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The pairing of AT&T’s $43 billion spinoff of WarnerMedia with Discovery as well as Amazon’s $8.54 billion acquisition of MGM Studios presents the Biden Administration with its first major merger reviews. How will the examinations play out?
Notably, the prior administration went to court in 2017 to stop AT&T’s $85 billion acquisition of Time Warner and failed in its antitrust case. That case now shadows over today’s media merger frenzy, and could signal a bit about what’s ahead. At the time, many observers saw the Trump-era DOJ’s pursuit through a political lens given the president’s anti-media views, although from a legal perspective, it was a huge development in antitrust enforcement — the first time in decades that the government had sought to stop so-called “vertical integration,” that is, a tie-up between a distributor and supplier. Ultimately, a judge permitted the $85 billion marriage between one of the nation’s largest telecoms and one of the country’s biggest content producers.
AT&T’s decision to now spin off its Warner unit marks a stunning turn, although at least for WarnerMedia-Discovery, the deal isn’t another instance of vertical integration. Rather, this one features horizontal consolidation as WarnerMedia and Discovery both have a massive footprint in TV production. That said, the merging parties will surely point to their nascent streaming services — HBO Max and Discovery+ — as lagging behind Netflix and Disney+ and present the tie-up as necessary for competition. It may help that Discovery’s forte is unscripted programming, which some in Hollywood may see as less of a concern on the jobs front.
Then again, it’s also no slam dunk: Makan Delrahim, the Trump-era antitrust enforcer, is among those who expect that regulators will take a hard look at AT&T’s 71 percent equity in the merged spin-off. They’ll want to ensure this isn’t a sly way of obscuring the growing might of AT&T in the marketplace.
As for Wednesday’s announcement of Amazon’s latest acquisition, that one is much more like the AT&T-Time Warner deal — vertical integration, and a development that despite its relatively smaller size, could provoke another government attempt to block. The purchase of MGM will likely have folks revisiting the government’s vertical merger guidelines, issued just last year upon fierce opposition by labor interests, and come as lawmakers consider making changes to antitrust laws, including a more heavy emphasis on monopsony, or a market where a buyer of goods and services dominates.
Amazon controls digital distribution platforms (like Amazon Prime) of high importance to MGM’s rivals and even has a recent history of some bargaining friction. Last year, for example, Amazon and WarnerMedia couldn’t come to a deal for six months to bring the HBO Max app to Fire TV devices until a breakthrough in the negotiations happened in November.
There’s also a target on Amazon’s back already. Just on Tuesday, the D.C. attorney general filed an antitrust suit against Amazon over practices in online retail. The suit seeks structural remedies (like possible divestments) and an antitrust monitor.
Meanwhile, Lina Khan could soon become a commissioner at the FTC, one of the federal agencies that will be reviewing these latest media mergers. Khan, who two weeks ago got bipartisan support to advance her nomination through the Senate Commerce Committee, became famous in policy circles with a treatise called Amazon’s Antitrust Paradox. She believes that antitrust regulators should become more aggressive and expand their concerns beyond just consumer welfare. She’s particularly interested in anticompetitive conduct on digital platforms.
As for Delrahim’s permanent successor, President Biden has yet to nominate an individual to lead the Department of Justice’s Antitrust Division. This could become meaningful because while Biden has pledged to not interfere in DOJ affairs, he could make mega-media mergers a topic in job interviews. A Democratic administration is typically expected to be more skeptical about corporate consolidation and this will be the Biden-era DOJ’s first opportunity to signal its approach. A soon-to-come nomination for antitrust czar also means there will be a confirmation hearing, where both WarnerMedia-Discovery and Amazon-MGM now figure to become a hot topic of conversation. Given that WarnerMedia’s assets include CNN and thanks to the presence of Amazon owner Jeff Bezos, Republican Senators could take shots at the prospect of more media concentration.
“I’m deeply concerned by Amazon’s acquisition of MGM Studios,” tweeted Rep. Ken Buck, the ranking Republican on the House Antitrust Committee. “It’s critical that mergers and acquisitions involving monopoly companies experiencing tremendous and exponential growth are met with a greater level of scrutiny.”
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