Three judges all but shot down any opposition to AT&T’s merger with Time Warner, affirming the telco’s plan to distribute organic content of its own.
A U.S. Court of Appeals panel rejected the U.S. Department of Justice‘s complaint against the $85.4 billion merger between the service provider and media company. The panel confirmed the decision District Court Judge Richard Leone made last June.
The Justice Department could appeal to the Supreme Court, but its 15-month campaign against the merger nears an end. The federal agency asserts that AT&T would use Time Warner’s media content “as a weapon” against rival platforms in order to “substantially lessen competition.”
The appeals court unanimously affirmed Leone’s decision, arguing that the Justice Department failed to shoulder its burden of proof.
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“The government offered no comparable analysis of data and its expert opinion and modeling predicting such increases failed to take into account Turner Broadcasting System’s post-litigation irrevocable offers of no-blackout arbitration agreements, which a government expert acknowledged would require a new model,” Rodgers, Wilkins and Sentelle wrote in their decision.
— David Shepardson (@davidshepardson) February 26, 2019
The panel also faulted the original District Court decision, criticizing how it calculated AT&T’s potential net earnings. The appeals decision ultimately came down to the Justice Department’s lack of evidence. (Read the panel’s full argument, which includes a rather heady discussion of mathematician John Nash‘s bargaining theory.)
“Undoubtedly the district court made some problematic statements, which the government identifies and this court cannot ignore,” the panel said.
Reuters called the Justice Department’s opposition a unique intervention against a vertical merger. A vertical merger brings together companies from two different industries or different parts of the supply chain. One of the reasons for political resistance (aside from sharp criticism from President Trump) is that more and more companies like Verizon and AT&T are trying to acquire content. Comcast last year made a play to purchase 21st Century Fox but appears to have lost to Disney.
Gil Regev, chief communications officer of RGK Mobile, told us in 2017 that mobile operators will inevitably assume control of content providers, leading to a “much-necessary revolution” in TV as well as distribution in general.
“We are really laying the foundation here for a future that is all about mobility, and the fact that operators are finally partaking in this ecosystem and not [using it] as a mere means to an end is an exciting one,” Regev said.
Companies in the indirect IT/telecom channel are also reconsidering the role of distribution, but in reverse fashion. AppDirect’s purchase of master agent WTG actually exemplifies a product/solution (content) acquiring a company to …