A group of primarily Democratic senators this week urged the Department of Justice (DOJ) to block AT&T’s proposed $85.4 billion acquisition of Time Warner. The group of senators sent a letter to Attorney General Jeff Sessions, which cited concerns that the combined company would gain unmatched control and distribution of popular content, resulting in higher prices, fewer choices, and poorer quality services for consumers.
According to the letter, opponents of the deal want the DOJ to prevent the merger if it “determine[s] that the substantial harms to competition and consumers arising from the transaction outweigh the purported benefits.” The group of senators expressed their belief that the merger’s potential harms will outweigh the benefits for consumers, regardless of whether the government bestows any kind of transactional conditions. The letter was signed by a number of prominent Senators including Al Franken (D-Minn), Elizabeth Warren (D-Mass), Bernie Sanders (I-VT), and Cory Booker (D-NJ).
Marketing firm Morris Creative Group has listed Time Warner as one of the “big six” media giants that control up to 90 percent of what 277 million Americans read, watch, or listen. AT&T is the largest service provider for paid television in the United States with a combination of 25 million subscribers from DirecTV and U-verse TV, and is one of the top four U.S. wireless carriers.
AT&T has structured the deal so that Time Warner would get rid of its FCC licenses before the merger was completed. This would allow the companies to utilize a loophole that would prevent a public interest review by the FCC, which is normally triggered by license transfers in merger transactions. One option the DOJ could consider in blocking the merger is suing on antitrust grounds. This differs from the FCC’s public interest standard, but would force AT&T and Time Warner to prove how their deal would benefit their customers.
President Donald Trump reiterated multiple times his administration wouldn’t approve the merger “because it’s too much concentration of power in the hands of too few.” After his election, however, Trump appointed a Justice Department antitrust chief who doesn’t believe the merger poses any kind of significant antitrust threat. Since then, the DOJ hasn’t publically commented on the deal.
Despite the backlash, AT&T insists the merger will be beneficial to customers as it would include “more relevant advertising in ad-supported video services” and “greater choice, convenience, and value in programming bundles.” But in their letter this week, the democratic senators argued these promises are attainable with “a contract between the two companies in their current capacities.”
While AT&T said it wouldn’t have incentives to restrict Time Warner content access, the signees of the letter remain skeptical since they said AT&T has a “troubling track record when it comes to compliance with its past promises.” This alludes to their 2015 acquisition of DirecTV, after which the company increased rates, citing rising programming costs as the main factor – even though the company previously told regulators the merger would help keep those programming costs in check.
