The Story:
The $85.4 billion mega deal involving AT&T’s proposed merger with Time Warner Inc. could face regulatory hurdles as the Department of Justice seeks support for an antitrust lawsuit from at least 18 state attorneys general, according to a Reuters report.
Important Because:
The deal has a political angle because Trump promised to block it when he was running for the presidency.
The DOJ has, so far, failed to get any of the states to back a lawsuit, despite a year going by in its antitrust review.
And there’s good reason for that.
Why No Support?
The objective of antitrust lawsuits and, indeed, antitrust regulations themselves, is typically to prevent mergers of companies that are direct competitors, and which would reduce the level of healthy competition within that industry.
The AT&T-Time Warner deal, on the other hand, is what’s known as a vertical merger because the businesses complement each another rather than compete with one another: AT&T’s distribution system, comprising cable, wireless and satellite, forms an ideal infrastructure through which to serve Time Warner’s programming, including HBO and Turner networks like TNT, CNN and TBS.
In general, vertical mergers do not end up in court because of the fact that they are complementary rather than anti-competitive, and it would be a tough case for the government to win on the grounds that the newly formed entity would harm the competition.
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