The Department of Justice’s attempt to reverse the AT&T/Time Warner merger received some help yesterday from an unexpected source: the Federal Communications Commission.
The FCC previously allowed AT&T to buy Time Warner without having to undergo a lengthy public-interest review, despite pushback from Democrats in the Senate and FCC. The DOJ fought the merger alone, ultimately losing a court ruling that allowed AT&T to complete the acquisition.
But the DOJ appealed that court ruling last month, and yesterday the FCC gave the DOJ’s case a small boost. The FCC isn’t actually supporting the DOJ’s case, but the commission’s filing points out an error made by the US District Court for the District of Columbia. In US District Judge Richard Leon’s ruling against the DOJ, he said that he was “hesitant to assign any significant evidentiary value” to previous statements that AT&T and the AT&T-owned DirecTV made to the FCC. AT&T’s own statements to the FCC, made in the years prior to the AT&T/Time Warner merger, supported the DOJ’s case that a merged entity could raise the price of programming. Those AT&T statements were made as part of the FCC’s 2010 review of the Comcast/NBCUniversal merger and in other FCC proceedings.
In the filing, the DoJ says the district court approved the merger after “erroneously ignoring fundamental principles of economics and common sense” and that it used a “deeply flawed assessment of the government’s evidence” to reach its decision.
According to the DoJ, AT&T’s access to Time Warner’s content, including the highly important Turner Broadcasting System, which includes CNN, Cartoon Network, TBS, TNT, and other networks, gives it bargaining leverage over rivals, which could drive up access fees, ultimately resulting in higher prices for consumers.
The original ruling approving the merger, says the DoJ, ignored key documents from AT&T on the competitive harm of vertical mergers, limited expert economic testimony, and refused to close the courtroom to allow for testimony related to confidential business information. Further, the DoJ insists the original ruling ignored the economics of bargaining and did not consider corporate profit maximization.
The government established a reasonable probability that the AT&T-Time Warner merger would increase Time Warner’s bargaining leverage and, thus, substantially lessen competition, in violation of Section 7 of the Clayton Act.
The district court’s contrary conclusion rests on two fundamental analytical errors: it discarded the economics of bargaining, and it failed to apply the foundational principle of corporate-wide profit maximization. These errors colored the court’s view of the facts, leading to a decision that is clearly erroneous in light of the evidence presented at trial.
The Department of Justice is asking the appeals court to vacate the district court’s ruling and remand the matter for further proceedings.
AT&T and Time Warner completed their merger in June following the judge’s ruling that the merger was legal. The Justice Department said at the time that it was disappointed in the court’s ruling and would consider its next steps, but allowed the merger to move forward and did not file an emergency stay.
While the merger is finished, the Department of Justice remains able to appeal the judge’s ruling and first announced plans to do so back in mid-July.
Shortly after acquiring Time Warner, AT&T announced a new WatchTV service allowing AT&T wireless subscribers with new “AT&T Unlimited &More” and “AT&T Unlimited &More Premium” plans access to more than 30 live channels and 15,000 TV shows and movies on demand.
AT&T’s plans are more expensive than previous unlimited wireless plans, but they include WatchTV, which AT&T charges $15 per month for on a standalone basis.
Though AT&T said that its prices would not increase following the merger, it raised prices on its DirecTV Now plans by $5. AT&T also recently raised its administrative fees for postpaid wireless subscribers to $1.99, which some analysts have speculated is to make up for the expense of the Time Warner purchase.
“The Court’s decision could hardly have been more thorough, fact-based, and well-reasoned,” said AT&T General Counsel David McAtee in a statement. “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.”
The US Department of Justice will appeal the court ruling that allowed AT&T to purchase Time Warner Inc.
AT&T completed the merger after getting a favorable ruling from a judge at the US District Court for the District of Columbia last month. The Trump administration’s Justice Department did not seek a stay of the ruling, so AT&T was able to take ownership of Time Warner. But the DOJ is appealing the judge’s ruling to the United States Court of Appeals for the District of Columbia Circuit, the DOJ said in a court filing today.
A court could theoretically force AT&T and Time Warner to reverse the merger. AT&T said it would maintain some separation between its old and new business units in a post-verdict letter to the DOJ. That separation might make undoing the merger logistically easier if the DOJ wins its appeal.
A month after a judge approved AT&T’s $85.4 billion purchase of Time Warner with no conditions, the United States Department of Justice has announced plans to appeal the merger’s approval.
In a court document filed with the United States District Court for the District of Columbia, the DoJ announced its formal appeal. No additional data was included in the initial document.
Notice is hereby given that the United States of America, plaintiff in the above named case, appeals to the United States Court of Appeals for the District of Columbia Circuit from the final judgment entered in this action on June 12, 2018.
AT&T first announced its plan to purchase Time Warner in late 2017, but the acquisition was put on hold when the DoJ filed a lawsuit to put a stop to the merger based on the grounds that it would result in higher bills and fewer options for consumers.
A judge in June, however, ruled that the merger was legal, and while the Justice Department said it was disappointed in the court’s ruling and would consider its next steps “in light of [its] commitment to preserving competition for the benefit of American consumers,” it ultimately decided not to interfere with a stay at the time that the ruling was announced.
Just days after the judge’s approval, AT&T completed its acquisition of Time Warner, but the DoJ is still able to appeal the decision even after the completion of the merger.
Shortly after the acquisition, AT&T announced a new WatchTV service that offers AT&T wireless subscribers under the new “AT&T Unlimited &More” and “AT&T Unlimited &More Premium” plans access to more than 30 live channels and 15,000 TV shows and movies on demand. These new plans are more expensive than AT&T’s previous unlimited wireless plans, but includes WatchTV. On a standalone basis, WatchTV is $15 per month.
While AT&T said that its prices would not increase following the merger, it raised prices on its DirecTV Now plans by $5. AT&T also recently raised its administrative fees for postpaid wireless subscribers to $1.99, which some analysts have speculated is to make up for the expense of the Time Warner purchase.
On June 19, former AT&T executive and new chief executive of Warner Media John Stankey spoke to a group of HBO employees about changes coming to the premium cable company in the near future. The discussion was held in the wake of AT&T’s acquisition of Time Warner, which owns HBO, and also included HBO’s chief executive officer Richard Plepler.
The telecommunications company previously stated that it would take a “hands-off approach” to running HBO, but The New York Times this weekend reported on Stankey’s speech and it sounds like that might not be the case. According to a video of the discussion, Stankey explained Warner Media’s intent to align HBO more alongside streaming companies like Netflix in order to increase its subscriber base, although he refrained from referencing Netflix by name.
This means creating more content that releases at a faster pace, in comparison to HBO’s current stable of limited Sunday night-focused shows. According to Stankey, the goal is to increase the hours per day viewers watch HBO, which is currently less than rivals like Netflix and Hulu because of HBO’s smaller catalog.
“We need hours a day,” Mr. Stankey said, referring to the time viewers spend watching HBO programs. “It’s not hours a week, and it’s not hours a month. We need hours a day. You are competing with devices that sit in people’s hands that capture their attention every 15 minutes.”
Continuing this thread, Stankey specifically stated that more hours of user engagement means that Warner Media can “get more data and information” to monetize through advertisements and new subscription options.
“I want more hours of engagement. Why are more hours of engagement important? Because you get more data and information about a customer that then allows you to do things like monetize through alternate models of advertising as well as subscriptions, which I think is very important to play in tomorrow’s world.”
As the discussion continued, Stankey appeared to have butted heads slightly with Plepler on the topic of HBO’s monetization, which Stankey believes can be increased through his new methods. Plepler claimed that the company is already a consistent moneymaker, to which Stankey responded: “Yes, yes you do… Just not enough.”
Stankey and Warner Media hope that an increased output of original content will boost HBO’s 40 million paid subscribers in the United States, which Stankey said as of now “was not going to cut it.” Comparatively, Netflix earlier this year had 55 million U.S. subscribers and Hulu in May had 20 million.
HBO’s business currently expands across paid cable add-on packages, the connected HBO GO app, and standalone HBO NOW app. Stankey said that Warner Media’s plans will kick off soon and “there’s going to be more work” for HBO employees over the next twelve months, which he called a “dog year.”
While Apple wasn’t mentioned in the discussion, the Cupertino company is another upcoming competitor in the streaming TV market, with plans to debut more than a dozen television shows beginning sometime in 2019. Although the distribution of these shows remains unclear, the company is rumored to be planning a bundle with original TV content, Apple Music, and more.
AT&T is raising the base price of its DirecTV Now streaming service by $5 per month, despite promising in court that its acquisition of Time Warner Inc. would lower TV prices.
AT&T confirmed the price increase to Ars and said it began informing customers of the increase this past weekend. “The $5 increase will go into effect July 26 for new customers and varies for existing customers based on their billing date,” an AT&T spokesperson said.
The $5 increase will affect all DirecTV Now tiers except for a Spanish-language TV package, AT&T told Ars. That means the DirecTV Now packages that currently cost $35, $50, $60, and $70 a month will go up to $40, $55, $65, and $75.
AT&T has been offering free HBO to its unlimited data customers since last year, and you might have expected that deal to continue unaltered now that AT&T owns HBO thanks to its acquisition of Time Warner Inc.
But AT&T revamped its two unlimited mobile plans this week, and in the process it raised the price for the entry-level plan by $5 a month while removing the free HBO perk. The entry-level unlimited plan now starts at $70 instead of $65.
Existing customers can keep their old plan and the free HBO, but new customers or those who switch plans will have to buy the more expensive unlimited plan to get HBO at no added cost.