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Time Warner : Five Takeaways From Antitrust Case -- WSJ

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06/13/2018 | 08:48am CEST

By Brent Kendall

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (June 13, 2018).

WASHINGTON -- A federal judge blessed AT&T Inc.'s takeover of Time Warner Inc. and soundly rejected the Justice Department's arguments to stop the blockbuster deal.

Judge Richard Leon said Tuesday that the Justice Department had failed to show how the merger would harm consumers and that the two companies should be allowed to proceed with their merger, without any conditions or divestitures.

Here are five takeaways from the ruling:

1. Uphill From the Start

There is a reason the government rarely challenges so-called vertical mergers like AT&T-Time Warner: The cases are hard to win. The deal will integrate complementary companies that don't compete head-to-head. In the typical merger lawsuit, the government objects to the marriage of direct rivals that battle one another on price and service. That dynamic was absent here.

Early on in the AT&T trial, the Justice Department appeared to be having difficulties persuading Judge Leon. Those appearances proved correct.

The AT&T trial was the first fully litigated vertical merger case in 40 years. The Justice Department over the years has harbored concerns that vertical deals could damp competition, but it has usually resolved those concerns by settling with the companies and placing restrictions on the merged firm. That happened, for example, when the Justice Department allowed Comcast Corp. to take control of NBCUniversal in 2011 and approved Ticketmaster's merger with Live Nation in 2010.

2. Clouds Lift for Deal Makers

Companies, as well as antitrust lawyers, have had a difficult time getting a read on antitrust enforcement under the Trump administration, and the Justice Department's AT&T lawsuit had left some potential merger partners on the sidelines until the dust cleared.

Now, all that could change. Comcast, for example, could make a bid soon to buy the bulk of 21st Century Fox, seeking to upend a deal with Walt Disney Co. Other companies may also feel liberated to move forward given the judge's sweeping decision in favor of AT&T.

3. Justice Department in a Pickle

The ruling breaks a long winning streak in merger cases for the department, which has succeeded in blocking an array of deals in recent years, including two major health-insurance mergers that it persuaded judges to block.

Other times, the department has doomed mergers without having to go to court, including when Comcast dropped its bid for Time Warner Cable in 2015 in the face of government objections.

The department's antitrust chief, Makan Delrahim, brought the AT&T case weeks after he was confirmed by the Senate. He surely would like to avoid a second loss on his résumé.

"We are disappointed with the Court's decision today," Mr. Delrahim said.

4. For AT&T, Now Comes the Hard Part

Now that AT&T has won its prize, it faces a new set of challenges, starting with integrating the two companies. The telecom giant and Time Warner have different corporate cultures and sets of expertise.

AT&T, meanwhile, has ambitious goals for the acquisition and its executives acknowledged in open court that some of their aims could be difficult to achieve. That includes AT&T's plans to compete with Google and Facebook Inc. for advertising dollars by creating a new platform that will allow the sale of targeted commercials to customers based on their viewing preferences and other personalized data.

AT&T said it expects to close its deal by June 20.

5. Judge Skeptical of Appeal

The Justice Department will have to decide almost immediately whether to appeal the ruling, and the antitrust division will have to consult with the U.S. Solicitor General's office before any appeal is filed. Officials said after the verdict that they would review the decision before deciding their next steps.

In a rare move, Judge Leon said the Justice Department shouldn't bother asking for an emergency court order staying the merger during appellate litigation. If the department can't win an emergency stay during appellate litigation, AT&T and Time Warner will be free to go ahead and close their deal.

Write to Brent Kendall at brent.kendall@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
AT&T 1.25% 33.495 Delayed Quote.-15.05%
TIME WARNER 0.00%-End-of-day quote.7.98%
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