Michael Wolff: How Trump Can (and Just Might) Kill AT&T's Time Warner Deal
The president’s view on the $85.4 billion merger has been quite un-Republican-like, and he wants to keep his campaign promise, which would mean intervening (and stifling CNN nemesis Jeff Zucker).
Donald Trump says he is determined to keep his campaign promises. It is a mantra in the West Wing. All campaign promises have to be turned into executive orders, legislation or regulatory action. That’s the agenda. There’s an actual checklist on which staffers tick off each promise. One of those promises — falling somewhere behind extreme vetting, repealing and replacing Obamacare (well, um, cough, blame someone else for that), tax reform, immigration bans, military expansion, budget cutting, a Mexican border wall and making NATO allies pay up — is to block the planned merger of AT&T and Time Warner.
I recently contacted Time Warner, which will receive $500 million if the $85.4 billion merger doesn’t go through, about the status of the deal and was pretty much told that the press- and politics-savvy company, led by Jeff Bewkes, was strictly in the backseat on this one. In fact, at the presidential inauguration party at Time Warner’s Washington government affairs offices (in sight of the White House) — where Carol Melton, who oversees the D.C. office, is regarded as one of the best public policy people in the media business — the talk was about closing the Capitol outpost.
So I got in touch with AT&T’s Washington office, which seemed confused about how to talk to a reporter. Claudia B. Jones, AT&T vp public affairs and communications, responded by sending me a press packet about the deal. I said thanks but that I was really looking to sit down with someone and hear a bit of the thinking — on background would be fine — about how AT&T was planning to navigate the new and strange realities of Trumpworld and its public disdain for the deal. Corporate PR then stepped in and offered an on-the-record interview with AT&T general counsel David McAtee.
Now, one of the significant things that is occurring in the AT&T-TW merger — perhaps as important to its success as Trump’s acquiescence to the deal — is the transformation of AT&T, an infrastructure and industrial services giant, into a media company. Media companies, necessarily in the spotlight, indeed ever courting the spotlight, live in the media world. You probably can rank each major media company on the deftness with which it handles the media, and that ranking would be pretty close to a ranking of the relative success of each company (Disney, at the top, masterful; Viacom, at the bottom, not so good).
Anyway, trotting out your on-the-record general counsel might not suggest that you see the world of public perception, political backlash and the vagaries of a strange new president as quite a difficult needle to thread. A general counsel, one insisting on speaking strictly on the record, can only really deliver a legal party line, and is likely not going to offer a nuanced narrative of a nuanced political problem: What do you do when you need the government’s good will and the volatile new president doesn’t like you?
Trump’s view on the deal has been so far quite un-Republican-like. Rather than giving the benefit of the doubt to big corporations, he’s taking the liberal view of media mergers: Big media stifles opposing views (liberals, of course, don’t think mergers stifle conservative views, but rather more liberal ones). Then, too, Trump has had a running feud with the media, often vowing to make life hard for the business. His central bete noire is CNN, a division of Time Warner, which, put together with AT&T, might suddenly have more clout. On top of that, AT&T joining with Time Warner proposes to further advance the merger of media and digital, another liberal-leaning industry that Trump has been cool on. And then there’s Rupert Murdoch, who has Trump’s ear and who has been dissing the deal, which he sees as disadvantageous to his 21st Century Fox. Also, the future of Jeff Zucker, CNN’s chief, toward whom Trump now often expresses a blood enmity, could get rosier in a merger — he’s a potential new leader of Time Warner as a whole (an irony here is that his success at CNN has been aided by the great interest in Trump).
General counsel McAtee, on the call with me chaperoned by corporate PR, insisted on the technical righteousness of the deal: AT&T and Time Warner are not in the same business, therefore the Justice Department does not have an anti-trust case. Period.
Now, there are only two ways to confront the government’s opposition to a merger: You can argue the legal merits — and therefore the rights of the shareholders of the two companies to prevail against political disapproval — or you can work to change political opinion. AT&T’s CEO Randall Stephenson paid a visit to the president-elect at Trump Tower in early January, but beyond that, the company’s lobbying and PR efforts have been muted. There has been little effort to sell consumers on the benefits of the deal or to convince Washington that the deal has a political upside (or not a downside).
AT&T’s legal position may be a fairly solid one, or it would be if it were seeking to subsume any other company but a media company. Again, it’s thinking like an industrial giant rather than a would-be media giant. Media complicates the situation, because the government, with some amount of caprice, can stop a media merger by referring it not just to the Justice Department but to the FCC. While the Justice Department might have high hurdles in making an anti-trust case (it’s on the Justice Department to prove a company is a monopolist), all the FCC has to do to delay and effectively kill the deal is to find that it might not be in the “public interest” (it’s on the company to prove it is acting in the public interest). That’s what happened to Comcast’s efforts to merge with Time Warner Cable. Of note, while there are many jobs still open in the Trump administration, it has filled the FCC chairman’s job with Ajit Pai, an anti-regulation Republican. And while that might suggest he’s a free marketeer, he’s also a longtime foe of Obama-era FCC policies — ones that generally favored digital growth and expansion. He’s looking for actual and symbolic rollbacks.
AT&T’s McAtee bristled at this and said there are no FCC licenses being exchanged in the deal, so the FCC has no standing. Perhaps. Pai himself seemed to indicate that he took this view. On the other hand, while neither AT&T nor Time Warner has television stations, both are dependent on all kinds of FCC-regulated government spectrum. Indeed, it would seem a particularly stoic ostrich act to believe that jurisdiction could not be established if the FCC wants to establish it.
The issue is that AT&T is proceeding literally, while, in the new Trumpian age, fast and loose rules. The general customs, mores and political rules, short of absolute laws, that govern much of how regulatory agencies work no longer necessarily apply. (After all, who would have ever thought a president could withhold his tax returns? But, surprise, he can. Who would have ever thought conflict-of-interest rules that apply to cabinet members don’t apply to the president? Surprise, they don’t seem to.) So, say, could the president call up Mr. Pai and say, “I said we weren’t doing this, so don’t!” or, “Make them sell CNN or deep-six Jeff Zucker if they want our approval!”? By long practice and tradition, that’s not exactly kosher, but it might not be illegal either, which would rather leave Mr. McAtee with his pants down.
The surprise would not be if President Trump, with ham hand and big foot, jumped into the middle of this deal, but if he didn’t keep the promise he made to do exactly that.