The trial over the Department of Justice’s antitrust
challenge to the AT&T/Time Warner merger is now in its third week of what
is expected to be a six to eight week trial. U.S. District
Judge Richard Leon is presiding over the trial in federal court in the District
of Columbia.
As I have noted before, the DOJ challenge is unprecedented in the modern antitrust era.
The last vertical merger challenged by U.S. antitrust agencies was in 1979, when
the FTC lost its challenge to truck trailer
manufacturer Fruehauf’s acquisition of a brake component supplier. The last
vertical merger successfully challenged was in 1972, when Ford
Motor Company bought a supplier, Autolite, and was forced to sell off some of
the assets after DOJ challenged the merger.
Instead, U.S. antitrust
agencies have either allowed vertical mergers to proceed without challenge, as
was the case with the 2017 acquisition of Whole Foods by
Amazon, or have agreed to behavioral
restrictions. For example, Comcast’s
2011 acquisition of NBC and NewsCorp’s 2004 acquisition of DirecTV raised
similar alleged competitive issues as the AT&T/Time Warner merger, and both
were settled with behavioral restrictions that allowed the mergers to proceed
without structural changes. However, the
current head of the DOJ’s Antitrust Division has stated that he is skeptical
about behavioral conditions and strongly prefers that any relief be structural.
At trial this week, however, Judge
Leon asked questions of a witness about whether behavioral conditions would be
sufficient. Judge Leon had previously denied a motion
by DOJ to exclude evidence the merger parties plan to present that they are
offering 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. This week, Judge Leon asked a witness for the DOJ to
address whether such relief would alleviate his company’s concerns about the merger,
which may indicate that the judge is willing to consider such relief to resolve
the case.
For a substantive analysis of the
merger, including an assessment of behavioral and structural relief in vertical
merger cases, see my February 8, 2018 Perspectives from FSF Scholars entitled
“The Proper Context for Assessing the
AT&T/Time Warner Merger.”
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