AT&T Intensifies Battle for Time Warner by Targeting Trump Role

(Bloomberg) -- AT&T Inc. is pursuing an unprecedented strategy of injecting politics into the fight to salvage its planned takeover of Time Warner Inc. by threatening to call the head of the U.S. Justice Department’s antitrust division to testify about his decision to sue to block the merger.

AT&T believes Trump and the head of the division, who previously worked at the White House and was appointed by Trump, discussed the transaction before the government sued to block the deal in November, according to a person familiar with the matter who wasn’t authorized to discuss the information publicly.

The company is seeking communications between the department and the White House about the merger, and wants to put the head of the division, Makan Delrahim, on its witness list, another person said.

The move carries potential risks and rewards. Evidence that Trump, a relentless critic of Time Warner’s CNN and an opponent of the merger, pushed the Justice Department to sue would undermine the government’s credibility. But Delrahim may welcome the chance to defend the case as a legitimate enforcement action that was filed without political influence.

Trump’s Criticism

Delrahim’s case is based on a strong complaint that lays out how the combination will harm consumers, even though the lawsuit may seem politically motivated given Trump’s criticism of CNN, said Michael Carrier, a law professor at Rutgers University who specializes in antitrust.

"I just can’t see a smoking gun where he’d say, ‘Let’s bring this case, Mr. President, because we want to stick it to CNN,’" Carrier said. "I see this as a way of kicking up some dirt."

If approved, the merger would reshape the media landscape by uniting a telecom giant with the owner of CNN, Warner Bros., TNT, TBS and HBO. AT&T, the owner of DirecTV, is the largest pay-TV distributor, as well as a powerhouse in mobile phones and landlines. The Justice Department has argued that letting AT&T own the films and TV shows that flow down its pipes would harm consumers and competitors.

Denying Involvement

The White House and the Justice Department have denied Trump had any involvement in the review. Delrahim says the $85.4 billion merger would raise costs for consumers and reduce choice by combining AT&T’s distribution channels with Time Warner’s content. The lawsuit was a surprising setback to a deal that seemed on track for approval, just as Comcast Corp.’s prior purchase of NBCUniversal, which combined distribution and content, was cleared by the Justice Department.

Bloomberg reported in November that AT&T intended to dig into whether the White House influenced the decision to sue the companies. The New York Times earlier reported on AT&T’s plan to put Delrahim on the witness list.

The dispute over AT&T’s requests will probably become public Friday at a hearing in Washington before U.S. District Judge Richard Leon, who is overseeing the case. Lawyers for both sides held a closed-door hearing with the judge Monday and declined to comment on what was discussed.

AT&T and the Justice Department declined to comment on Wednesday.

“This is a matter to be discussed in court, not the press, and as we have consistently told all reporters yesterday and today, we will reserve comment on it for the courtroom,” Dan Petrocelli, lead trial counsel for Time Warner and AT&T, said in a statement.

Vowing Fight

AT&T immediately responded to the lawsuit, vowing to fight the case in court and calling out Delrahim’s change of tone, pointing to comments he’s made over time on the deal.

“I do want to address the elephant in the room here,” AT&T Chief Executive Officer Randall Stephenson said at the time. “There’s been a lot of reporting and speculation, whether this is all about CNN. And frankly, I don’t know. But nobody should be surprised that the question keeps coming up, because we witness such an abrupt change in the application of antitrust law here.”

Delrahim, who had served as in the Justice Department’s antitrust division under President George W. Bush, commented during a Canadian TV interview on the Time Warner deal shortly after it was announced in late 2016, saying he didn’t see it as "a major antitrust problem.”

Since taking the top antitrust job, Delrahim has positioned himself as an aggressive enforcer who wants to bring sweeping change to the way the agency handles mergers. One of his strongest positions is a dislike for the traditional practice of approving vertical mergers like the Time Warner deal if the companies promise to adhere to certain conditions on how they do business.

Delrahim’s decision to draw that line with the first major cross-industry merger pits him against an army of well-paid AT&T lawyers and a history of approval decisions that hinged on conditions.

If the Justice Department objects to AT&T’s plan to put Delrahim on the witness list, the judge will have to decide whether his testimony is relevant to the government’s claim that the combination will harm competition, said Matthew Cantor, an antitrust lawyer at Constantine Cannon.

"It could be AT&T wants to make the Justice Department argue these issues are irrelevant or make it look like the Justice Department is concerned about Mr. Delrahim testifying, so even if they lose, they sort of win a public relations victory," Cantor said.

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