By Owen Voutsinas-Klose
Owen Voutsinas-Klose is a freshman at the University of Pennsylvania studying Politics, Philosophy and Economics and minoring in Legal Studies and History in the College of Arts and Sciences.
In 2016, Makhan Delrahim predicted that the recently announced AT&T and Time Warner merger would be approved by regulators quickly. “I don’t see this as a major antitrust problem” Delrahim, at the time a law professor, told a media outlet. Yet in 2017, almost exactly a year later, the Justice Department under Delrahim (now serving as the Assistant Attorney General for the Antitrust Division) suddenly blocked the merger weeks after it had been expected to have been approved. The question of what caused the sudden change of heart for Trump’s Justice Department and the man who leads its antitrust efforts is central to the impending trial that has far reaching implications for future antitrust policy. [1]
Owen Voutsinas-Klose is a freshman at the University of Pennsylvania studying Politics, Philosophy and Economics and minoring in Legal Studies and History in the College of Arts and Sciences.
In 2016, Makhan Delrahim predicted that the recently announced AT&T and Time Warner merger would be approved by regulators quickly. “I don’t see this as a major antitrust problem” Delrahim, at the time a law professor, told a media outlet. Yet in 2017, almost exactly a year later, the Justice Department under Delrahim (now serving as the Assistant Attorney General for the Antitrust Division) suddenly blocked the merger weeks after it had been expected to have been approved. The question of what caused the sudden change of heart for Trump’s Justice Department and the man who leads its antitrust efforts is central to the impending trial that has far reaching implications for future antitrust policy. [1]
Prior to the announcement of the deal’s rejection, several news outlets reported that Delrahim had specifically asked Randall Stephenson, AT&T’s CEO, to shed CNN if the merger was to be approved. Reports indicated that Stephenson had refused, seeing a sale of CNN as not germane to the antitrust issues at hand. Soon after, the DOJ blocked the deal.
Delrahim’s purported request to sell CNN is significant because it offers AT&T the ability to make an argument that the deal’s rejection was politically motivated. President Trump has criticized CNN repeatedly for what he claims is unfair coverage, and has been critical of the deal. As a candidate, Trump said his administration would never allow the deal to be approved. After the department filed the lawsuit, Mr. Trump said he shouldn’t comment on the litigation, but then added: “Personally, I’ve always felt that that was a deal that’s not good for the country. I think your pricing is going to go up.” In court, AT&T lawyers sought records of internal communications between Delrahim’s team and the Justice Department top brass and White House, yet were rebuffed by the Judge hearing the case. Stephenson himself has called tensions over CNN “the elephant in the room.” [2]
The proposed merger has broad implications for the media industry. AT&T contends that the DOJ’s intervention in this so-called vertical merger (where a firm in the same industry fulfilling a different role is acquired) is highly unusual, evidencing political interference. Delrahim pushes back on this, denying interference from the White House and claiming a desire to protect consumer competition. If AT&T wins its merger, other companies including Comcast and Verizon eying expansion could move ahead.
This is not the first time AT&T has lost a major antitrust case, however. In 2011 the company lost $4 billion in a failed bid for rival T-Mobile. Typically the DOJ intervenes to prevent firms from acquiring their competition in horizontal mergers, as was the case with T-Mobile. Both sides are planning on calling expert witnesses to the stand, with the government relying on former Obama administration official Carl Shapiro and AT&T calling University of Chicago economics professor Dennis Carlton, an expert on mergers to argue before the judge whether or not they believe the merger would benefit consumers and competition. [3]
All told, Delrahim’s sudden reversal on the merger and the DOJ’s should worry even the most ardent anti-trust advocates. If the report about the DOJ demanding the sale of CNN is true, it could represent a worrying politicization of antitrust decision making, as well as a dangerous precedent of a President using his Justice Department to punish a critical broadcaster financially for negative coverage. This is not to mention the fact that the deal was speedily approved in all other countries required, including the European Commission and Brazil. The Justice Department has so far managed to avoid document requests on internal political deliberations made by AT&T lawyers, although they have suggested political biases will play a major role in the argument over the case. The court is expected to rule on the merger by the beginning of summer.
[1] Kang, Cecilia. "AT&T Deal Puts Trump's Antitrust Cop at Center of a Political Storm." The New York Times. November 10, 2017. Accessed March 28, 2018. https://www.nytimes.com/2017/11/09/technology/justice-department-antitrust.html.
[2] Kendall, Brent. "Judge Denies AT&T Access to Government Discussions on Time Warner." The Wall Street Journal. February 20, 2018. Accessed March 28, 2018. https://www.wsj.com/articles/judge-denies-at-t-bid-for-information-on-internal-government-discussions-about-time-warner-deal-1519156444.
[3] Kendall, Brent, and Drew FitzGerald. "How the DOJ's Face-Off With AT&T Could Alter American Business." The Wall Street Journal. March 15, 2018. Accessed March 28, 2018. https://www.wsj.com/articles/how-the-dojs-face-off-with-at-t-could-alter-american-business-1521137209?mod=searchresults&page=1&pos=3.
Image Source: Getty Images
The opinions and views expressed through this publication are the opinions of the designated authors and do not reflect the opinions or views of the Penn Undergraduate Law Journal, our staff, or our clients.
Delrahim’s purported request to sell CNN is significant because it offers AT&T the ability to make an argument that the deal’s rejection was politically motivated. President Trump has criticized CNN repeatedly for what he claims is unfair coverage, and has been critical of the deal. As a candidate, Trump said his administration would never allow the deal to be approved. After the department filed the lawsuit, Mr. Trump said he shouldn’t comment on the litigation, but then added: “Personally, I’ve always felt that that was a deal that’s not good for the country. I think your pricing is going to go up.” In court, AT&T lawyers sought records of internal communications between Delrahim’s team and the Justice Department top brass and White House, yet were rebuffed by the Judge hearing the case. Stephenson himself has called tensions over CNN “the elephant in the room.” [2]
The proposed merger has broad implications for the media industry. AT&T contends that the DOJ’s intervention in this so-called vertical merger (where a firm in the same industry fulfilling a different role is acquired) is highly unusual, evidencing political interference. Delrahim pushes back on this, denying interference from the White House and claiming a desire to protect consumer competition. If AT&T wins its merger, other companies including Comcast and Verizon eying expansion could move ahead.
This is not the first time AT&T has lost a major antitrust case, however. In 2011 the company lost $4 billion in a failed bid for rival T-Mobile. Typically the DOJ intervenes to prevent firms from acquiring their competition in horizontal mergers, as was the case with T-Mobile. Both sides are planning on calling expert witnesses to the stand, with the government relying on former Obama administration official Carl Shapiro and AT&T calling University of Chicago economics professor Dennis Carlton, an expert on mergers to argue before the judge whether or not they believe the merger would benefit consumers and competition. [3]
All told, Delrahim’s sudden reversal on the merger and the DOJ’s should worry even the most ardent anti-trust advocates. If the report about the DOJ demanding the sale of CNN is true, it could represent a worrying politicization of antitrust decision making, as well as a dangerous precedent of a President using his Justice Department to punish a critical broadcaster financially for negative coverage. This is not to mention the fact that the deal was speedily approved in all other countries required, including the European Commission and Brazil. The Justice Department has so far managed to avoid document requests on internal political deliberations made by AT&T lawyers, although they have suggested political biases will play a major role in the argument over the case. The court is expected to rule on the merger by the beginning of summer.
[1] Kang, Cecilia. "AT&T Deal Puts Trump's Antitrust Cop at Center of a Political Storm." The New York Times. November 10, 2017. Accessed March 28, 2018. https://www.nytimes.com/2017/11/09/technology/justice-department-antitrust.html.
[2] Kendall, Brent. "Judge Denies AT&T Access to Government Discussions on Time Warner." The Wall Street Journal. February 20, 2018. Accessed March 28, 2018. https://www.wsj.com/articles/judge-denies-at-t-bid-for-information-on-internal-government-discussions-about-time-warner-deal-1519156444.
[3] Kendall, Brent, and Drew FitzGerald. "How the DOJ's Face-Off With AT&T Could Alter American Business." The Wall Street Journal. March 15, 2018. Accessed March 28, 2018. https://www.wsj.com/articles/how-the-dojs-face-off-with-at-t-could-alter-american-business-1521137209?mod=searchresults&page=1&pos=3.
Image Source: Getty Images
The opinions and views expressed through this publication are the opinions of the designated authors and do not reflect the opinions or views of the Penn Undergraduate Law Journal, our staff, or our clients.
