AT&T-Time Warner Merger Gets The Green Light From Federal Court

AT&T-Time Warner Merger Gets The Green Light From Federal Court

AT&T-Time Warner Merger Gets The Green Light From Federal Court

Moments after a federal judge cleared AT&T's $85 billion bid for Time Warner Tuesday, acquisition targets saw their stocks trade sharply upwards after hours, hinting at a merger-friendly playing field.

"This decision from Judge Leon will have broad ramifications for the tech, telecommunications and media sector for decades to come", said Daniel Ives, the chief strategy officer at GBH Insights.

The Justice Department, which may still appeal the decision, sued the companies in November, arguing that the tie-up could be used to suppress competition and raise prices for consumers. A loss for AT&T and Time Warner could have signaled a new era of government scrutiny over so-called "vertical mergers" and could have halted attempts by companies like Disney, Fox and Comcast to announce their own megadeals. During the trial, AT&T made several efforts to introduce evidence about political interference into the case but was rebuffed by Judge Leon.

Leon rejected the notion of temporarily suspending the merger for a possible appeal by the government.

After the decision was issued Tuesday, AT&T said it expected to close the Time Warner deal on or before Wednesday, June 20. The companies then entered into discussions with the DOJ previous year and rumors surfaced that the agency had suggested some divestitures in order for AT&T to avoid an antitrust lawsuit. "For AT&T and Time Warner, this is a major victory lap". It may immediately trigger another deal between Comcast and Fox, which already has an agreement to sell its entertainment assets to Walt Disney.

The decision on a so-called "vertical integration" - between two companies who do not make competing products - could have a profound impact on future mergers. Other acquisitions on the table include Disney's offer to buy 21st Century Fox, drug store CVS's bid for Aetna and T-Mobile's potential merger with Sprint. On that same day, then-candidate Donald Trump pledged that his administration would block the deal, saying "As an example of the power structure I'm fighting, AT&T is buying Time Warner and thus CNN, a deal we will not approve in my administration because it's too much concentration of power in the hands of too few".

AT&T-Time Warner Merger Gets The Green Light From Federal Court
AT&T-Time Warner Merger Gets The Green Light From Federal Court

Those comments and his repeated criticism of CNN, which is owned by Time Warner's unit Turner Broadcasting, raised speculation that Trump had pushed Delrahim and the Justice Department to block the deal.

But the most immediate effect of the deal will be on the already consolidated media market. Comcast, for instance, owns NBCUniversal, and Verizon owns websites including Yahoo and HuffPost.

AT&T, for its part, insists that legacy media companies can't compete with the rising titans of Amazon and Netflix unless they're allowed to bring content creation and distribution under the same roof.

The government's case hinged on an economic model produced by Carl Shapiro, an economist at the University of California at Berkeley, who predicted an annual price increase to consumers of at least $285 million.

AT&T has demonstrated considerable optimism about the deal in recent weeks.

The judge rejected the government's argument that the merger would hurt competition in pay TV and cost consumers hundreds of millions of dollars more to stream TV and movies.

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