Uncle Sam Should Put Consumers First in Its AT&T Appeal

Posted by Bloomberg

Uncle Sam Should Put Consumers First in Its AT&T Appeal

By Tara Lachapelle

Antitrust officials from the US Justice Department say the judge that ruled in favor of AT&T Inc.’s takeover of Time Warner ignored economic theory and common sense. But what the judge needed from them was something more concrete.

On Monday, the government’s attorneys filed their opening brief to appeal US District Judge Richard Leon’s June decision, a last-ditch attempt to stop—or, rather, now undo—the US$102 billion transaction that has transformed AT&T into a powerful media conglomerate and inspired other corporate giants to test the bounds of antitrust law. 1 While the odds of overturning the ruling are widely considered slim, it’s interesting, if not disappointing, to see where Assistant Attorney General Makan Delrahim is taking the case.

Rather than present stronger evidence, his team is arguing that the court erroneously disregarded the economics around bargaining power and failed to fully grasp an expert witness’s analytical model that was core to the case, thus arriving at the decision based on “faulty logic.” I’m no lawyer, but I’m not sure this is the most promising tack.

The common thread in the judge’s opinion seemed to be that the government wasn’t specific enough in tracing the harm the deal would cause consumers and instead relied too much on speculation from AT&T’s competitors. Recall the cross-examination of the government’s first witness, an executive from Cox Communications (an AT&T rival and Time Warner distributor) who was lambasted by AT&T’s lawyer for not doing her “homework” before giving testimony. The judge zeroed in on that back-and-forth in his opinion.

It’s a complicated case because it’s unprecedented in many ways and does require some educated guessing about the future. At the onset of the trial, Leon said “I guess I have to get a crystal ball,” a comment that in and of itself didn’t bode well for the government’s attorneys. After all, the media landscape is undergoing rapid change; the pay-TV market went through its round of consolidation, leading the TV-network and film-studio operators to pursue their own megamergers, as they all grapple with cord-cutting and the rising popularity of low-margin streaming services. The truth is, nobody knows what the industry will look like in five or 10 years.

Even so, the power AT&T now wields by owning HBO, the Turner family of TV networks and the Warner Bros. film studio, alongside its own DirecTV satellite business, DirecTV Now streaming app and AT&T wireless service should be questioned. The antitrust officials make this important point in their opening brief that I would have liked to see them drive home better in the course of the trial:

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