By Edmund Lee and Cecilia Kang
New York Times News Service
The federal government Tuesday lost its second court challenge to AT&T’s $85.4 billion merger with Time Warner, a deal that has already begun to reshape much of the media industry.
A three-judge panel of the U.S. Court of Appeals for the District of Columbia rejected the government’s claim that a lower court had applied antitrust laws incorrectly in allowing the merger to proceed. Justice Department lawyers have argued the combination of the two companies would reduce competition and hurt consumers.
“The government’s objections that the district court misunderstood and misapplied economic principles and clearly erred in rejecting the quantitative model are unpersuasive,” Judge Judith W. Rogers wrote on behalf of the panel.
The Justice Department does not plan another appeal, a spokesman for the agency, Jeremy Edwards, said.
AT&T can now proceed with its plan to transform WarnerMedia into a streaming-video business in its version of the television industry’s go-to strategy. The company has said it would unveil several online video products by early next year, with premium cable channel HBO anchoring a service that would feature films and TV shows from the Warner Bros. library. (HBO will continue to be available as a stand-alone service.)
That means blockbuster movies like “Wonder Woman” and installments of the Harry Potter franchise could show up on the service next to TV shows like “Friends” and HBO hits like “Game of Thrones.” AT&T also plans to license some of its video properties to services like Netflix.
The appeals court ruling was a blow to the Justice Department and its lead antitrust regulator, Makan Delrahim, a conservative appointed by President Donald Trump. Delrahim had sought a divestiture of some Time Warner assets as a condition of allowing the deal to go through, but AT&T’s chief executive, Randall Stephenson, refused to make such concessions.
In a statement, David McAtee, AT&T’s general counsel, welcomed the appeals court’s decision, which followed a lower-court ruling in June.
“The merger of these innovative companies has already yielded significant consumer benefits, and it will continue to do so for years to come,” McAtee said.
By challenging the transaction in court, the Justice Department signaled it would have an aggressive approach to so-called vertical mergers between companies with complementary businesses.