Money, power and the massive influence of controlling TV distribution are on trial right now, and it will determine the creation of a media behemoth like we’ve never seen before.
On the campaign trail in 2016, Trump said he wouldn’t approve a proposed merger between AT&T and Time Warner because it would change the media forever. Now that $85-billion deal hangs in the balance in the courtroom as the Justice Department sues to block it.
On Thursday, the Justice Department and AT&T met in court, while Time Warner CEO Jeff Bewkes promising consumers that the deal would be good for them with “better programming at lower prices”.
Bigger isn’t always better.
Government lawyers say the reverse is the reality. They have argued that consumer bills could rise by as $400 million annually, or 45 cents per month per consumer.
"If the merger goes forward, consumers all across America will be worse off as a result," Justice Department lawyer Craig Conrath told the court Thursday.
He also argued that AT&T would reduce competition and endanger innovation by using content from Time Warner as a weapon to run competitors out of business.
Matt Wood, policy director at Free Press, a consumer advocacy group, said large acquisitions rarely result in better prices for people. "Mergers create cost savings, but they don't have to pass them along to consumers unless there's competitive pressure,” Wood said.
Blocking a merger of this nature would be a big change for Washington, but these are times of change, indeed.
While courts have rarely ruled against vertical mergers in the past, we need only look at Singapore-based Broadcom’s $140-billion hostile takeover bid for Qualcomm, which the government crushed earlier this month for reasons of national security.
But the threat to innovation in the increasingly strategic chip and telecoms industries was also a major factor in that deal.
For the court, the key issue will be power, and whether the combined force of AT&T and Time Warner would mean a level of pricing power that would not only be harmful to consumers but would also destroy any competition. Related: Elon Musk’s $2.6 Billion Tesla Challenge
This is the antitrust trial of the decade, and because it’s so big and holds so many implications, the conspiracy theories abound, including speculation that this is motivated by Trump’s feud with CNN, which he regularly describes as a “fake news” network.
AT&T itself has attempted to add fuel to that fire; however, since the trial launched this week, it has refrained from resorting to arguments of political motivation in the courtroom.
But at the end of the day, even if there is an anti-CNN element to efforts to block the merger, the sheer size of the deal and the implications for the competition warrant a trial. Few could successfully argue that there is not a significant anti-trust issue in this deal.
The outcome of this will also be a barometer for other potential mergers in the works, including Disney’s plans to buy Fox’s entertainment business, and rumors of a possible CBS and Viacom deal at some point.
There is also Comcast’s bid for European pay TV operator Sky, meant to mirror Disney’s play for Fox, but on a smaller level.
For AT&T, time is of the essence, and the courtroom is slowing things down. The telecoms giant has until 22 April to close this deal in order to avoid paying Time Warner a $500-million breakup fee.
More Top Reads From Safehaven.com:
