US Justice Department to Appeal Decision Approving AT&T’s Acquisition of Time Warner

By David Shepardson

WASHINGTON (Reuters) – The U.S. Justice Department said on Thursday it will appeal a federal judge’s decision to approve AT&T Inc.’s $85.4 billion takeover of Time Warner, suggesting the deal, just a month after it closed, could be invalidated.

AT&T was sued by the Justice Department under antitrust laws, saying the deal would harm consumers, but U.S. District Judge Richard Leon last month approved the deal, allowing it to proceed after a lengthy trial. The merger, first announced in October 2016, has also been opposed by President Donald Trump.

Leon ruled that AT&T’s wireless and satellite businesses were legal to combine with Time Warner’s movies and television programming under antitrust law.

AT&T CEO Randall Stephenson told reporters Thursday at a conference in Sun Valley, Idaho, that the company was not surprised by the Justice Department’s decision to appeal.

“They have the right to appeal. Everyone has the right to appeal. We have a very well-considered order based on the facts. It will be assessed on those grounds,” he said.

A Justice Department spokesman declined to comment.

The Justice Department decided in June that it would not seek an immediate stay of the court’s approval of the merger, allowing it to close on June 14. The Justice Department still had 60 days to appeal the decision approving the merger.

The notice of appeal filed by the government in the U.S. District Court in Washington does not disclose the basis on which the government intends to challenge that approval.

Michael Carrier, an antitrust expert at Rutgers University, said the Justice Department could question Leon’s analysis of the facts of the case, the economic arguments presented or what Carrier described as the judge’s clear pro-defendant stance.

Leon strongly urged the Justice Department not to seek a stay of his ruling, saying it would be “manifestly unfair” and unlikely to succeed. In his ruling, he said the government had not shown competitive harm.

In a June 14 letter, AT&T told the Justice Department that it would operate Time Warner’s Turner cable networks as a separate business unit and take other steps by February 2019 or until the government decides its appeal.

AT&T also said it would not play any role in Turner’s pricing in the short term, and that Turner’s headcount and target compensation and benefits would remain “largely unchanged.” AT&T also said it would implement a firewall between Turner and AT&T to prevent the exchange of confidential information from independent developers or distributors.

In 2016, the Justice Department required AT&T to sell the Turner Networks, which owns CNN, as part of approving the merger.

John Bergmayer, senior counsel at the nonprofit Public Knowledge, said that since the deal was approved, AT&T has raised prices for some video and wireless services.

“The AT&T-Time Warner deal is a bad deal for consumers and competition,” he said. “Judge Leon’s decision was flawed in many ways, and we believe the DOJ’s position should be vindicated.”

In the past, agreements approved by a federal judge have been invalidated on appeal.

In 2001, H.J. Heinz Co. called off its acquisition of Beech-Nut after an appeals court reversed a lower court’s decision to allow the merger. The Federal Trade Commission argued that the deal would combine the No. 2 and No. 3 baby food makers and that competition would be “substantially lessened” if the merger went through.

(Reporting by David Shepardson; Additional reporting by Carl O’Donnell in Sun Valley, Idaho; Editing by Leslie Adler and Peter Cooney)