The Justice Department announced on Monday that it will sue to block AT&T’s acquisition of Time Warner, pitting the Trump administration against a media business that has turned to mergers to compete with the rise of tech giants like Facebook and Netflix. The $108 billion deal, which would be one of the largest mergers in American history, had been in the works for more than a year.
Both Democrats and Republicans have historically approved of these so-called “vertical mergers” between companies operating at different levels of a particular industry. Time Warner, which owns HBO, TNT, and TBS, is mostly in the pure content business, while AT&T, which sells phone and internet access and owns DirecTV, is largely in the media-distribution business. Mergers between such media and distribution companies have rarely faced much scrutiny. For example, the Obama administration approved a similar merger between Comcast and NBCUniversal in 2011.
So, that is the mystery of this lawsuit: By what standard would the department approve that deal, but deny the AT&T merger with Time Warner?
There are two starkly different explanations for the Justice Department’s motives. The first is that a merger between two powerful media companies deserves to be blocked, since it provides an obvious temptation for anticompetitive practices. The Justice Department has argued that AT&T could raise the price for rivals to distribute HBO and other Time Warner content and choke off innovation in video and technology. In a New York Times op-ed, Tim Wu, a Columbia Law School professor and antitrust author, wrote that “the department seems right to worry” about the merger.