Published: Wed, June 13, 2018
Markets | By Noel Gibbs

Judge rules AT&T can purchase Time Warner

Judge rules AT&T can purchase Time Warner

A federal judge on Tuesday ruled that AT&T and Time Warner can go through with their $85 billion merger, dealing a blow to the the Trump administration's Justice Department and ending a landmark legal battle.

"This decision from Judge Leon will have broad ramifications for the tech, telecommunications and media sector for decades to come", said Daniel Ives, the chief strategy officer at GBH Insights.

The proposed acquisition of Time Warner by AT&T was what's known as a "vertical merger", the integration of two companies in different areas of the economy. AT&T lawyers initially sought email correspondence between Trump's White House and the Justice Department, but Leon declared that any communications were not relevant to the trial, and AT&T relented. AT&T is known to most consumers as a telecom company, offering cable, internet and phone services, but this is just the latest in a line of mergers from such companies trying to break into the media landscape. Time Warner owns HBO, Warner Bros., and Turner Broadcasting System.

"I conclude the government has failed to meet its burden of proof", Leon said.

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The merger was approved without any conditions, a stunning rebuke of the government's case. "For AT&T and Time Warner, this is a major victory lap".

The biggest impact of this deal will be felt quickly, as Comcast will now formally make an offer to Fox for the majority of its assets. The loss is a black eye for the Justice Department.

As president, Trump has called the merger "not good for the country" and said he believed it would push pay-TV prices higher.

Judge Richard Leon said the USA government failed to meet the burden of proof that the tie up between the largest United States pay TV operator and media entertainment giant Time Warner would harm competition.

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During the trial, the judge heard from dozens of witnesses, including AT&T CEO Randall Stephenson and Time Warner CEO Jeffrey Bewkes. President Donald Trump, while still a candidate, said he would block the deal "because it's too much concentration of power in the hands of too few". The ruling comes one day after the repeal of net neutrality, meaning that AT&T now has more freedom to prioritize the delivery of select content on its network. In fact, he suggested, consumers could end up paying less after a merger - maybe even $500 million less annually.

AT&T said it intends to close the merger by June 20.

AT&T and Time Warner said they need to combine in order to better compete with Facebook (FB), Amazon (AMZN), Apple (AAPL), Netflix (NFLX) and Google (GOOG), companies that are already powerhouses in the content game. A loss for AT&T and Time Warner could have signaled a new era of government scrutiny over so-called "vertical mergers" and could have halted attempts by companies like Disney, Fox and Comcast to announce their own megadeals.

"We are gratified that the court's decision to categorically reject the government's bid to block this historic merger", he said.

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