AT&T’s blockbuster $86 billion megamerger with Time Warner will be sticking around.
Last year, the Department of Justice sued to block AT&T’s latest merger, explaining in detail how AT&T would use its newfound power to jack up prices for “must have” Time Warner content like HBO, harming consumers and competitors alike. But US District Court Judge Richard Leon rejected the government’s argument in a ruling last June that was widely criticized for being absurdly narrow.
The DOJ appealed late last year, noting AT&T raised prices on consumers and competitors like Dish Network, which was forced to drop the channel from its cable lineup because the company couldn’t afford the higher rates. This, the DOJ noted, simply proved its original point. But a three-judge panel of the U.S. Court of Appeals for the DC Circuit issued a ruling Tuesday morning rejecting the DOJ’s arguments, stating DOJ claims that the courts “misunderstood and misapplied economic principles” and “clearly erred” were “unpersuasive.” Still, the problems created by the deal are already abundantly obvious. AT&T’s 2015 merger with DirecTV and last year’s union with Time Warner saddled the telecom giant with an unprecedented level of debt. To dig out from underneath this debt load, AT&T has been laying off employees and raising rates. In the wake of the Time Warner Deal, AT&T quickly jacked up the cost of its DirecTV Now streaming service, something AT&T lawyers had claimed wouldn’t happen during the original trial. AT&T also quickly hiked its “administrative fee” applied on wireless customers, netting the company an additional $800 million per year. Meanwhile, AT&T began quietly using the death of net neutrality protections to its competitive advantage, applying usage caps and overage fees on its broadband customers if they use competing services like Netflix, but not if they use AT&T’s own streaming services. In a statement, AT&T insisted this kind of behavior was innovative and beneficial to consumers.
“The merger of these innovative companies has already yielded significant consumer benefits, and it will continue to do so for years to come,” AT&T said in a statement. “While we respect the important role that the U.S. Department of Justice plays in the merger review process, we trust that today’s unanimous decision from the DC circuit will end this litigation.” Consumer groups unsurprisingly don’t agree with AT&T’s rosy assessment.
"This is bad news for the public, which will see higher bills and even more media power handed over to Ma Bell,” Craig Aaron, CEO of consumer group Free Press told Motherboard in a statement. Others were quick to point out that the steady erosion of government antitrust authority by lobbyists have left government lawyers trapped in very narrow windows of economic theory while attempting to make even the most obvious case against predatory corporate behavior. “The DC Circuit's decision demonstrates that US antitrust laws and Justice Department merger guidelines are sorely in need of reform,” former FCC lawyer Gigi Sohn said in a statement to Motherboard. “It has become nearly impossible for the government to meet its burden of showing that a merger violates the antitrust laws, especially when it comes to vertical mergers.” Some of the DOJ’s failures were of its own making. The phrase net neutrality wasn’t mentioned once during the DOJ’s initial trial, despite being an obvious, integral part of AT&T’s overall anti-competitive ambition in the streaming wars to come.
“While we welcomed the government's challenge to this merger, the DOJ tried the wrong case,” Aaron argued. “They largely ignored the market and customer harms that AT&T can now to bring to bear through its ownership of content and Internet service, instead focusing on a narrower and less compelling case."
Between the merger, the death of net neutrality, and the erosion of FCC oversight at the behest of telecom lobbyists, critics say the stage has been set for AT&T to engage anti-competitive shenanigans for years to come. And it’s becoming increasingly clear that the US government, at least in its current incarnation, couldn’t care less.