is reporting that the Department of Justice (DoJ) is considering an antitrust lawsuit against AT&T’s acquisition of Time Warner. DoJ officials have met with AT&T executives in recent weeks, according to the outlet.
The DoJ is “preparing for litigation in case it decides to sue to block the deal,” although no decision has been made yet. AT&T and the DoJ are reportedly still negotiating to come to some kind of a settlement that will allow the acquisition to proceed. “The outcome could go either way and the timing of any decision remains uncertain,” the WSJ says.
Based on previous deals, a settlement might include provisions that AT&T allow competitors access to Time Warner’s programming, a commitment from AT&T to expand the coverage area for its home internet service, or a program to provide service to low-income households.
“For over 40 years, vertical mergers like this one have always been approved because they benefit consumers without removing any competitors from the market,” AT&T said in a statement. “While we won’t comment on our discussions with DOJ, we see no reason in the law or the facts why this transaction should be an exception.” ”
While it’s true that vertical integration — two companies that participate in the same market but don’t directly compete — is better than two cable companies merging, the notion that it will benefit consumers is dubious. AT&T would contend that integration can lower costs, which could be passed on as cheaper plans to consumers. However, AT&T owning entertainment all the way from content creation to delivery to customers’ eyeballs gives the company immense power that it can use to make market entry difficult for competitors. For example, AT&T is already offering free HBO to wireless subscribers.
In any case, a DoJ lawsuit — if it even happens — wouldn’t necessarily be the end of the road for the merger. The department would have to present its case to a judge, and it would have the burden of proof to show that a deal would hurt competition.
Shares of Time Warner fell 5.6 percent following the news.