The United State Department of Justice recently appealed a federal judge’s June approval of AT&T’s $85 billion acquisition of Time Warner, reports USA Today. The deal is expected to bring in an influx of media and telecom mergers that will counterbalance the growing influence of tech giants like Netflix, Amazon and Apple.
However, the U.S. government believes that one company having so much power over how Americans receive their information and what they watch would be harmful to consumers. The DOJ appealed despite Judge Richard Leon’s advice. The judge stated during his June 12 ruling he did not believe the DOJ was likely to succeed on the merits of an appeal.
The news came as no surprise to AT&T CEO Randall Stephenson, who told his board of directors to expect an appeal, according to Network Builder Reports. “It could take up to a year before oral arguments are heard and a final decision made,” wrote Jefferies analyst John Janedis in a research note. “If the DOJ were to win, we think AT&T would appeal, ultimately sending the case to the Supreme Court.”
“We do not expect AT&T to pull back on the strategy of integrating this asset,” wrote analyst Jennifer Fritzsche of Wells Fargo. “However, one contact suspected that while the DOJ doesn’t want to unwind the deal in its entirety, the goal might be to require the sale of its Turner assets.”
Time Warner’s Turner assets include CNN, which President Trump has said AT&T will not purchase under his administration.
During the original trial, the DOJ said AT&T should not have access to Time Warner’s content assets. The government’s argument was the carrier could withhold access to Time Warner content from competing distributors to force customers to switch to an AT&T distribution channel like DirecTV or U-Verse.
However, AT&T promised the court Time Warner would negotiate its content distribution deals separate from what the carrier’s interest as a distributor might be.
“When you think about it, it’s a hard argument to accept,” analyst Craig Moffett of MoffettNathanson said. “It amounts to, ‘I trust you when you say you won’t take into account your own best interests.’”
Moffett stated he thinks the case could make it through the DC Circuit Court of Appeals within a few months, but believes a reversal of Judge Leon’s decision could happen.
“We’re not as sure as everyone else that Judge Leon’s decision will be upheld on appeal,” he told investors. “One would have to assume that the odds are actually relatively low. But they are not zero.”