AT&T, Fox Square Off Over Document Confidentiality in Government's Merger Fight

ATT_Merger_Alley_Illo - THR - H 2017
Illustration by: Matt Collins

When the U.S. government appears at trial next March and takes on AT&T with the goal of blocking the proposed Time Warner merger, the showdown may spill all sorts of secrets, including the terms of closely guarded licensing agreements. With this prospect looming, 21st Century Fox has become the first media giant to intervene in court and spar over the confidentiality of its documents.

In a motion filed in D.C. federal court, Fox seeks to amend a protective order with word that it "faces severe competitive harm to its business from the potential disclosure of highly competitive sensitive information."

Fox has already turned over to the Justice Department its agreements with major television distributors as well as data on revenue, pricing, and subscribers. But Fox is resisting handing over everything to the largest distributor of its programming (AT&T/DirecTV) and a significant competitor (Time Warner) with the warning that "highly confidential information might be inadvertently disclosed or misused," and further, that AT&T could gain an unfair advantage on "future potential corporate transactions, strategies for developing and licensing content, and developing new ways to reach consumers and improve the viewing experience."

The judge is told that Fox should be permitted to withhold anything that it deems "not necessary or relevant" or at least have the ability to "redact highly competitively sensitive terms such as pricing prior to production."

AT&T objected to Fox's motion on Monday.

"That request should be rejected," state AT&T's lawyers in a court filing. "The Fox data includes programming content prices that the Government alleges will be affected by the merger. Whether the information helps the Government’s case or hurts it, Defendants are entitled to analyze the same factual record the Government has analyzed. Allowing the Government to develop its case with evidence only the Government can see would contravene the most basic notions of due process."

It's not unusual for big media companies to intervene in court fights to protect the confidentiality of documents. That's particularly true in antitrust fights, where the analysis of competitive harm requires an exploration into the market. Those in the television industry have become accustomed to these side battles. Recent lawsuits over the pay of college athletes provides one example. Another is Cablevision's 2013 antitrust lawsuit against Viacom, which is being seized upon by Fox because during that case, Time Warner itself fought to shield agreements from outside eyes.

AT&T says Fox's reliance on the Cablevision case is "misplaced" because there was never any order there "categorically denying one party access to key pricing and other market data possessed by the other party."

Although fights over document confidentiality have become routine for the television industry, this one is noteworthy not only because AT&T and Time Warner are seeking to preserve access, but also because of the players involved. Fox's motion notes that AT&T is being represented by the law firms of O'Melveny & Myers and Gibson Dunn & Crutcher, who have been involved in some of the biggest transactions in the entertainment industry in recent years. One idea being floated by Fox is a two-year "cooling off" period for anyone who accesses Fox's confidential information. Such individuals wouldn't be allowed to be involved on other matters involving Fox without consent. AT&T says it would accept the "cooling off" idea if it only applied to programming agreements.

As for how Fox's documents will be used, the court papers address this as well.

Fox recently announced it would be selling much of its assets to Disney, and while that transaction will undergo regulatory review and could spur concern over licensing to an entity like Netflix, it's too soon to say the Fox-Disney deal will factor whatsoever in government's challenge to AT&T-Time Warner.

Nevertheless, AT&T says Fox documents are still necessary to obtain.

"The Government’s case will rely heavily on econometric models in attempting to establish that the merger will lead to higher prices for programming," its lawyers write. "Those models, in turn, necessarily incorporate the very data that Fox seeks to keep from Defendants. Notably, the Government during meet-and-confer discussions has not denied that it intends to use Fox’s information at trial. Defendants thus need prompt access to that information so that their experts can prepare Defendants’ responses to the Government’s analysis."