The Department of Justice unveiled a lawsuit to block the $85 billion mega merger more than one year after it was announced.
The Justice Department sued on Monday to block AT&T’s merger with Time Warner, calling it an “illegal” combination that harms consumers and stifles innovation, DOJ officials said.
AT&T and Time Warner announced their $85 billion merger last year but the closing has been dragged out by the government’s anti-trust review.
It is the latest salvo in a drama more than one year in the making. Earlier this month, reports circulated that the government had demanded AT&T sell Turner Broadcasting, operator of the CNN news network, or DirectTV as a condition of approval, though the government pushed back at those reports.
A Justice Department official told reporters on Monday that the merger would raise prices for consumers and potentially block creators of media content from distributing their product without paying more money. Time Warner owns various networks, including the CNN news channel, TBS, TNT, Cartoon Network and others and has lucrative sports broadcasting deals.
The government was also working to get state attorneys general to support a lawsuit but so far none has signed on, the Justice official said on Monday.
In a statement on Monday, AT&T’s general counsel, David McAtee, said, “Today’s DOJ lawsuit is a radical and inexplicable departure from decades of antitrust precedent. Vertical mergers like this one are routinely approved because they benefit consumers without removing any competitor from the market. We see no legitimate reason for our merger to be treated differently.”
The case is being filed in a D. C. federal court under the direction of the Justice Department’s newly installed antitrust chief, Makan Delrahim. He was only recently confirmed by the Senate, and seemed to signal his intentions in last week in a speech at the National Press Club in Washington.
Delrahim was critical at the attempts of prior administrations to put “behavioral remedies” on the approval of big corporate mergers that are supposed to create fairness and protect consumers but create extra burdens on regulators.
Traders have said in recent days that a government move to block the deal could put a chill on merger activity. So far this year, there have been more than 9,000 mergers announced in the U. S., worth an estimated $1.2 trillion, according to Dealogic. Within the U. S. media sector, there have been 209 deals announced this year for an estimated $32 billion.
What’s missing this year, however, traders said, were the huge deals that characterized 2016.
While the merger market seemed to awaken since Labor Day, “this could kill it again,” said Nancy Havens, an event-driven trader who takes bets on stocks of companies before they complete their deals, about Delrahim’s stance. “It makes the future antitrust approval of mergers much more difficult.”
Justice officials were seen as headed to a lawsuit no matter what. But Delrahim, who has lobbied on behalf of AT&T in the distant past, said in an interview on Canadian television last year he didn’t see the deal has having a major antitrust problem.
The Justice Department has disputed it made the sale of Turner Broadcasting or CNN a condition of approval, and AT&T’s CEO has said he had no intention of selling CNN.
Last year the Justice Department under the Obama administration teamed up with 11 states to challenge Anthem’s $54 billion acquisition of Cigna, and with eight states to block Aetna’s $37 billion of Humana. Both deals were canceled earlier this year.
