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.”
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