U.S. Justice Department Says It’s Appealing AT&T-Time Warner Merger Decision

(Bloomberg) -- The U.S. Justice Department said it’s appealing a judge’s decision allowing AT&T Inc.’s takeover of Time Warner Inc., renewing the government’s antitrust fight against a merger that created a telecommunications and media giant.

The department’s antitrust division filed a one-sentence notice of appeal Thursday in federal court in Washington. AT&T shares declined 1.1 percent to $31.86 in extended trading at 5:05 p.m. in New York.

U.S. Justice Department Says It’s Appealing AT&T-Time Warner Merger Decision

A Justice Department win at the appeals level would undo a stinging rebuke for the government and vindicate the decision by the head of the antitrust division, Makan Delrahim, to challenge the Time Warner takeover. The case has been closely watched because it’s the first time in decades a court has decided a merger of companies that operate in a different parts of a supply chain.

The outcome of the appeal could have a broad effect on how antitrust enforcers consider these so-called vertical deals. A loss for the government would set a binding precedent that could restrict future enforcement while a win would enhance the government’s ability to police the deals. Several are pending before the Justice Department now, including CVS Health Corp.’s planned takeover of Aetna Inc. and Comcast Corp.’s bid for 21st Century Fox Inc.

AT&T closed the Time Warner transaction on June 14, two days after U.S. District Judge Richard Leon’s ruling. The Justice Department had agreed not to seek an emergency court order preventing the deal from closing after AT&T promised to operate Time Warner’s Turner Broadcasting as a separate business unit until 2019. That would make it easier for AT&T to sell Turner if the government ultimately prevails.

AT&T’s General Counsel David McAtee said in a statement that the company is ready to defend Leon’s decision approving the $85 billion Time Warner takeover.

“The court’s decision could hardly have been more thorough, fact-based, and well-reasoned. 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," he said.

The Justice Department declined to comment beyond the filing.

In his decision, Leon rejected the government’s argument that acquiring Time Warner will give AT&T the power to raise prices that cable and satellite-TV companies pay for Time Warner content such as CNN, which in turn will lead to higher bills for consumers. AT&T countered that the government’s economic model was riddled with flaws and that the deal will enable AT&T and Time Warner to more effectively compete against companies such as Netflix Inc.

The ruling was a blow to Delrahim’s approach to reviewing vertical mergers. For years, companies won antitrust approval for these deals by agreeing to restrictions on how they conduct business.

Delrahim rejected those behavioral settlements last year because he said they required enforcers to act as regulators who must ensure companies comply with their promises. Instead, companies should have to sell assets to fix competitive problems stemming from mergers, he said.

That stance led to the AT&T lawsuit in November after Chief Executive Officer Randall Stephenson refused the government’s demand to sell DirecTV or Turner Broadcasting.

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