DOJ says AT&T’s acquisition of Time Warner will lead to far higher TV costs for consumers

Chance Miller | Aug 6 2018 - 4:16 pm PT

Despite initially approving AT&T’s acquisition of Time Warner, the Department of Justice later said it would appeal the merger. As part of those efforts, the DOJ has filed its opening brief with the Washington D.C. District Court of Appeals as it looks to protest the June decision that allowed the merger to move forward…

In the brief, the Justice Department explained that companies such as Dish Network and Charter would not only be AT&T’s competitors, but they would also be customers as they negotiated for Time Warner content. This relationship gives AT&T an unfair bargaining advantage over competitors, the department wrote.

This, the DOJ says, will ultimately lead to consumers paying far more for pay-television services, with distributors inherently passing on the higher costs to their customers (via CNET):

“American consumers will pay hundreds of millions of dollars a year more for pay-television service, as distributors pass on their higher costs.”

Further, the DOJ says that the merger between Time Warner and AT&T is “vertical,” meaning that it’s two different companies in different business combining. The outcome of this case can have major effects on the future of the television and telecommunications industry.

“The outcome of this appeal will shape the future of the media and telecommunications industries for years to come by setting the standard for determining whether industry participants will be permitted to merge into vertically integrated firms that control valuable programming content as well as the means of distributing that content to consumers,” the brief said.

The initial decision that allowed the merger to go through was faced on “faulty logic and a deeply flawed assessment of the government’s evidence,” the DOJ wrote according to The Washington Post:

“It is fundamental to the economics of bargaining that a party derives leverage from having the ability to walk away, even if it never actually does so,” the Justice Department wrote.

That leverage, regulators had said, would give AT&T an advantage in future negotiations with TV distributors whose customers demand Time Warner content.

The initial deal was approved at $85 billion, but now that it is in limbo and facing push back from regulators, it’s unclear what the future will bring.