U.S. Sues to Block AT&T-Time Warner Merger

The Justice Department sued to block AT&T Inc. from taking over Time Warner Inc. on Monday, a sweeping challenge to a deal it says would give one company too much control in a rapidly evolving media landscape. AT&T Chief Executive Randall Stephenson said the suit “defies logic” and that the company would fight the case, the first major antitrust action under the Trump administration. 

By challenging the deal, the Justice Department is taking an approach to antitrust issues that is starkly different from the Obama administration’s. In 2011, for instance, the department approved a similar deal – Comcast’s acquisition of NBCUniversal – after imposing numerous conditions on the transaction. If AT&T’s bid for Time Warner were to go through, the merger would create a media and telecommunications behemoth. By itself, AT&T is one of the nation’s largest internet and telephone providers. With its 2015 acquisition of DirecTV, the country’s largest satellite company, it also became the largest television distributor in the United States. 

The combined company would have an unrivaled ability to reach consumers through news and entertainment programming. Among Time Warner’s properties are HBO, the home to “Game of Thrones”; Warner Bros., the studio behind blockbusters like “Wonder Woman” and the Harry Potter film series; and Turner Broadcasting, which includes the news channel CNN and the sports-heavy TNT network. 

The companies said they would fight the lawsuit, which is unusual in that it seeks to halt a vertical merger, meaning the businesses do not directly overlap but do complement each other. The Department of Justice will now have to prove that the combination would be harmful. “It’s not totally shocking. It didn’t come completely out of left field,” said James Paulsen, chief investment strategist at Leuthold Group. “It is odd in the sense for the market to be dealing in deregulatory environment under a Republican administration and under a Republican-controlled Congress to have this come out. It’s just a little odd. It makes you wonder where you really are on the regulatory front.” 

Paulsen said the stock market could respond negatively if it appears that the administration is becoming more aggressive against merger in general, but for now it’s likely to be contained. “This certainly puts a wet blanket over media deals,” said Paulsen.

 

Keep those stops tight

Todd “Bubba” Horwitz