AT&T-Time Warner vs. Trump’s DoJ: The Slugfest in the Swamp

Richard Levick - AT&T-Time Warner vs. Trump’s DoJ: The Slugfest in the SwampRichard Levick, Esq., Chairman and CEO, LEVICK        

On Monday afternoon of Thanksgiving week, “referees” signaled the start of what promises to be one of the biggest donnybrooks ever staged in the nation’s capital. It was at that moment that officials at the Department of Justice (DoJ) announced the administration’s intention to oppose AT&T’s $85 billion acquisition of Time Warner.

If the flurry at the opening bell is any indication, Washington is in for a slugfest. With apologies to the late (and truly great) Muhammad Ali, it promises to be the “Thrill-a on Capitol Hill-a” – not to mention the West Wing of the White House, the DoJ’s Antitrust Division, the U.S. District Court for the District of Columbia, prominent think tanks, lobbying shops, and virtually every other repository of power in Washington.

In one corner (oddly, the left one) sits the Trump Administration’s DoJ, making good on candidate Trump’s vow in October 2016 to scuttle the proposed AT&T-Time Warner deal because it represents “too much concentration of power in the hands of too few.” The administration’s cornermen include a strange-bedfellow alliance of consumer champions, telecom and technology competition advocates, “big is bad” anti-corporatists, and an array of media detractors.

Senators Bernie Sanders (I-VT) and Elizabeth Warren (D-MA), meet fellow alliance member Steve Bannon of Breitbart, who will never be mistaken for a fiery progressive. Common Cause, say hello to your new friends, the Tea Party Patriots. It could be the only issue on which these combatants ever shake hands.

In the other corner sits the political influence amassed by the nation’s largest telecommunications conglomerate, which also happens to be a huge Internet provider, plus its putative merger partner, one of the world’s most lucrative media and entertainment empires and the “parent” behind such iconic offspring as Warner Bros., HBO, Turner Classic Movies, and, perhaps not incidentally, CNN, the all-news network at the business end of dozens of angry Donald Trump tweets. A small army of lawyers is poised to challenge the administration’s lawsuit in D.C.’s U.S. District Court.

Ultimately the decision will hinge, observes antitrust expert Raymond Jacobsen of McDermott, Will & Emery, on “vertical” vs. “horizontal” interpretations of market dominance and antitrust law. Even DoJ attorneys will concede that AT&T subsidiaries and Time Warner companies don’t compete horizontally.

“It is very unusual for DoJ to challenge a purely vertical merger” such as AT&T-Time Warner, says Jacobsen. “It has not done so successfully in over 45 years. In challenging horizontal mergers, if DoJ shows that the merger creates a firm with a high market share, DoJ gets the benefit of a presumption that the merger is unlawful. That doesn’t occur with vertical mergers.”

The onus will be on DoJ, Jacobsen points out, to prove that AT&T already has a high market share in distribution, that if the deal goes through AT&T will likely raise the cost of Time Warner programming, and that consumers will consequently be harmed. Since AT&T’s current presence in many markets is at the low end of shares deemed “dominant,” it won’t be easy for DoJ to demonstrate that consumers will be harmed, Jacobsen notes.

AT&T-Time Warner vs. Trump’s DoJ_The Slugfest in the SwampAnother seasoned Washington veteran of contentious antitrust reviews and an expert in telecom policy says that it would be a “significant departure” for DoJ to oppose the AT&T-Time Warner deal.

“It’s hard to ignore the fact that last October candidate Trump flatly said that this specific transaction was ‘a deal we will not approve in my administration.’

“While it’s true that behavioral conditions have often been rather ineffective in protecting competition, it’s ironic that many public interest groups that decry practically everything this Justice Department does are finding themselves on the same side in this case,” he says.

It’s also hard to ignore two other relevant facts: that Trump and his inner circle don’t care for CNN’s coverage of their administration and might well be looking to punish its corporate parent; and the Federal Communication Commission’s recently unveiled decision on net neutrality suggests that the administration doesn’t always put consumer interests at the top of its priority list.

Much is stake in these deliberations. Proponents of the deal maintain that it will enable the merged entity to offer reasonably priced programming packages and popular TV channels a la carte, which could trigger lower prices and forge greater consumer choice in technology and entertainment.

Opponents argue that a merger would inevitably lead to higher monthly consumer bills and a stifling of technological development. Critics worry that consumers might be forced to subscribe to AT&T’s services to gain access to Time Warner programming.

Look for the pro-merger forces to pursue an aggressive communications strategy that spotlights the job growth, marketplace efficiencies, and competitive benefits that an approved merger could bring to the U.S. economy and grassroots consumers. Get ready for white papers, testimonials from left- and right-wing commentators, endorsements from such disparate allies as corporate CEOs and one-time labor activists, and a barrage of broadcast appearances and op-eds authored by everyone from Nobel laureate economists to the head of the local cable outlet.

The anti-merger forces will be sure to retort with counterpunches of their own, thrown by the likes of Public Knowledge, the Writer’s Guild of America, Bannon allies, and other elements of the incongruent coalition that’s rallied to this cause. Watch the way both sides distill arcane metrics of market dominance into sound bites that may or may not illuminate understanding of the issue.

Very soon, we may not need our usual amounts of morning caffeine: a quick glance at an op-ed page ought to get everyone’s heart thumping.

Neither side is likely to play “rope-a-dope”: this bout is almost certain to be contested toe-to-toe in the middle of the ring. It may not be Ali vs. Joe Frazier in Manila. But it’s the closest Washington may ever come.

 

About the Author: Richard Levick, Esq., @richardlevick, is Chairman and CEO of LEVICK, a global communications and public affairs agency specializing in risk, crisis, and reputation management. He is a frequent television, radio, online, and print commentator. 

 

 

image_print

Leave a Comment