Deals

I Never Root for Megamergers, But Go, AT&T-Time Warner!

Trump wants to block the deal because he hates CNN. That's how dictators behave.

Trump's problem.

Photographer: Michael A. Schwarz/Bloomberg

In the spring of 2009, Comcas­­t Corp. announced that it was buying NBCUniversal from General Electric and consumer groups were up in arms. The deal would make Comcast too powerful, they said, predicting that the company would use its size to squelch competition.

"Our greatest fear is that this Comcast merger will cause such a behemoth” that the combined company "will have the incentive and the ability to kill over-the-top video in its crib," said Gigi Sohn, then the president of Public Knowledge, a public interest group.

The Justice Department looked at the deal closely, but ultimately approved it with minimal requirements. Why? Because even though the combination would indeed create a behemoth, the two companies didn't compete directly with each other in any of their businesses. As the antitrust cognoscenti say, it was a "vertical merger."

And as the legal website Law360 noted shortly after the deal was completed, "The DOJ almost never blocks vertical mergers unless the merger would make it impossible for a new competitor to enter." More recently, Rich Greenfield, the BTIG media analyst, wrote that "the DOJ has not litigated a vertical merger in over 40 years."

Last summer, when Verizon announced that it was buying Yahoo! Inc., complaints were also raised, this time about the privacy implications of the deal. Once again, the Justice Department examined the deal and then waved it through. It was another vertical merger.

QuickTake Q&A: Trump and the AT&T Deal

Now comes AT&T Inc., which a year ago announced that it planned to acquire Time Warner Inc. for $85.4 billion. Consumer groups ranging from the Consumer Federation of America to the Tea Party Patriots protested, claiming that free expression would be "threatened by an increasingly limited number of companies that dominate U.S. media," as they put it in a letter to Attorney General Jeff Sessions.

Just as with Comcast-NBCUniversal and Verizon-Yahoo, those complaints shouldn't matter, not if the Justice Department abides by its own written guidelines and applies the same standards. AT&T and Time Warner have no competing businesses. AT&T, which also owns DirectTV, is a distributor. Time Warner, with HBO, Turner Broadcasting and Warner Brothers, is a content company. Last year, an antitrust expert named Makan Delrahim was quoted as saying that while the combined company would be very big, he didn't think it posed a "major antitrust problem."

Yet now, with the deal nearing completion, the news is leaking that the Justice Department has been demanding significant divestitures by AT&T as its price to approve the deal. Bloomberg News has reported that Justice wants AT&T to sell off either DirectTV or Turner Broadcasting, the latter of which includes CNN. On Wednesday, when the Justice Department suggested that AT&T had offered to sell off CNN, the company’s chief executive, Randall Stevenson, responded almost immediately, vehemently denying that he had made that offer—and insisting that he never would.

You don't have to be a fan of the merger to realize that there is something seriously wrong here. As others have noted, the merger appears to be in trouble for a worrisome reason: President Donald Trump hates CNN and wants to inflict some punishment.

That Trump has long opposed the merger is hardly a secret. During his campaign, he said that if AT&T and Time Warner were allowed to combine it would "destroy democracy." He put out a campaign statement vowing to "break up the new media conglomerate oligopolies” that "are attempting to unduly influence America's political process."

As for his antipathy towards CNN, it’s been a running subplot ever since he decided to run for president. He bashed the station all through the campaign and hasn’t let up as president, accusing it of being one of the media outlets that trafficks in “fake news.” A few months ago, he shockingly tweeted an image of a train running over a CNN reporter.

Trump has every right to oppose the deal and to criticize CNN; as they say, it’s a free country. But he doesn’t have the right to bend the Justice Department to his will. Yet that appears to be what is happening. That antitrust expert who said last year that the deal didn’t pose any problems? Makan Delrahim is now the head of the Justice Department’s antitrust division. And wouldn’t you know it: He’s suddenly had a change of heart about the antitrust implications of the deal.

I know there is divided opinion about whether we should have another distribution/content behemoth like Comcast, and there are plenty of Americans who agree with Trump that the big media conglomerates should be broken up. Indeed, we could probably use a rethinking of antitrust policy—one based on legal principles and sound public policy goals. But that’s not the issue here.

The issue is whether we are still a country that abides by the rule of law. If we are, then the AT&T-Time Warner deal should be approved, no matter what Trump wants. It’s a vertical merger, and it should be dealt with the same way as previous vertical mergers. Trump should not be able to kill the merger simply because he wants revenge on CNN. That is what authoritarians do. In fact, that is exactly how Vladimir Putin operates—which is why doing business in Russia is so treacherous.

It is appalling that the Justice Department’s antitrust department appears poised to do Trump’s bidding. The good news is that AT&T has vowed to go to court if the government tries to block the merger. So far, the judiciary has been the branch of government that has stood up to the president’s authoritarian impulses. I never thought I would be rooting for two very big companies to combine into one giant company, but I am. If the AT&T-Time Warner merger goes through, it will mean that the rule of law has won. At least for now.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

    To contact the author of this story:
    Joe Nocera at jnocera3@bloomberg.net

    To contact the editor responsible for this story:
    Jonathan Landman at jlandman4@bloomberg.net

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