AT&T recently defeated the DOJ’s challenge to their $86 billion merger with Time Warner thanks to a comically narrow reading of the markets by U.S. District Court Judge Richard Leon. At no point in his 172-page ruling (which approved the deal without a single condition) did Leon show the faintest understanding that AT&T intends to use vertical integration synergistically with the death of net neutrality to dominate smaller competitors. In fact, net neutrality was never even mentioned at the multi-week trial.
The trial did a wonderful job showing how modern antitrust law does a dismal job policing companies that dominate both the conduit to the home (wireless, wired connection) and the content running over it. And shortly after Leon signed off on the deal, AT&T got right work… being AT&T.
The company had made repeated promises before, during and after the trial that the merger would only result in price reductions and other wonderful things for consumers. But with the ink barely dry on the deal, AT&T quickly began raising rates on its streaming video services, eliminating promo offers providing free HBO to its wireless customers, jacking up the price of the company’s unlimited data wireless plans, and imposing bogus new fees on those same subscribers. Most of these moves were expected as AT&T tries to recoup some of the monumental debt incurred by its endless quest to grow ever larger.
Initially, the DOJ stated it wouldn’t appeal its court loss, even though Leon’s myopic ruling opened the door to the idea. But the DOJ clearly sees something in AT&T’s recent moves that gives it additional ammunition for another shot at the merger, so it’s appealing the judge’s ruling to the United States Court of Appeals for the District of Columbia Circuit according to a DOJ filing (pdf).
AT&T, for its part, doesn’t seem particularly worried and believes the merger is a done deal:
“We think the likelihood of this thing being reversed or overturned is really remote,” Mr. Stephenson told CNBC Friday in an interview at Allen & Co.’s annual Sun Valley, Idaho, media conference. “The merger is closed. We own Time Warner.”
That may or may not be true. Antitrust law has been so weakened over decades that the DOJ spent most of the first trial narrowly confined to strict corridors of economic theory as it tried to prove the obvious: AT&T’s ownership of Time Warner will result in AT&T jacking up licensing costs for must-have content like CNN and HBO for its video (traditional cable and streaming) competitors. Patchy antitrust laws ill-suited for the mega-Comcast era aren’t magically being fixed before the next legal battle, meaning it’s pretty likely the next round won’t go much better for the DOJ than the first.
That said, AT&T’s price hikes do provide some additional ammunition. The DOJ might also want to actually mention net neutrality this go round. The agency likely avoided the concept the first time around because it didn’t want to emphasize that while it was suing AT&T to “protect consumers” (though Trump’s disdain for CNN and Rupert Murdoch’s opposition to the deal for competitive reasons are just as likely motivators), another arm of the government (Ajit Pai’s FCC) was busy eroding net neutrality rules making it easier than ever for AT&T to behave anti-competitively.
If you’ve watched AT&T do business for any more than five seconds, it’s obvious the death of net neutrality is the lynch pin for AT&T’s anti-competitive ambitions moving forward. While certainly a bit off the traditional antitrust track, at least mentioning that fact at some point during the trial might just be a good idea for the DOJ during the next round.