The Department of Justice Blocks AT&T Merger

By James Sweet III | USA

The Department of Justice announced Monday that they would pursue a civil antitrust lawsuit in the U.S. District Court for the District of Columbia in an attempt to block AT&T from buying Time Warner. Time Warner has networks like CNN, HBO, TNT, and many more. The Department stated that the $108 billion acquisition would result in “higher prices and less innovation for millions of Americans”. Is this true, or is it just another government intervention in the market?

Well, earlier this month, there were talks that the DOJ was pushing AT&T to sell assets in order for the deal to go through. However, AT&T refused to sell any assets, putting the company in their current situation. AT&T has stated that this deal should go through as it is a “vertical merger”. Vertical mergers are mergers where the companies don’t necessarily compete against each other and “operate at separate stages of the production process”.  In the United States, vertical mergers are rarely blocked.

To answer the question first stated, we must look in depth. Time Warner owns many television channels, while AT&T owns DirecTV, a television provider. Together, AT&T could begin to consolidate the television industry. If they were to truly raise prices, however, it would not end there. If the deal went through, and AT&T did indeed raise prices, a solution could quickly arise. Other companies like Spectrum could seize the opportunity and begin to offer services in these areas at lower prices. Seeing lower prices, the consumer, having to deal with their budget constraint, could quite possibly move to companies like Spectrum. This will hurt AT&T, as they will begin to lose customers. If they attempted to remove their channels from the air in retaliation, legal or not, alternative channels will take their place. NBC could become the next media outlet in the absence of CNN.

In terms of providing television, this merger will not affect AT&T’s capabilities. Time Warner Cable split off from Time Warner in 2009. Time Warner Cable was later bought out by Charter Communications, creating a new brand called Spectrum. Comcast is also a strong competitor in this market.

What do you think? Is this lawsuit good for the American consumer? After all, the government says its responsibility is to protect us. Perhaps this is just another case of the government sticking their nose into the markets. This can evolve into a major case, either for or against the private sector. Only time will tell.

To see the Department of Justice press release on this matter, click here.