The trial is over. And the decision is coming.
As U.S. District Court Judge Richard Leon prepares to shake up the media industry with his much-anticipated decision in the Justice Department’s lawsuit to block the merger between AT&T and Time Warner, both sides have submitted post-trial briefs.
The defendants, represented by attorney Daniel Petrocelli, are taking a victory lap of sorts.
“The government’s central prediction of harm rests on the premise that AT&T would use Time Warner’s Turner content as a ‘weapon’ against rival distributors by threatening to withhold it during bargaining, thereby forcing them to pay higher prices,” states the brief. “The trial evidence demolished that premise — starting from the government’s own express concession that post-merger Turner would not, in fact, ever withhold content, thereby conceding away any prospect that Turner could ever credibly threaten to withhold.”
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The would-be merging parties paint the government as relying upon “predictable complaints from AT&T rivals,” “a few documents — most authored by lower-level employees,” and an economist, Carl Shapiro, whose model “collapsed at trial when confronted with the real-world evidence.”
At the end of the trial, the judge directed the parties to address remedies if he should find — or even if he doesn’t — that the merger violates antitrust law. AT&T doesn’t want to play that game.
Arguing that no remedial order is necessary, Petrocelli writes, “This is not a close case.”
The defendants also attempt to distinguish what’s happening here from the settlement between the government and Comcast/NBCUniversal to resolve concerns over that vertical merger. Here, it’s argued that there is no statutory mandate to impose remedial conditions absent a declared legal violation.
That’s important, because Turner has put forward what it calls a “Commitment” to go to arbitration whenever there is a license dispute with a cable or satellite distributor and not impose a blackout on programming in an effort to gain leverage in negotiations.
But AT&T is careful about what this means.
“In fact, were the Court to find that the government failed to prove a violation of § 7 [of the Clayton Act], yet nevertheless include in its judgment any provision the government could portray as ‘remedial’ — such as modifying the Commitment — the government will try to exploit such a provision to challenge the Court’s underlying ruling,” states the brief. “Specifically, the government would argue on appeal that such a provision contradicts the Court’s finding of no liability because ‘[w]ithout liability there would be no basis for injunctive relief.’ … To that end, the Court should reject the government’s persistent effort to portray the Commitment as a ‘remedy.’ It is not a remedy. The Commitment — just like Turner’s existing long-term licensing agreements — is simply a real-world economic fact: It directly affects bargaining leverage, even when the distributor does not invoke its unilateral rights to compel arbitration and preclude Turner from going dark.”
Thereafter, AT&T attempts to stay optimistic that the evidence supports no violation and that its arbitration/no-blackout offer should be deemed an “additional and independent basis” for this conclusion.
“In all events, this Court should reject any ‘remedy’ proposed by the government that would involve divesting DIRECTV or Turner,” Petrocelli adds. “And divestitures here would destroy the very consumer value this merger is designed to unlock. Divesting DIRECTV would eliminate the price decrease for millions of DIRECTV consumers predicted by the government itself, and divesting Turner would eliminate the content innovations and the advertising benefits that put downward pressure on Turner prices. On this record, there is no basis to impose any remedies at all, much less divestitures that would destroy the value of the transaction.”
The government’s own brief is currently under seal, but should be available very soon.
