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The government is suing to block the AT&T-Time Warner deal

The stage is set for a highly politicized battle in light of President Donald Trump’s feud with CNN.

Republican Presidential Candidates Debate In Miami Area
Then-candidate Donald Trump at a March 2016 Republican primary debate.
Photo by Joe Raedle/Getty Images
Emily Stewart covers business and economics for Vox and writes the newsletter The Big Squeeze, examining the ways ordinary people are being squeezed under capitalism. Before joining Vox, she worked for TheStreet.

The federal government is suing to block AT&T’s proposed takeover of Time Warner, setting the stage for a potentially highly politicized battle in light of President Donald Trump’s past comments on the deal and his ongoing feud with CNN.

The U.S. Department of Justice has filed a lawsuit to block the proposed deal, it announced on Monday. AT&T in a statement slammed the move as a “radical and inexplicable departure from decades of antitrust precedent.”

The telecom giant announced its $85 billion takeover of Time Warner more than a year ago. AT&T, the United States’ No. 2 wireless carrier, aims for the combined company to bundle video entertainment on its mobile service. Time Warner owns HBO, the movie studio Warner Bros., and Turner Broadcasting, which includes cable networks TNT, TBS, and CNN, among others.

AT&T holds that the deal would benefit customers by enhancing access to premium content on their mobile devices and providing an alternative to cable TV companies. Detractors say the combined company would concentrate too much power, stifling consumer choice. The Justice Department in a statement announcing the lawsuit said the deal would “substantially lessen competition, resulting in higher prices and less innovation for millions of Americans.”

The Financial Times and the New York Times suggested earlier this month that the federal government might try to block the merger. As Vox’s Matt Yglesias pointed out at the time, they offered different accounts of the department’s reasoning:

In the FT’s account, the government’s objections are fairly narrowly focused on CNN and seem closely linked to President Trump’s feud with the network.

In the Times’s account, the government’s objections are broader. They want the merged entity to divest itself of either the entire Turner Broadcasting suite of channels or AT&T’s satellite television broadcasting unit, DirecTV. That would have the impact of forcing the merged entity to divest of CNN, which is a part of Turner Broadcast, but the implications would be both broader and more policy-focused.

AT&T rejected demands to divest either the DirecTV unit or Turner Broadcasting, leading to the Justice Department’s decision to sue, according to Reuters. The suit sets the stage for a court battle between AT&T and the DOJ.

Trump has been against the deal from the start — and so have some Democrats

Trump spoke out on the proposed deal when it was first announced in October 2016 before he was elected to the White House, indicating from the get-go that his ongoing feud with CNN was at least on his mind.

“AT&T is buying Time Warner, and thus CNN, a deal we will not approve in my administration because it’s too much concentration of power in the hands of too few,” Trump said at a campaign rally in Gettysburg, PA, citing it as “an example of the power structure I am fighting.”

Trump’s continued public bashing of CNN and his willingness to weigh in on the deal lend to a conspiratorial narrative of the DOJ’s objection to it — that the government is opposing the merger to hurt CNN, as Yglesias explains:

One version of the story, laid out by Peter Kafka at Recode, is that this is a form of creeping authoritarianism. Donald Trump doesn’t like CNN’s journalism, CNN is owned by Time Warner, AT&T’s proposed takeover of Time Warner is good news for Time Warner’s shareholders, so Trump is trying to scuttle the deal to retaliate against CNN.

Makan Delrahim, who now heads the Department of Justice’s antitrust division, said last year he didn’t see a major problem with the transaction.

But there are other, less personal reasons why Trump’s Department of Justice might object to the takeover. Plenty of other figures, including a number of Democrats, agree that allowing the two companies to merge would be a problem.

A group of Democratic senators, including Elizabeth Warren (D-MA) and Al Franken (D-MN), in June sent a letter to Attorney General Jeff Sessions asking his department to “closely scrutinize” the AT&T-Time Warner agreement, citing “strong concerns” that the combination could lead to higher prices, fewer choices, and poorer quality services for Americans.

Sen. Bernie Sanders (I-VT) called for the deal to be killed almost as soon as it was announced last year:

Democrats have also added to their platform a plank directly tied to antitrust enforcement and combatting megamergers.

A Department of Justice spokesman did not immediately return request for comment on the matter.

AT&T chairman and CEO Randall Stephenson in an interview with CNBC earlier this month said that if the issue does head to court, his team is ready. “If we feel like litigation is a better outcome, then we will litigate,” he said.

"Today's DOJ lawsuit is a radical and inexplicable departure from decades of antitrust precedent,” said David McAtee, senior executive vice president and general counsel at AT&T, in a statement released on Monday. “Vertical mergers like this one are routinely approved because they benefit consumers without removing any competitor from the market. We see no legitimate reason for our merger to be treated differently.”

He said the company is “confident” the courts will side with it.