On Thursday, the U.S. Justice Department faced off against AT&T in a trial relating to the latter’s $85 billion purchase of Time Warner. AT&T, which has 25 million cable subscribers, insists that the proposed merger would be good for consumers, while the government believes that it would hurt innovation and raise prices. It has therefore asked the judge presiding over the case to block the merger.
Craig Conrath, who is a lawyer for the Justice Department, said in an opening statement that the deal should be blocked because it will raise consumer prices in excess of $400 million, or $0.45 per household. It would do this, Conrath insists, because competitors of AT&T would have to pay more money for content provided by Time Warner. Conrath further told U.S. District Judge Richard Leon that AT&T would use Time Warner as a weapon against its rivals, as these rivals need the content that Time Warner provides. He went on to say that AT&T would also use content from Time Warner to drag innovation in the area of online video.
Daniel Petrocelli, who is an attorney representing both AT&T and Time Warner, mocked the government’s case. He said that their arguments were both outdated and not consistent with the reality of the situation. He further said that the deal would actually result in consumers paying 50 cents less per month for television service, and he said that the government was using a flawed model that miscalculated the effect of the merger on future prices. Petrocelli concluded his opening statement by saying that the government cannot prove that the proposed merger would adversely affect competition, and he said that the merger would in reality help the two companies better compete with the likes of Amazon and Alphabet.
AT&T believes the deal would result in cost savings of around $2.5 billion annually for the company by 2020.
In November of last year, the Justice Department filed suit to stop the deal, which has been heavily criticized by President Trump. If the government loses the case, it could open the possibility of future mergers between content providers and distributors.
Judge Leon will decide the case after a trial that is expected to last anywhere from 6 to 8 weeks.