U.S. DoJ Says Ruling Approving AT&T-Time Warner Merger Ignored 'Fundamental Principles of Economics and Common Sense'

The U.S. Department of Justice today filed an appeal with the District of Columbia Appeals Court protesting the June ruling that allowed the merger between AT&T and Time Warner to move forward, reports The Washington Post.

In the filing, the DoJ says the district court approved the merger after "erroneously ignoring fundamental principles of economics and common sense" and that it used a "deeply flawed assessment of the government's evidence" to reach its decision.

According to the DoJ, AT&T's access to Time Warner's content, including the highly important Turner Broadcasting System, which includes CNN, Cartoon Network, TBS, TNT, and other networks, gives it bargaining leverage over rivals, which could drive up access fees, ultimately resulting in higher prices for consumers.

The original ruling approving the merger, says the DoJ, ignored key documents from AT&T on the competitive harm of vertical mergers, limited expert economic testimony, and refused to close the courtroom to allow for testimony related to confidential business information. Further, the DoJ insists the original ruling ignored the economics of bargaining and did not consider corporate profit maximization.

The government established a reasonable probability that the AT&T-Time Warner merger would increase Time Warner's bargaining leverage and, thus, substantially lessen competition, in violation of Section 7 of the Clayton Act.

The district court's contrary conclusion rests on two fundamental analytical errors: it discarded the economics of bargaining, and it failed to apply the foundational principle of corporate-wide profit maximization. These errors colored the court's view of the facts, leading to a decision that is clearly erroneous in light of the evidence presented at trial.

The Department of Justice is asking the appeals court to vacate the district court's ruling and remand the matter for further proceedings.

AT&T and Time Warner completed their merger in June following the judge's ruling that the merger was legal. The Justice Department said at the time that it was disappointed in the court's ruling and would consider its next steps, but allowed the merger to move forward and did not file an emergency stay.

While the merger is finished, the Department of Justice remains able to appeal the judge's ruling and first announced plans to do so back in mid-July.

Shortly after acquiring Time Warner, AT&T announced a new WatchTV service allowing AT&T wireless subscribers with new "AT&T Unlimited &More" and "AT&T Unlimited &More Premium" plans access to more than 30 live channels and 15,000 TV shows and movies on demand.

AT&T's plans are more expensive than previous unlimited wireless plans, but they include WatchTV, which AT&T charges $15 per month for on a standalone basis.

Though AT&T said that its prices would not increase following the merger, it raised prices on its DirecTV Now plans by $5. AT&T also recently raised its administrative fees for postpaid wireless subscribers to $1.99, which some analysts have speculated is to make up for the expense of the Time Warner purchase.

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Tags: AT&T, Time Warner

Top Rated Comments

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aka777

17 months ago

Government protecting consumers. That’s a good one. All their unnecessary regulations causes prices on everything to be tremendously higher than they should be in the first place.

This deal would be blocked in pretty much any other developed country. It's just interesting that free market capitalist types don't seem to grasp the core fundamentals of Capitalism, which is competition. Monopolies and Super-Corporations go against the core principle of Capitalism.

Also, with the exception of America, every single developed country has government bodies looking out for their We the People. The success of this is why today, 19 of the top 20 economies on the planet are Big Gov types.

We can also break this down on a state level, as almost all of the bottom 20 states for GDP per capita, wealth per capita, home prices, incomes, quality of life, poverty, education etc are No Gov Red States. Whereas, the majority of the top 20 states for the above are Big Gov Blue States. Ironically, the biggest welfare recipient states in the Union are also No Gov Red states.

Rating: 23 Votes

ActionableMango

17 months ago

Also, with the exception of America, every single developed country has government bodies looking out for their We the People.

Oh really.

* Why Canadian cell phone bills are among the most expensive on the planet ('https://nationalpost.com/news/canada/why-canadian-cell-phone-bills-are-among-the-most-expensive-on-the-planet')
* Canadians Get Some Of World’s Worst Deals On Wireless Data, Study Finds ('https://www.huffingtonpost.ca/2018/05/08/wireless-data-prices-canada_a_23429799/')
* How Did Australia End Up With Such Ridiculously Slow Internet? ('https://www.forbes.com/sites/millystilinovic/2017/02/14/how-australias-ridiculously-slow-internet-speeds-are-harming-its-residents/#2bd3851afc06')
* Australia Internet slower than Kenya ('https://www.smh.com.au/business/companies/life-in-the-slow-lane-australia-has-slower-internet-than-kenya-20171004-gytril.html')

Rating: 9 Votes

Kaibelf

17 months ago

Government protecting consumers. That’s a good one. All their unnecessary regulations causes prices on everything to be tremendously higher than they should be in the first place.

Nonsense. This is the government interfering with a vertical merger because they want to punish CNN.

Rating: 8 Votes

aka777

17 months ago

There is plenty of competition to AT&T/DirectTV.

They're actually purchasing the content side with this deal. They're not buying TWC. That means that AT&T will be in control of the distribution, which can and will affect all of the services that you listed.

There is also plenty of cell phone competition.

Not in America, we are about to drop to 3 carriers, which hardly counts as plenty. The largest two American carriers essentially only compete superficially anyway, which is why the American wireless market is ranked as offering one of the worst value in the developed world.

Perhaps you're thinking of Europe or Asia.

Why Canadian cell phone bills are among the most expensive on the planet

They only have 3 carriers.

Canadians Get Some Of World’s Worst Deals On Wireless Data, Study Finds

We basically rank the 2nd worst. We also rank extremely poorly for wireless speeds.

How Did Australia End Up With Such Ridiculously Slow Internet? Australia Internet slower than Kenya

That's disingenuous as the Aussies are building a $50 Billion dollar nationwide wholesale broadband network that allows for any number of competitors. It's pretty much a world first.

Now compare this to the majority of America, which barely has one broadband option. In most American cities, I had a choice of either cable or DSL. I had a good 6+ ADSL 2 options to chose from in Australia + 2 cable networks. Their Mobile networks also rank highly for speed.

Rating: 4 Votes

miniyou64

17 months ago

Government protecting consumers. That’s a good one. All their unnecessary regulations causes prices on everything to be tremendously higher than they should be in the first place.

Rating: 4 Votes

Cigsm

17 months ago

Lol that’s so cute you think businesses aren’t in business to make as much money as possible and absolutely certainly wouldn’t do everything possible to make every dollar they can.

It’s even cuter you made that comment on an article stating AT&T told the government the merger wouldn’t raise rates and then a month after it was approved they raised rates.

Government protecting consumers. That’s a good one. All their unnecessary regulations causes prices on everything to be tremendously higher than they should be in the first place.

Rating: 3 Votes

Diode

17 months ago

Huh? Did we read the same article. This is not about Hulu and the like. It’s about where those services buy their content from. All it takes is Time Warner (TBS, CNN etc) raising prices for Hulu, Netflix etc to stream their content and it will pass on to consumers.

Same with cell phones - a t-mobile / Sprint merger is on the horizon and you can kiss MVNO deals good bye.

Rating: 3 Votes

Solomani

17 months ago

Capitalism is an obsolete American ideal. What we have now is not capitalism. It's Corporatism. The US Government is in cahoots with the Mega-corporations, they scratch each other's backs. The Government enacts laws that favor the Corporations (over the consumers/citizens). The corporations spend their wealth and lobby money to keep their supporters in government in power. And the cycle perpetuates. The ordinary consumers/citizens can't do anything about it.

Rating: 3 Votes

Princejb134

17 months ago

There is plenty of competition to AT&T/DirectTV.

For TV there is free over-the-air antenna, all the cable companies, FIOS, DISH, Amazon, Netflix, Hulu, Sling, iTunes, FandangoNow, VUDU, Crackle, Google Play, Yahoo, Playstation, Microsoft, and even multiple disc-based services.

There is also plenty of cell phone competition. Four nationwide networks AT&T, Verizon, Sprint, and T-Mobile, plus some regional networks like US Cellular, and dozens or hundreds of MVNOs using those networks. Right here in these forums there are plenty of people switching between the carriers all the time. It takes tens of billions of dollars to build a nationwide cellular network, so how many companies do you expect to do that and be able to compete? 5? 6? 15? I'm not even sure 4 is sustainable...Sprint isn't looking too good.

Oh really.

* Why Canadian cell phone bills are among the most expensive on the planet ('https://nationalpost.com/news/canada/why-canadian-cell-phone-bills-are-among-the-most-expensive-on-the-planet')
* Canadians Get Some Of World’s Worst Deals On Wireless Data, Study Finds ('https://www.huffingtonpost.ca/2018/05/08/wireless-data-prices-canada_a_23429799/')
* How Did Australia End Up With Such Ridiculously Slow Internet? ('https://www.forbes.com/sites/millystilinovic/2017/02/14/how-australias-ridiculously-slow-internet-speeds-are-harming-its-residents/#2bd3851afc06')
* Australia Internet slower than Kenya ('https://www.smh.com.au/business/companies/life-in-the-slow-lane-australia-has-slower-internet-than-kenya-20171004-gytril.html')

Yup but there ain't no competition when it comes to internet access. Netflix and Hulu is only a cheap alternative if you don't pay high prices for internet.
Knowing Atnt and its selfish history. They will definitely raise prices

Rating: 2 Votes

WarHeadz

17 months ago

Wow...the DOJ actually doing it’s job. I wonder what the ulterior motive is. Someone at AT&T must have pissed off someone in this administration.
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Competition with Internet will come when the cellular infrastructure could support unlimited home broadband for millions of people simultaneously. The reason there’s no completion now is because of who owns the fiber optic cable in the ground.

Rating: 2 Votes

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