Summary: The $85 billion AT&T and Time Warner merger has been approved by a judge.
The trial lasted for six weeks and began in March after the Justice Department filed an antitrust lawsuit to stop the merger, which was valued at $85 billion. Leon’s task was to determine whether the merger between the telecommunication giant and the owner of CNN, HBO, and Time Warner was in violation of Section 7 of the Clayton Act.
The government had argued that the merger would render AT&T and Time Warner too powerful because AT&T also owns satellite company, DirectTV. They said that if AT&T owned popular content such as the NBA Playoffs and HBO’s Game of Thrones, then they would have too much power over consumers.
The defendants countered that companies such as Netflix and Amazon produce and distribute their own content and that the internet has changed the way people view entertainment.
Leon said that this was not an ordinary antitrust case and that he considered the merger to be vertical, not horizontal.
“[T]he ‘familiar’ horizontal merger playbook is of little use,” Leon wrote. “That is, of course, because the proposed transaction between AT&T and Time Warner is a vertical merger — i.e., one that involves firms that do not operate in the same market and thus produce[s] no immediate change in the level of concentration in any relevant market. The parties therefore agree that in this case there is no short-cut way to establish anticompetitive effects, as there is with horizontal mergers.”
The Wall Street Journal’s Christopher Mims predicts that this merger will result in more expensive entertainment packages. He cited as proof for this theory AT&T’s acquisition of DirectTV. When this occurred, costs did not go down for consumers, but they were offered more extensive options such as more channels.
“In the future, you will pay lots of money for lots of entertainment options,” Mims said.
Mims said that consumers would prefer on-demand options at a cheaper price than huge bundles, but big entertainment companies are still refusing to offer this deal. Instead, they opt for triple play packages, which give bundle landlines, internet, and cable. Luckily, technology companies such as Netflix or Sling are attempting to disrupt this model and give customers more choice at more affordable prices.
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