DOJ demands AT&T sell off Time Warner assets before approving merger

UPDATE 3 — 11/18, 1:15 p.m. EST: DOJ’s antitrust division head Makan Delrahim explained in a Thursday speech to the American Bar Association why the federal government wants to prevent so-called vertical mergers between companies that don’t directly compete, like the pending Time Warner-AT&T deal.

“Vigorous antitrust enforcement plays an important role in building a less-regulated economy in which innovation and business can thrive, and American consumers can benefit,” he said.

Delrahim went on to explain Trump’s DOJ will work to ensure “structural remedies” to prevent monopolies before mergers are approved, essentially requiring asset sell offs, as opposed to the Obama-era policy of green-lighting mega-mergers on the condition of increased regulations.

 

UPDATE 2 — 11/11, 6:07 p.m. EST: Answering reporters questions aboard Air Force One Saturday, President Trump said he did not direct the Justice Department to attempt to block the pending AT&T-Time Warner merger.

However, Trump conceded DOJ is pursuing a break-up of AT&T upon its acquisition of the media conglomerate.

“I do feel you should have as many news outlets as you can”, he said. “So we’ll see — that probably ends up being litigation, maybe not, we’ll see how it all plays out.”

 

UPDATE — 11/10, 3:17 p.m. EST: Reuters cited sources on Friday which said Twenty-First Century Fox founder and executive chairman, Rupert Murdoch, has inquired about buying Time Warner-owned CNN with AT&T CEO Randall Stephenson on two occasions in 2017.

Vanity Fair’s Gabriel Sherman has also reported that Time Warner executives believe Murdoch is behind the DOJ’s insistence AT&T sell some of its acquiring assets from the media conglomerate before approving the mega-merger.

In 2014, Time Warner rejected an $80 billion buy-out offer from Twenty-First Century Fox — an event that Sherman’s sources speculate is motivating Murdoch’s interference in the pending deal.

 

Multiple media outlets reported Wednesday the Justice Department has demanded AT&T Inc. sell some or all of Time Warner’s assets upon its acquisition of the media conglomerate, or face an antitrust lawsuit.

In October 2016, AT&T agreed in principle to buy Time Warner, which owns Turner Broadcasting and its subsidiaries including CNN and TBS, as well as Warner Bros. Entertainment and HBO, for $85.4 billion.

Sources familiar with a Monday meeting between AT&T CEO Randall Stephenson and DOJ antitrust division head Makan Delrahim on finalization of the merger say the U.S. government wants acquirers to agree to sell either Turner, currently owned by Time Warner, or DirecTV, which AT&T bought in July 2015.

Justice Department sources cited by The Hill and other outlets, however, claim AT&T offered to sell only CNN in order to gain approval of the deal, a deal DOJ lawyers will reportedly not accept. Those reports were later denied by Stephenson, who has since said his company is willing to challenge the government in court, if necessary, as a “vertical merger like this hasn’t been blocked for over 40 years”.

Following last year’s announcement of the planned merger, then-candidate Donald Trump announced his opposition to the deal and vowed to block it if elected, citing the enormous power media conglomerates like Time Warner already have.

Since assuming the White House in January, however, Trump has not publicly commented on the pending deal, and adviser Kellyanne Conway remained noncommittal when asked about the issue in a recent CNN interview.  Delrahim also issued a recent statement saying he had not received instructions from the president on how to handle the transaction.

In 2016, however, before being confirmed to DOJ in September, Delrahim said he didn’t see the merger as a “major antitrust problem”, but has reportedly changed his view on the transaction.

Responding to the news on Wednesday, Sens. Al Franken (D-Minn.) and Brian Schatz (D-Hawaii) pointed to the president’s negative attitude toward CNN and the implications blocking such a deal would have.

“I am deeply concerned with the notion that the Justice Department may be pressuring the companies . . . given the president’s repeated public complaints about CNN’s coverage of him,” Franken said. “Any indication that this administration is using its power to weaken media organizations it doesn’t like would be a profoundly disturbing development.”

Despite concerns the president is using his power to settle a personal score, consumer advocacy groups oppose the acquisition of Time Warner arguing it will lead to price gouging and further disadvantage smaller TV and cellular networks.

 

[Financial Times] [Reuters] [CNNMoney] [Photo courtesy Fortune]

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