AT&T Shellacs the Government in Time Warner Merger Case
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ARTICLE SUMMARY
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.
KEY TAKEAWAYS
- 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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About Randal Picker
Randal Picker is the James Parker Hall Distinguished Service Professor of Law at the University of Chicago Law School. He is also Senior Fellow at The Computation Institute of the University of Chicago and Argonne National Laboratory. His primary areas of interest are the laws relating to intellectual property, competition policy and regulated industries, and applications of game theory and agent-based computer simulations to the law. He currently teaches classes in antitrust, network industries, and secured transactions; and regularly teaches bankruptcy and corporate reorganizations.
