Hold the phone, it ain’t over yet.
One month after losing its case to block AT&T’s $85 billion merger with Time Warner, the Justice Department filed an appeal Thursday.
In a statement, AT&T’s general counsel, David McAtee, sounded a bit baffled.
“The Court’s decision could hardly have been more thorough, fact-based and well-reasoned,” he stated. “While the losing party in litigation always has the right to appeal if it wishes, we are surprised that the DOJ has chosen to do so under these circumstances.”
McAtee went on to state that AT&T is ready to defend the district court’s decision in the Washington, DC, Circuit Court of Appeals.
Regardless, AT&T’s shares dipped 1% after the bell, though they started creeping back up nearly immediately.
Although the Justice Department’s new filing includes no details, during the trial the government argued that combining the two behemoths – AT&T’s distribution pipes with Time Warner’s premium content – was an antitrust violation that would lead to higher prices for consumers.
AT&T claimed that to attract ad dollars and more effectively compete against massive tech rivals – Netflix, Amazon, Facebook and Google – it needed the opportunity to combine data, entertainment and distribution into a single platform.
The federal judge presiding over the case, Richard Leon, was ultimately unmoved by the government’s argument, deciding unequivocally in AT&T’s favor and deeming the merger legal. There were no conditions imposed on the merger.
In his 172-page opinion on June 12, Leon expressly stated his belief that the government has no “likelihood of success on the merits of an appeal.”
“[The] government here has taken its best shot to block the merger based on the law and the facts and within the time allowed,” Leon wrote. “The defendant did their best to oppose it. The Court has spoken.”
But what does the government’s move mean for the future of vertical mergers if Leon’s blessing of AT&T-Time Warner is revoked? It’s possible there could be a dampening effect, at least in the short term, for other media and cable giants, notably Disney and Comcast, as they battle for more assets of their own.
As Elgin Thompson, managing director of Digital Capital Advisors, noted to AdExchanger in June, after Leon approved the AT&T-Time Warner deal: The “DOJ pushed the pause button on the media M&A market” in November when it first sued AT&T over the telecom’s merger aspirations.
Now it’s trying to do the same again.