AT&T Inc lashed out at the U.S. antitrust lawsuit against the company’s proposed takeover of Time Warner Inc, saying the government’s own economic expert determined the deal would raise prices for pay-TV subscribers by just 45 cents a month.
The telecommunications giant derided the Justice Department’s case, saying the government’s own analysis shows the deal would cause minimal consumer harm, according to a filing Friday in federal court in Washington. AT&T counters that the merger with the owner of CNN and HBO would allow it to more effectively compete against rivals like Comcast Corp and Netflix Inc to the benefit of consumers.
“The government’s modeled price increase is so negligible that, given the inherent uncertainty in that predictive exercise, it is not meaningfully distinguishable from zero,” AT&T said in the filing, which Time Warner joined.
The two sides are jostling over the deal’s merits as they prepare to go to trial starting March 19 in Washington. The case represents a rare legal challenge to a tie-up of two companies that operate in different parts of the same supply chain. Such deals are typically approved with settlements, and the outcome of the Time Warner case could affect similar combinations awaiting approval like CVS Health Corp’s proposed acquisition of insurer Aetna Inc
The trial is scheduled to last 15 days and is expected to feature testimony from AT&T Chief Executive Officer Randall Stephenson, Time Warner Chief Executive Officer Jeff Bewkes, AT&T competitors that have concerns about the scale of the combination, and economists.
AT&T has portrayed the government’s case as driven by politics, suggesting that President Donald Trump’s animus toward Time Warner’s CNN was behind the Justice Department’s decision last year to sue to block the takeover. The judge overseeing the case prevented AT&T from investigating whether Trump interfered.
Trump’s Scorn of CNN and Why It’s an Antitrust Issue: QuickTake
The U.S. claims that for AT&T, as the owner of DirecTV and the largest U.S. pay-TV provider, its control of Time Warner’s programming would give it more leverage in content negotiations with rival distributors and cause prices to rise. The deal is an “unacceptable threat to competition” and would allow AT&T to stifle growth of online competitors, the U.S. said in its filing Friday.
The government portrayed the price effects from the combination in starkly different terms than AT&T. Its economic expert determined the merger would raise prices charged to rival pay-TV distributors for Time Warner’s Turner Broadcasting content by $61 million a month. Nationwide, consumers would pay $36 million more per month for pay-TV, the government said.
AT&T defends the $85 billion takeover, saying it’s not removing a competitor from the market and that by adding Time Warner content, it can introduce new video products to consumers.
The government claims that AT&T would have greater leverage in content negotiations because if it fails to strike a deal with a rival distributor, it could make up lost revenue because some subscribers would switch to AT&T to get that content. AT&T said withholding content would lead to “immediate, catastrophic losses.”