A federal judge approved AT&T's $85.4 billion purchase of Time Warner on Tuesday, handing the telecommunications giant a victory in one of the most closely watched antitrust trials in decades.
From Comcast's bid for 21st Century Fox to CVS' acquisition of Aetna, corporations increasingly have sought to expand their reach by buying up companies in different lines of business. The judge's decision, which is allowing AT&T to merge with Time Warner without conditions, shows the federal government may struggle to rein in such mergers.
"I think for business, in general, it's going to be seen as a green light for mergers. I think you'll see a lot of people using it as an opportunity to push mergers they may have been thinking about," said Ed Black, president of the Computers and Communications Industry Association, a trade group in Washington, D.C., that represents companies like Amazon, Facebook and Google.
Federal judge Richard Leon said the Justice Department -- whose antitrust chief, Makan Delrahim, brought the case -- failed to provide sufficient proof that the deal would harm competition or consumers.
He took issue with the government's analysis that the merger would result in higher prices for consumers, telling a packed courtroom that the findings "rested on improper notions."
Leon made it clear that the government had failed to prove any of its arguments against the merger during the six-week trial.
The judge also warned the U.S. government against bringing an appeal if the purpose was to try to stymie the deal. For the moment, the Justice Department has not indicated its next steps.
"The parties have waged an epic battle," Leon said. "The court has spoken."
AT&T, already a telecommunications giant with more than 100 million wireless subscribers and 25 million pay TV homes, will acquire Time Warner's valuable entertainment assets, including HBO, CNN, Cartoon Network, TBS, TNT, Turner Classic Movies and Warner Bros., Hollywood's largest TV and movie studio.
The decision means AT&T will now control highly sought-after programming -- including Game of Thrones, the Harry Potter movie franchise, and CNN.
"We are pleased that, after conducting a full and fair trial on the merits, the Court has categorically rejected the government's lawsuit to block our merger with Time Warner," said David McAtee, the general counsel of AT&T. "We look forward to closing the merger on or before June 20 so we can begin to give consumers video entertainment that is more affordable, mobile, and innovative."
Wall Street welcomed the decision, which boosted the shares of other media companies. Time Warner Inc. closed at $96.22 and jumped 5 percent in after-hours trading, although shares in AT&T, which closed at $34.35 Tuesday, dropped 1.5 percent after markets closed.
Before the ruling, public-interest advocates worried that an AT&T victory would quicken the consolidation of the media, telecom and tech industries.
Everyone's waiting to see what happens in entertainment, said Gene Kimmelman, the president of Public Knowledge. "But if Google and Facebook get the signal the court will not let the government block vertical transactions, then the door is open for them buying more artificial intelligence firms, more messaging firms, more data-gathering firms. I think what you see is everybody bulks up in their space."
The antitrust case was unusual because it dealt with a vertical merger, meaning the two companies do not directly compete in their primary businesses.
Such deals are different from horizontal mergers, which involve companies that compete directly. Those mergers remove competitors from the marketplace and are more frequently blocked.
In a statement, Delrahim said he was "disappointed" in the ruling but stopped short of saying his division would appeal, saying only that it would "consider next steps in light of our commitment to preserving competition."
Months before President Donald Trump nominated him to the Justice Department's leading antitrust position in 2017, Delrahim had expressed an openness to the combination of AT&T and Time Warner, predicting in an interview on Canadian television that it might not trigger any regulatory concerns.
Trump, however, was critical of the merger. Delrahim maintained that he had not been instructed by the White House on how to handle the transaction.
Trump had said during the 2016 presidential campaign that the merger would concentrate too much media power in one company, and his long-running feud with Time Warner's CNN cast a political shadow over the case.
The White House did not immediately respond to a request for comment.
Speaking after the ruling, AT&T's chief lawyer, Daniel Petrocelli, sidestepped many questions about potential political interference. Instead, he said the companies were frustrated that the resolution took 18 months but were relieved that the fight was finally over.
"It was a case that should never have been brought," Petrocelli said. "The government could present no credible proof in defense of its theories."
In an extraordinary move, Leon did not post his decision online. He delivered it from the bench. Spectators were not allowed to leave the courtroom until Leon finished.
Professional line-standers, who were paid by attorneys, corporate executives and hedge-fund managers to hold a place in the courtroom line, began lining up outside the courthouse on Monday afternoon -- nearly 24 hours in advance. About 50 spent the night on the street outside.
In the courtroom, just before the session was set to begin, court deputy John Haley instructed the crowd that nobody would be able to leave while the judge was delivering his decision "except maybe on a gurney."
Now that AT&T's bid to purchase Time Warner has been approved, other companies are likely to rush to consolidate. Some media industry watchers expect Comcast to bid for Fox's entertainment business as early as today.
Disney has made a $52.4 billion all-stock offer for the bulk of Twenty-First Century Fox, including the studios behind Avatar, The Simpsons and Modern Family.
But Comcast has said it is preparing an all-cash offer that is superior to Disney's.
Fox previously rejected a bid from an unnamed suitor, widely believed to be Comcast, because of potential regulatory roadblocks. AT&T's favorable ruling would seem to clear those objections.
If Comcast succeeds in outbidding Disney, a major cable distributor would control even more channels on its lineup and those of its rivals. That could lead to higher cable bills or make it more difficult for online alternatives to emerge, though there is not yet evidence of either happening after other mergers.
For Disney, a successful Comcast bid could make Disney's planned streaming service less attractive.
In April, telecom companies Sprint and T-Mobile announced a $26.5 billion combination. The deal would combine the nation's third- and fourth-largest wireless companies and bulk them up to a similar size to Verizon and AT&T.
A 2014 attempt to combine fell apart amid resistance from the Barack Obama administration.
The worry is that with just three major carriers, there would be less incentive to keep innovating on prices and service.
Information for this article was contributed by Tony Romm and Brian Fung of The Washington Post, Jim Puzzanghera and Meg James of the Los Angeles Times and Mae Anderson of The Associated Press.
Business on 06/13/2018