DirecTV Can't Escape Gov't Suit to Block Merger Between AT&T, Time Warner

AT&T exec Brad Bentley at DirecTV Now launch event - Getty H 2016
Courtesy of Getty Images

On the verge of closing arguments in the big trial that will determine the fate of the merger between AT&T and Time Warner, DC federal judge Richard Leon has decided that DirecTV, a subsidiary of AT&T, should remain in the case as a co-defendant.

DirecTV, which was acquired by AT&T for $49 billion in 2015, asked for a judgment in its favor on April 17.

The defendant argued that it was not a party to the proposed transaction and that the government hadn't presented evidence about its "incentives or behavior will change for the worse, or that it will be capable of harming competition." 

The government responded that the combination of DirecTV with Time Warner "is the principal source of anticompetitive harm arising out of this challenged transaction."

Specifically, Justice Department lawyers argued in a brief that it is AT&T's ownership of DirecTV that will give the telecom giant the incentive to raise rivals' costs for Turner programming (CNN, TBS, TNT) and that DirecTV would be the principal beneficiary of any coordination to impede the development of virtual MVPDs, meaning streaming services featuring skinny bundles.

During opening statements in the case, defense attorney Daniel Petrocelli suggested that the only reason why DirecTV was a party to the proceeding was because the government wanted a path towards introducing the anti-merger positions of the satellite TV giant that came in regulatory proceedings before its tie-up with AT&T. That came up in the briefing on the motion as the government slammed DirecTV's "effort to make new law in order to obscure the importance of DirecTV documents that show anticompetitive incentive and ability."

Judge Leon doesn't get to the merits of the government's positions with respect to DirecTV, but in a short minute order on Friday, he ruled that DirecTV will continue to be a defendant.