US: DOJ Delivers Appellate Argument Against AT&T/Time Warner Merger

The Justice Department (DOJ) plans to argue that the judge who approved AT&T’s acquisition of Time Warner committed “fundamental errors of economic logic and reasoning” when he ruled against the government’s attempt to block the deal, according to an appellant brief filed by the government on Monday, August 6.

Judge Richard Leon, the government’s attorneys wrote in the brief, “discarded the economics of bargaining.” Leon, who approved the merger in June, both “misunderstood” and “failed to apply the foundational principle of corporate-wide profit maximization” when he found that the government failed to prove that the merger would substantially harm competition, they argued.

The DOJ argued in Monday’s brief that Leon “substantially constrained the government’s presentation of evidence showing that the merged entity would have greater bargaining leverage.” The department said the judge ignored the fact that corporations will do what they can to maximize profits and instead accepted without reservation the testimony of defendants’ executives.

“These errors colored the court’s view of the facts, leading to a decision that is clearly erroneous in light of the evidence presented at trial,” the DOJ wrote.

The DOJ has argued that by owning Time Warner, which includes HBO and TBS, AT&T would have “both the incentive and the ability to raise its rivals’ costs and stifle growth of innovative, next-generation entrants that offer attractive alternatives to AT&T/DirecTV’s legacy pay-TV model—all to the detriment of American consumers.”

AT&T responded quickly. “Appeals aren’t ‘do-overs,’” AT&T General Counsel David McAtee said in a statement. “After a long trial, Judge Leon weighed the evidence and rendered a comprehensive 172-page decision that systematically exposed each of the many holes in the government’s case. There is nothing in DOJ’s brief today that should disturb that decision.”

Full Content: The Wall Street JournalGov DOJ

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