On Tuesday, the ambition of AT&T of becoming a telecom-media giant had to face a decisive moment with an expected ruling on whether its $85.4 billion take over on Time Warner merger can proceed or not.
The decision will be no less momentous for Justice Department of Donald Trump because a victory for the government could rewrite the way antitrust rules and takeovers are applied.
AT&T, most popularly known as a mobile-phone provider, is trying to buy Time Warner, owner of big media brands including HBO, Warner Bros. and CNN.
In the month of October in 2016, the takeover was announced and is the latest effort by a big telecom or cable company to acquire media assets.
The Justice Department had sued to block the deal, arguing that it would limit competition and raise costs. The companies have countered that the deal would allow Time Warner and AT&T to compete more effectively against Silicon Valley companies like Google and Netflix.
However, the case will be decided by Richard J. Leon, a United States District Court judge who was appointed by President George W. Bush. He is expected to give a shortened version of his opinion in remarks around 4 p.m.
It is doubted that Judge Leon could block the deal.
Doing so might encourage the Justice Department to act more aggressively when it looks at deals in the future and might prompt a rethink by companies with similar deals in the works.
A key argument against the government’s case is that the deal is a so-called vertical merger, which means that the two companies do not produce competing products: One makes media content, and the other distributes it.
So a win for the government could really shake up some businesses’ plans and open the door for a new definition of antitrust regulation which would wave the opposite effect. It could be the green light for more vertical takeovers and would be seen as a setback for the Trump administration.
If the deal is allowed to proceed, Comcast is expected to make a bid for most of the television setups of 21st Century Fox set up a bidding war against the Walt Disney Company, which has already struck a deal to buy those holdings.
The aim of the conditions would broadly be to keep AT&T from using its control of content like HBO or CNN as a weapon to increase costs for its rivals. The fear is that At&T could charge rivals a high price as they did for At&T Time Warner charter merger, say, HBO to make AT&T’s own product more competitive.
They also had some previous Time Warner mergers like Time Warner Comcast merger, AOL merger, Cable merger, Spectrum merger.
One way to address this would be to appoint a third party to oversee disagreements between AT&T and the cable companies that want to license Time Warner content. The government doesn’t like that approach.
Another option is to demand that AT&T and Time Warner sell off some plum assets. AT&T and Time Warner don’t like this approach, so would be expected to appeal any such decision.