Merger survives court challenge
Tuesday’s federal court decision clearing the way for AT&T to acquire TimeWarner has implications not only for consumers and businesses, but the entire media landscape.
Judge Richard Leon of the D.C. District Court ruled in favor of the two companies on Tuesday imposing no conditions after a long six-week trial. The merger was announced on a Saturday night in 2016, bringing together the likes of the nation’s largest telecom company and one of the largest studios in the country, who owns the rights to Bugs Bunny, The Big Bang Theory, and cable networks TNT, TBS, CNN, Adult Swim, and premium service HBO.
Judge Leon found no evidence the merger would harm competition and hurt free markets, and the Justice Department failed to prove rival distribution chains would suffer. The companies argue the merger is needed to compete with the likes of streaming services Netflix, Hulu, and Amazon and tech companies such as Google and Microsoft.
The Justice Department, who sued to block the deal, may appeal. However, Judge Leon said he would not grant a stay. The deal is expected to close on June 20.
President Trump called the deal “not good for the country”, but critics charge the only reason he was opposed because of CNN, a news network he feuds with declaring it “fake news”. The Justice Department ordered AT&T and TimeWarner to spin-off or sell either DirecTV or CNN.
The ruling is expected to have a serious impact on the media business as companies are looking to scale up. In fact, NBCUniversal parent Comcast Corp. is looking to outbid Disney for control of the properties 21st Century Fox is selling. Comcast said it would make a bid as soon as Wednesday if the judge ruled in favor of AT&T and TimeWarner, which he did.
The ruling is also expected to impact the other pending merger, Sinclair’s $3.9 billion purchase of Tribune Media, whose chances of approval have apparently gone through the roof. The FCC and the Justice Department however, has yet to sign off on the deal.
Other smaller companies may have to get bigger or get left out at the barging table. Lionsgate, Discovery (who recently acquired Scripps’ networks), AMC Networks, Entertainment Studios, and Hallmark are among possible acquisition targets.
And the ruling is expected to have implications outside the media business as well. Pharmacy chain CVS is looking to acquire insurance company Aetna – a merger derided by some as too much power in the healthcare industry.
Reaction was swift, and much of it negative – from consolidation critics, unions, and Democratic politicians. But the biggest critic of the deal – Trump – has been silent as of this writing. It is not known if cable/satellite bills would rise or fall and if distribution channels would be limited for outside product, among other things. But given the huge change in the media business thanks to the advent of streaming services and the availability of watching your shows on something other than a traditional TV set, it has become more difficult for companies to compete and maintain profitibility.
TO read the 172-page decision on the AT&T-TimeWarner case, click here.