Just When You Thought the AT&T-Time Warner Saga Was Over, the DOJ Is Appealing the Verdict

Appeal filed one month after a federal judge approved the merger

AT&T CEO Randall Stephenson and the DOJ's Makan Delrahim could be back in court again soon.
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One month after a federal judge approved AT&T’s merger with Time Warner, ruling that the Justice Department’s antitrust suit had failed to make its case against the merger, the DOJ has decided that the 21-month-old saga isn’t over yet. The DOJ is appealing the ruling, according to court documents filed today.

On June 12, U.S. District Judge Richard Leon approved the AT&T-Time Warner deal with no conditions. The verdict was a blow to Makan Delrahim, chief of the Justice Department’s antitrust division, who filed suit against AT&T just two months after he was confirmed.

In October 2016, AT&T announced it would be acquiring Time Warner in a $85 billion megadeal that would combine Time Warner’s hefty film and TV properties (including Warner Bros., HBO, TNT, TBS and CNN) and AT&T’s robust broadband (U-Verse), wireless (AT&T), satellite (DirecTV) and streaming live TV (DirecTV Now) offerings.

The DOJ sued to block the deal in November, claiming it would give AT&T too much control and raise costs for consumers.

What ended up being the biggest antitrust case in decades got underway in March, as Delrahim’s team tried to make its case that AT&T would use networks like HBO and TNT to raise prices for rivals.

After Leon’s ruling, the Justice Department could have sought an injunction but announced that it chose not to. However, the DOJ said it was still considering filing an appeal, which it can do up to 60 days after the merger.

AT&T and Time Warner needed to act quickly after Leon’s verdict, as their merger agreement was set to expire on June 21. Time Warner would have received a $500 million breakup fee if the merger did not go forward.

So AT&T wasted no time in moving forward with the deal, completing its $85 billion purchase of Time Warner (the brands and business of which are now known as WarnerMedia) two days after the ruling.

But AT&T has kept its WarnerMedia assets in a separate unit in anticipation of a potential DOJ appeal.

UPDATE: “The Court’s decision could hardly have been more thorough, fact-based, and well-reasoned,”AT&T general counsel David McAtee said in a statement about the DOJ’s appeal. “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. We are ready to defend the Court’s decision at the D.C. Circuit Court of Appeals.”

Leon’s ruling had an immediate ripple effect, as it prompted Comcast to make a $65 billion all-cash offer for 21st Century Fox one day later in an effort to wrest the company away from Disney.

But on June 20, Disney countered by upping its bid to $71.3 billion; Comcast has yet to respond.

No matter how things shake out with the DOJ’s appeal, it won’t affect Disney’s merger proposal, which the Justice Department approved on June 27. However, Disney will be required to divest Fox’s 22 regional sports networks.

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