The trial over the Department of Justice’s antitrust
challenge to the AT&T/Time Warner merger appears to be nearing its end. U.S. District Judge Richard Leon is presiding over the
trial in federal court in the District of Columbia.
This week, Time Warner
Chief Executive Jeff Bewkes defended his company’s planned merger with telecoms firm AT&T as
necessary to compete for on-line advertising revenues with Internet giants like
Google and Facebook.
This argument should
sound familiar. Mark Cuban made the same point almost a year and a half ago in his testimony before a
Congressional Committee:
The idea that
TV is the dominant content delivery mechanism no longer is valid.
Instead, we fill our time by consuming content from Facebook,
Instagram, Snapchat, Messenger, WhatsApp and slowly from Virtual Reality
companies like Occulus Rift. Combined, these apps reach
more than 1.5 billion users a month. They can deliver any
kind of content, in any manner the consumer would like to receive it, be it
message, video, VR, post, ad, you name it, to populations around the world in a
manner that dwarfs TV….
Apple, Google,
Amazon, MicroSoft, and Facebook are 5 of the 7 most valuable
companies by market cap in the world. All have established their dominant
positions in the app and content worlds by making important, strategic
content acquisitions. That is exactly what the Time Warner acquisition is for
AT&T, an important strategic content acquisition. Alone, it will
be very difficult, if not impossible for either AT&T or Time
Warner to compete with any of the companies I've mentioned. Together it
will be still be difficult, but a combined entity at least gives them a chance
to battle the dominant players in the market.
Bewkes also testified that the
Justice Department is wrong about AT&T being reluctant post-merger to license
Time Warner’s TV and movie content to rivals in order to win over new customers
to AT&T’s programming distribution services, DirecTV and U-Verse. Bewkes
called that argument by the DOJ “ridiculous,”
and added: “If our channels are not in distribution we lose lots of money.”
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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