It’s official: AT&T can merge with Time Warner

It’s official: AT&T can merge with Time Warner

AT&T and Time Warner announced their deal on October 22, 2016, in the midst of the bitterly contested presidential campaign between Donald Trump and Hillary Clinton. The DOJ moved to block the merger in March, arguing that the merger would reduce competition and hurt consumer choice.

The decision on a so-called "vertical integration" - between two companies who do not make competing products - could have a profound impact on future mergers.

CNN is owned by Time Warner. To survive the great unbundling, AT&T needs a content package strong enough to gain it a share of the "over-the-top" media market.

At the heart of the DOJ's complaint is an assumption that the merged entity would use its market power to raise the price of content now owned by Time Warner, or threaten to withhold programming, including hit shows such as Game of Thrones and NCAA March Madness.

A federal judge on Tuesday gave his blessing to telecom giant AT&T's drive to take over the Time Warner media conglomerate.

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"We continue to believe that the pay-TV market will be less competitive and less innovative as a result of the proposed merger between AT&T and Time Warner", he said in a statement.

The decision represents a setback for the Department of Justice, whose antitrust chief Makan Delrahim, had argued strenuously against the merger.

A merged AT&T-Time Warner could, in principle, refuse to supply content to some distributors in order to drive consumers to purchase its own access and content bundles, but it would not be in the merged company's financial interest to do so.

The acquisition will create one of the most powerful companies in global media, marrying AT&T's widespread consumer distribution capabilities with the crown jewels of Time Warner, including HBO, Warner Bros. film and TV studios, and TV channels including CNN, TNT and TBS. It's unclear at the present time if Fox will stick with the Disney deal or start a potential bidding war.

If AT&T is successful in its bid to buy Time Warner, it will nearly certainly find itself competing in a media market dominated by other large, integrated providers.

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AT&T in turn called the government's arguments "absurd" and has argued the deal is necessary for it to compete with tech companies like Netflix, Apple and Amazon as they spend billions to bolster their positions in media.

AT&T and Time Warner are not competitors; their proposed merger would be a "vertical integration" of complementary companies. 'We're chasing their tail lights, ' Petrocelli said. 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. He pledged at the time that, if elected, his administration would block the deal, "because it's too much concentration of power in the hands of too few".

The decision comes despite criticism from Trump, a frequent detractor of Time Warner's CNN and its coverage.

AT&T's stock fell as much as 2.5% and shares were up as much as 5.3% to more than $100 per share in after-hours trading Tuesday.

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