D.C. Appeals Court shoots down DoJ appeal of AT&T/Time Warner merger

The U.S. Department of Justice (DoJ) is now 0-for-2 when it comes to court attempts to stop the AT&T/Time Warner merger. A three-judge panel of the U.S. Court of Appeals for the District of Columbia ruled unanimously that the DoJ failed to prove that the judge in a previous ruling in favor of the merger had “misunderstood and misapplied” economic data presented during the initial trial. The DoJ has not commented on the ruling, nor has it indicated whether it will pursue further appeals.

Feb 26th, 2019

The U.S. Department of Justice (DoJ) is now 0-for-2 when it comes to court attempts to stop the AT&T/Time Warner merger. A three-judge panel of the U.S. Court of Appeals for the District of Columbia ruled unanimously that the DoJ failed to prove that the judge in a previous ruling in favor of the merger had “misunderstood and misapplied” economic data presented during the initial trial. The DoJ has not commented on the ruling, nor has it indicated whether it will pursue further appeals.

AT&T announced its intention to acquire Time Warner for $85.4 billion in October 2016 (see “AT&T's proposed Time Warner acquisition raises familiar questions”). After a review that took more than a year, colored by statements from then candidate Donald Trump that he would block the merger if elected President, the DoJ went to court in 2017 to do just that (see “AT&T, DoJ headed to court over Time Warner acquisition”). However, U.S. District Court Judge Richard J. Leon ruled in AT&T’s favor June 12, 2018, leading AT&T to close the merger two days later and rename Time Warner WarnerMedia (see “AT&T closes Time Warner purchase”).

But the DoJ did not admit defeat. The department filed an appeal of Judge Leon’s ruling the following July (see “Justice Department to appeal AT&T/Time Warner merger approval”). The appeal focused on the DoJ’s assertion that Judge Leon did not understand the likelihood that the price of Time Warner content, specifically that of business unit Turner Broadcasting System, would rise considerably under threat of blackouts during content negotiations with AT&T competitors.

However, in her summation of the new 35-page ruling, Circuit Judge Judith W. Rogers noted that the DoJ’s arguments failed to account for Turner’s offers of post-litigation no-blackout arbitration agreements; in fact, a DoJ expert witness agreed that the cost model the witness presented in court would have to be changed to account for such agreements. Judge Rogers also noted AT&T’s argument that the video industry was changing significantly with the presence of such providers as Netflix and Hulu; AT&T had argued the merger was necessary for it to compete with such emerging over-the-top (OTT) content providers.

“In this evidentiary context, the government’s objections that the district court misunderstood and misapplied economic principles and clearly erred in rejecting the quantitative model are unpersuasive,” wrote Judge Rogers. “Accordingly, we affirm [the earlier ruling].” Circuit Judge Robert L. Wilkins and Senior Circuit Judge David B. Sentelle also heard the appeal.

The DoJ could ask for the full appeals court to rehear its arguments or take the case to the Supreme Court. AT&T believes enough is enough. “The merger of these innovative companies has already yielded significant consumer benefits, and it will continue to do so for years to come. While we respect the important role that the U.S. Department of Justice plays in the merger review process, we trust that today’s unanimous decision from the D.C. Circuit will end this litigation,” said David McAtee, AT&T’s General Counsel, in a prepared statement.

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