Five Things to Know About the U.S. Case Against AT&T-Time Warner

By Drew FitzGeraldFeaturesDow Jones Newswires

Covering New Ground

The Justice Department rarely challenges "vertical" mergers, a term for deals that combine two companies that operate at different stages of a supply chain. The suit argues this vertical merger is "unusually problematic" because AT&T, which owns DirecTV, would control Time Warner content that could make rivals less competitive. AT&T says the suit goes against legal precedent and stretches antitrust law "beyond belief."

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The One That Got Away

Opponents of corporate consolidation often argue the government didn't do enough to limit Comcast Corp.'s power when it took control of NBCUniversal in 2011. That combination, which became a model for AT&T's purchase of Time Warner, is now back in the limelight. Monday's lawsuit says AT&T and Comcast would together control almost half of the country's TV-distribution market.

Cord-Cutters Cut Both Ways

Many Americans "cut the cord" this year by dropping cable TV or satellite service and replacing it with cheaper online TV packages delivered over the internet. AT&T argues its streaming service, DirecTV Now, is proof it's enhancing competition. The government says the merger can do the opposite, "substantially lessening competition among traditional video distributors and slowing emerging online competition," like Dish Network's Sling TV.

Elephant in the Room

The government's complaint barely mentions CNN, but President Donald Trump's public disdain of the news network's coverage has loomed over the merger review for more than a year. The Justice Department has denied any political influence. AT&T CEO Randall Stephenson on Monday hinted he wasn't so sure but insisted that the company wouldn't part with CNN to secure approval. "Any agreement forfeiting CNN, directly or non-directly, is a nonstarter," he said.

It Isn't TV, It's Premium

AT&T sees adding Time Warner's HBO and its award-winning shows as a strength. The Justice Department says it's too strong, allowing the telecom giant to use HBO to lure new customers to its wireless, satellite and broadband services in ways that other distributors won't be able to match. The department says other premium TV channels like Starz or Showtime "are not adequate alternatives to HBO" in that sense.

(END) Dow Jones Newswires

November 21, 2017 05:44 ET (10:44 GMT)