August 6, 2018 / 8:26 PM / 12 days ago

U.S. argues judge failed to take its arguments into account in AT&T trial

WASHINGTON (Reuters) - The U.S. government said on Monday the judge in the trial to stop AT&T Inc’s (T.N) purchase of Time Warner failed to take into account how companies negotiate with each other and seek to maximize profits in considering the Justice Department’s arguments about how the deal would decrease competition.

An AT&T logo is pictured in Pasadena, California, U.S., January 24, 2018. REUTERS/Mario Anzuoni/File Photo

In the brief for its appeal to the U.S. District Court decision in June, the government also argued the court should have concluded that the merger would give Time Warner more clout at the bargaining table.

Judge Richard Leon ruled in June that the Justice Department was wrong to ask that the $85.4 billion merger be blocked. The government had said it would lead to higher prices for consumers and was illegal under antitrust law.

In writing that ruling, Leon, the government said in its brief, ignored evidence regarding how companies use leverage to bargain with each other and failed to take into account corporate efforts to increase their revenues.

The court’s errors “colored the court’s view of the facts, leading to a decision that is clearly erroneous in light of the evidence presented at trial,” the Justice Department said.

The core of the Justice Department’s concern about the deal is that AT&T, which owns DirecTV, would use its ownership of Time Warner’s content to make pay TV rivals pay more, thus raising their costs and forcing them to charge consumers more.

“The district court erroneously concluded that the merger will not give Time Warner any increased bargaining leverage. The reasons the district court gave for finding zero increase in leverage are implausible and internally inconsistent,” the government said in its brief.

AT&T’s General Counsel David McAtee disagreed with the Justice Department’s assessment, saying that the government’s case had “many holes.”

“Appeals aren’t ‘do-overs.’ There is nothing in DOJ’s brief today that should disturb that decision,” he said, using the acronym for the Department of Justice.

The Justice Department has appealed but no date has been set for when the appeals court will hear the case. The deal closed on June 14.

AT&T has said it would manage Time Warner’s Turner cable television networks as part of a separate business unit until February 2019 or the conclusion of the government’s appeal.

The merger, announced in October 2016, was opposed by President Donald Trump. The merged company includes CNN, a frequent target of Trump’s ire.

Reporting by Chris Sanders; additonal reporting by Diane Bartz; editing by Jonathan Oatis

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