The Court’s Decision to Let AT&T and Time Warner Merge is Ridiculously Bad
Written by Nilay Patel on Jun 15, 2018, 4:47pm EDT and originally posted here, on The Verge.
AT&T and Time Warner won a historic court victory this week, convincing Judge Richard Leon in the US District Court for the District of Columbia that they should be able to merge over the antitrust objections of the Department of Justice. The deal, now finalized, combines one of the world’s largest telecom carriers with one of the world’s largest media organizations. The resulting company will have unparalleled market power over both content creation and distribution.
The decision surprised almost everyone — not necessarily that AT&T and Time Warner had won, but that Judge Leon allowed the merger to go through with no conditions or prohibitions on their behavior at all. In fact, Judge Leon’s opinion seems downright excited for the two companies, while systematically discounting the government’s case at every turn. Honestly, it’s a little strange.
And while the deal might be done now, I think it’s worthwhile for anyone who cares about how the government might restrain the power of giant media and tech companies to read and understand the government’s case and Judge Leon’s decision.
To spare you the pain of reading the 170-page opinion yourself, I went through and pulled out some highlights. You will note again and again that Judge Leon goes into incredible detail about the businesses of the past, like how the deal might affect cable TV negotiations, while naively glossing over the details of how media works in the present and future. (Buying Time Warner will allow AT&T to… put together clips of CNN to show on phones? Very innovative.)
You will also note that the government put on what seems like a very, very weak case. Here’s my condensed summary:
First, Judge Leon says Netflix and Hulu and Google and Facebook are major competitors to AT&T and Time Warner, but both the government and the judge fail to note that all of them depend heavily on open access to AT&T’s network to reach consumers.
Then the government’s own expert witness bafflingly cuts down his side’s arguments repeatedly, claiming the merger will save AT&T customers hundreds of millions of dollars.
The government does not argue that AT&T preloading its own services and content onto phones and prioritizing their traffic outside of data caps will create an unfair advantage over Netflix. In fact, Netflix is never substantively mentioned again after the introductory section.
The judge does not understand that HBO Now and Netflix are both accessed by consumers in the exact same ways.
Judge Leon quotes Randall Stephenson calling this a “vision deal.” Twice.
AT&T points out — correctly! — that it wants to see more people use more data generally, so it’s fine with other video services.
But the government never makes the argument that AT&T will use its network to prioritize Time Warner content and services over competitors.
The judge doesn’t figure this out.
So the government loses.
Read the full article here, on The Verge.