Christopher S. Yoo says the Justice Department's argument against AT&T's proposed acquisition of Time Warner is weak. Rebecca Haw Allensworth contends that the Trump administration has a legitimate complaint.
Yoo and Allensworth also agree that Trump's questionable motive — while a bad look — might not matter in court.
“Antitrust law largely ignores motive,” said Yoo, a professor at the University of Pennsylvania Law School.
“In the antitrust context, it would be completely unusual” to consider motive, concurred Allensworth, a professor at Vanderbilt Law School.
Thus, we have a situation in which the president has introduced doubts about his administration's objectivity but might pay no price for doing so.
AT&T agreed to buy Time Warner in October 2016. On the day the deal was struck, Trump said at a campaign rally in Gettysburg, Pa., that he would reject it, if elected.
“As an example of the power structure I'm fighting, AT&T is buying Time Warner and thus CNN, a deal we will not approve in my administration because it's too much concentration of power in the hands of too few,” Trump said.
The president reiterated his position on Tuesday, telling reporters, “I've always felt that that was a deal that's not good for the country. I think your pricing is going to go up.”
Trump has not raised similar objections to Sinclair Broadcast Group’s proposed $4 billion acquisition of Tribune Media, even though a merged company would violate an FCC limit on TV station ownership. In fact, the FCC is considering raising the limit, a move that would help the deal pass regulatory muster.
AT&T's acquisition of Time Warner would amount to what is known as a “vertical” integration, meaning a consolidation of two companies that represent different links in a supply chain. Time Warner produces content; AT&T distributes content. An example of a “horizontal” integration would be the purchase of one content producer by another. Horizontal integrations typically receive more regulatory scrutiny because they tend to leave consumers with fewer options.
“Vertical mergers are almost never challenged, for good reason,” Yoo said. “The overwhelming economic evidence suggests that vertical merges tend to benefit consumers, not hurt them. There are FCC regulations that already exist to protect consumers against the kinds of harms that the [Justice Department] suggests the merger might create.”
Allensworth sees things differently, arguing that “the economics that have prevailed in the last 20 or 30 years are overly simplistic.”
“What people fail to see,” she said, “is that if you own two links in the chain, you can make it so any competitor also needs to own two links in a similar chain.”
Allensworth presented a hypothetical: Suppose AT&T, with control of all Time Warner content, suddenly refuses to let Comcast distribute HBO. Consumers who wish to subscribe to HBO would have fewer options. AT&T might lose some revenue by withholding HBO from Comcast but could potentially inflict more damage on its rival by making Comcast's product less appealing. Comcast could launch its own premium cable channel but would have a lot of catching up to do.
“I think it's great that we're starting to think — especially in the media context — about how vertical mergers can inhibit competition,” Allensworth said. She continued:
What I see — as somebody coming from the perspective of there needs to be more enforcement; we've let mergers go to far — is there is an antitrust problem here. There is a sound legal argument, and it's basically the argument laid out in the Justice Department brief against this merger.However, it is the kind of argument that hasn't been made by any Republican, conservative administration ever — not even by Obama. It is a brave new perspective that is not in keeping with the people that Trump has appointed to do antitrust at the [Justice Department]. Yes, there's a good legal argument but, yes, it's also very suspicious that this is being done for the wrong reasons.Sometimes people do the right things for the wrong reasons. I think that what Trump is saying is, if you're a big corporation, under my administration, you can do whatever you want — unless you're the media.
The perception that Trump has a vendetta against CNN might not factor into a court's ruling on the AT&T-Time Warner deal, but it could backfire in a different way on a president who styles himself as a champion of American business.
“The U.S. has made an enormous effort over the past decades to advocate sound antitrust policies abroad,” said Anu Bradford, an antitrust specialist at Columbia Law School. “The [Justice Department] and the FTC have, in particular, emphasized the need to stick to economic analysis and taken a firm stand that merger control should not be used for political ends.
“The appearance — whether right or wrong — that the U.S. now allows politics to penetrate its own merger review is likely to send a troubling signal, potentially inviting politicization of antitrust enforcement in other jurisdictions. This would very likely have negative effects on deals pursued by U.S. companies in foreign markets.”
This post has been updated with Trump's latest comments on the deal
