On June 12, U.S. District Court Judge Richard Leon approved the proposed merger between telecommunications giants AT&T and Time Warner. Last year, the Department of Justice (DOJ) sued to block the merger on the grounds of federal anti-trust law. Specifically, the DOJ was worried about the possibility of AT&T, which owns satellite television provider DirecTV, charging competitors more for Time Warner content.
The DOJ’s lead attorney argued that consumers would have “higher bills and fewer of the new, emerging innovative options.” AT&T announced in October 2016 that it wanted to purchase Time Warner to “diversify its revenues.”
Judge Leon, in his full decision, noted that the merger was a vertical merger which would “result in hundreds of millions of dollars in annual cost savings to AT&T’s customers” and that “no competitor will be eliminated by the merger’s proposed vertical integration.” Vertical integration means that the company is buying a part of its operating cost (i.e. if a carmaker bought a tire manufacturer). This is allowed under federal anti-trust laws – but if the automaker bought another automaker, that would be horizontal and that merger might be blocked.
Leon concluded that the DOJ did not have enough evidence to prove that the merger would lessen AT&T’s competition. The DOJ could not prove that more people would purchase or switch to AT&T’s service based on owning HBO if the deal were to go through, or that AT&T would restrict its rivals’ use of the channel.
Tech companies like Netflix and Amazon are changing the television landscape. According to The Wall Street Journal, the rise of these companies led many to believe that bundles for cable, Internet, and phone service were “on the way out.”
After the ruling, Leon said in his decision that while the Government may seek to “stay” his ruling “pending an appeal to our Circuit Court,” he believes that the government would not have a strong reason or strong chance to successfully appeal the ruling based off, in part, his 170-page decision.
AT&T General Counsel David McAtee said that they “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.” The ruling would now allow AT&T ownership of channels such as HBO, CNN, and Warner Bros. film studio, according to CNBC.
With more access to entertainment than ever before, the ruling could have significant ripple effects across the market.