The Department of Justice argued Monday that a federal judge ignored economics and common sense in approving a $108 billion merger between AT&T and Time Warner.
The agency’s antitrust division is appealing a ruling from U.S District Judge Richard Leon earlier this year that allowed the transaction to proceed, despite regulators’ objections. In a federal filing, the Justice Department said the merger would allow the combined company to charge competing cable services more for Time Warner content, ultimately leading to increased costs for consumers.
“The outcome of this appeal will shape the future of the media and telecommunications industries for years to come by setting the standard for determining whether industry participants will be permitted to merge into vertically integrated firms that control valuable programming content as well as the means of distributing that content to consumers,” the government said in the filing.
The DOJ blasted Leon for, among other things, refusing to close the courtroom to the public to allow the government to share confidential business information. The agency also charged that the court did not take into account the economics of bargaining when determining its ruling.
“The court agreed that Time Warner enjoyed bargaining leverage before the merger, but it illogically and erroneously concluded that Time Warner will have no increased leverage post-merger,” the DOJ wrote. The court’s reasoning makes no sense, rendering clearly erroneous its analysis of the evidence on increased bargaining leverage.”
Leon ignored the federal government’s argument that the merger would raise cost for consumers, the DOJ claimed, while conversely agreeing to the views of AT&T and Time Warner that the transaction would result in cost savings.
“The court thus gave no weight to the undisputed fact that the merger gives Turner’s parent company something it did not have before the merger: ownership in a nationwide distribution service,” the DOJ wrote. “If AT&T-Time Warner acts rationally, the merger necessarily will make a difference in the negotiations, but the district court inexplicably found it made none.”
