Feds Say AT&T, Time Warner Decision 'Deeply Flawed'

The federal government on Monday challenged a judicial decision allowing AT&T to purchase Time Warner, arguing to a federal appeals court in Washington that the ruling suffered from “faulty logic” and ignored basic economic principles, reports The Washington Post.

Calling the lower-court decision a “deeply flawed assessment of the government’s evidence,” the Justice Department claimed that the U.S. District Court for the District of Columbia had misunderstood the power dynamics at work when television distributors such as AT&T negotiate with TV programmers over content prices and terms.

The filing marks the government’s most comprehensive articulation yet of its appeal against the $85 billion megamerger, which closed in June and gave AT&T control over CNN, TBS, TNT, and HBO, among other media properties. AT&T claimed it needed the deal to compete with tech companies such as Facebook and Google. Meanwhile, regulators had said the deal would indirectly lead to higher prices for consumers when AT&T used its control over Time Warner to demand higher content prices from rival TV services.

The Justice Department’s brief on Monday said Judge Richard Leon had gotten the case wrong when he determined that AT&T was not likely to yank CNN, TBS, and its sister channels off the air as a punishment against competitors that refused to pay higher prices. That is beside the point, government regulators said.

“It is fundamental to the economics of bargaining that a party derives leverage from having the ability to walk away, even if it never actually does so,” the Justice Department wrote.

That leverage, regulators had said, would give AT&T an advantage in future negotiations with TV distributors whose customers demand Time Warner content.

But if the merger is allowed to continue, the agency said, companies such as Dish Network or Charter Communications would not only be AT&T’s competitor. They would also become AT&T’s customers, as they sought to negotiate with Time Warner for its content.