The AT&T/Time Warner merger may have passed scrutiny by Federal District Court Judge Richard Leon, but an unlikely source came riding into the picture making its future survival during the appeals process very problematic, and that is good news.
In his decision, Judge Leon effectively dismissed statements made by AT&T opposing the very similar Comcast/NBC merger in front of the Federal Communications Commission back in 2010 as being “less credible” and of “limited evidentiary value.”
The FCC vehemently disagrees, submitting a court filing earlier this month unequivocally challenging these conclusions, writing, “There was no reason for the district court to treat those comments as less credible simply because AT&T and DIRECTV were ‘competitors’ of the merger applicants in those proceedings (rather than the applicants themselves).”
Back in 2010, in filings against the Comcast/NBC merger, AT&T ironically worried to the FCC that the Comcast-NBCUniversal media giant would have an unfair bargaining advantage over “rival video programming distributors.”
It’s ironic because this unfair bargaining advantage is exactly what AT&T is now seeking in their merger with Time Warner.
It wasn’t even really a secret.
During testimony throughout the trial, AT&T Executive Daniel York was asked by the Justice Department about a 2016 email York sent. In that email, York asserted that temporary, and since expired, consent decrees attached as conditions to the Comcast/NBC/Universal merger “keep the reins on [Comcast] at least philosophically.”
Additionally, AT&T actively game planned about how to compete in a market with a vertically integrated Comcast/NBCU, which had extraordinary control of content, platforms, and distribution which could be used to disadvantage their competitors.
During the trial, it was revealed that AT&T Vice President of Strategy and Business Development Timothy Gibson wrote in an early draft document that the merged Comcast and NBC would be able to “raise prices or withhold content.” Gibson also opined that it was the strategy group’s opinion that the combined Comcast and NBC could “play hardball” and “threaten blackouts.” He even expressed concern that they could “choose not to license online to some players and discriminate on price.”
Of course, AT&T’s legal team scrubbed Gibson’s original concerns out of the document before it was finalized, but their VP of Strategy was correct. Comcast/NBCU’s immense power through vertical integration was and is a threat to the marketplace. The only change for AT&T was they had determined that they were going to pursue the same advantages through a merger with Time Warner.
Which is exactly why the Jeff Sessions-led Justice Department rightly argued that the merged AT&T/Time Warner would be able to leverage their control over must-have content like CNN and HBO into a competitive advantage over DIRECTV competitors like DISH TV or other smaller, Time Warner cable competitors who would be at their mercy on price to the detriment of consumers.
The Federal Communications Commission’s recent filing makes this point abundantly clear and while they pointedly don’t take sides in the court battle between DOJ and AT&T/Time Warner, it is obvious that Judge Leon erred by discounting AT&T’s comments before the FCC. If the appeals court agrees, the door will be opened for a number of other statements, memos and emails from AT&T outlining the damage they anticipated due to the Comcast/NBCU merger once the seven-year consent decree period ended.
In a very real sense, both vertical integration mergers are on trial and AT&T may just find themselves in the uncomfortable position of testifying for both the plaintiffs and the defendants if the court agrees with the FCC position.
Rick Manning is president of Americans for Limited Government. Follow them on Facebook and Twitter.
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