Tuesday, March 13, 2018

Judge Denies Motion by Department of Justice to Exclude Evidence AT&T and Time Warner Plan to Present in Merger Trial

The federal judge presiding over the Department of Justice’s challenge to the AT&T-Time Warner merger has denied the motion by the DOJ to exclude evidence the merger parties plan to present at trial. That evidence is an offer to agree for seven years to arbitration in any Turner Networks carriage disputes with cable systems and other programming distributors that compete with ATT’s DirecTV and U-Verse. The combined companies would also agree not to “black out” these channels while the dispute is before an arbitrator. This offer appears to be modeled after the behavioral relief that DOJ and the Federal Communications Commission imposed in their settlement of their antitrust challenge to the Comcast-NBC merger in 2011.
This ruling could be important at trial. In its pre-trial brief, the DOJ indicates that it will rely on case studies to show the economic impact of programming that is removed from cable system when programming providers and distributors fail to reach agreements on prices. DOJ intends to argue that AT&T’s power to withhold Time Warner programming will give it market power over competing programming distributors who know they will lose customers if they cannot deliver Time Warner programming. If, however, the final decision on prices in programming carriage dispute is made by an arbitrator and blackouts are prevented during the arbitration process, then much of the harm alleged by DOJ would not occur.
The trial briefs is set to begin Monday, March 19, 2018. For a substantive analysis of the merger and the context in which it should be reviewed, see my February 8, 2018 Perspectives from FSF Scholars entitled “The Proper Context for Assessing the AT&T/Time Warner Merger.” For my review and assessment of the arguments made by the DOJ and the merging parties in their pre-trial briefs filed last week, see my recent blogpost entitled Department of Justice Pre-Trial Brief Describes A Case Against AT&T/Time Warner Merger That Will Be Difficult to Win.”