reporters during his recent trip to Asia that the deal might be challenged in court.

"I do feel that you should have as many news outlets as you can, especially since so many of them are fake," Trump said. "This way, at least you can get your word out. But I do believe you should have as many news outlets as you can."

A Section on 11/21/2017

Print Headline: U.S. sues in bid to block merger involving AT&T

Comments

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  • hah406
    November 21, 2017 at 8:40 a.m.

    DOJ is doing this on Trump's orders, and purely because of his hatred of CNN.

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