AT&T Shellacs the Government in Time Warner Merger Case

Competition Policy and Antitrust, Networks, the Internet, and Cloud Computing, Internet and Media and Content

Article Snapshot


Randal Picker


ProMarket, June 13, 2018


In June of 2018, United States District Court Judge Richard Leon ruled that government failed to provide enough evidence to enjoin the merger of AT&T with Time Warner.

Policy Relevance

Antitrust authorities will hesitate to challenge other vertical mergers.

Main Points

  • In October of 2016, AT&T announced plans to buy Time Warner for $108 billion; the firms would merge to create an integrated media and communications company.
  • In a horizontal merger, the merging firms compete directly with one another; in a vertical merger, the firms operate complementary businesses, but do not compete directly.
  • AT&T was primarily a communications firm that owned wireline and wireless infrastructure for delivery of phone service, satellite video, and data service, and Time Warner was a content company.
  • The merger of AT&T and Time Warner was a vertical merger, which can benefit consumers; the government's chief economic expert believed that the merger would create $352 million in benefits for consumers.
  • AT&T and Time Warner's merger would better enable the new firm to compete with data-rich firms like Facebook, Google, Netflix, and Amazon.
  • The government theorized that if AT&T bought Time Warner it would raise the price of content channels such as HBO to other video programming distributors.
  • The government failed to offer enough evidence to support its theory that AT&T would threaten to withhold its channels from other video distributors if they refused to pay more; Judge Leon ruled that there was no evidence that post-merger negotiations would follow the pattern of what economists call “Nash bargaining theory.”

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