Markets

Judge: Gov't evidence "too thin" in AT&T case

Judge: Gov't evidence

Petrocelli told Judge Leon that their estimates show FAANG is worth $3 trillion collectively, while an AT&T-Time Warner entity post-merger would be worth $300 billion.

The trial was closely watched as the fate of the deal could have had ripple effects on future deals and everyone from media giants to streaming service providers.

The Justice Department argued that the merger between AT&T and Time Warner would introduce unfair advantages in the marketplace.

In making that ruling, Leon reaffirmed the judiciary's traditional tolerance for "vertical integration" - the technical term for mergers between companies that operate related, but distinct, businesses.

The government can appeal the ruling, but Leon reportedly said that he would reject any government motion for a stay that would further delay the deal.

We're still waiting to get a copy of the full ruling, but Bloomberg TV reported that US District Judge Richard Leon ruled entirely in AT&T's favor.

"We continue to believe that the pay-TV market will be less competitive and less innovative as a result of the proposed merger between AT&T and Time Warner", said Assistant Attorney General Makan Delrahim.

It is about tectonic shifts in the media and technology industries. He also warned the US government against bringing an appeal if the goal was to try to stymie the deal, though the DOJ has not indicated its next steps. The Justice Department had argued that letting AT&T (a content distributor) combine with Time Warner (a content creator) would reduce competition between the mobile-phone giant and its rivals, and thus, hurt consumers.

With or without Time Warner, AT&T is very focused on its media business. The favorable decision, in a rebuke of the Justice Department's case opposing the deal, is viewed as a green light for other major M&A moves - and several scenarios are already in play.




In after-market trading following the ruling, shares of Time Warner rose almost 5 percent and AT&T shares fell 1.6 percent.

Fox shares rose 5.2% in after-hours trading Tuesday, while Comcast fell as much as 4% and Disney dropped as much as 2%. CNBC is reporting that Comcast will try to buy Twenty-First Century Fox if AT&T buys Time Warner.

In making its case, the USA government argued that the merger of AT&T could harm consumers in a number of ways.

The decision comes despite criticism from Trump, a frequent detractor of Time Warner's CNN and its coverage.

"We want people engaged with their mobile devices all day watching movies and video", Stephenson said in April during the trial.

The DOJ has argued that this type of consolidation would give the merged AT&T-Time Warner the ability to raise prices, thwarting the competition's ability to compete by forcing them to raise prices to maintain carriage rights.

After the ruling, Time Warner's stock dropped almost 5 percent in after-market trading. AT&T is known to most consumers as a telecom company, offering cable, internet and phone services, but this is just the latest in a line of mergers from such companies trying to break into the media landscape.

The Justice Department is not likely to be put off by the loss, said Amy Ray of the law firm Cadwalader, Wickersham & Taft LLP, noting it had prevailed in stopping other mergers between rivals.