U.S. government approaches 18 states to fight AT&T-Time Warner deal

WASHINGTON (Reuters) - The U.S. Justice Department has approached 18 state attorneys general to try to win their support for an antitrust lawsuit to block pay TV and wireless powerhouse AT&T Inc’s $85.4 billion deal to buy media and entertainment company Time Warner Inc, a person briefed on the matter said on Wednesday.

The department, conducting an antitrust review stretching more than a year, so far has failed to persuade any of the states to join a potential lawsuit but has sent them a draft of the complaint, according to the source, who spoke on condition of anonymity.

A spokeswoman for the Washington State Attorney General’s Office, said, “We recently received the complaint and are reviewing it.”

The AT&T-Time Warner deal has become a political flashpoint because Republican President Donald Trump vowed last year as a candidate to block it and because of his frequent sharp criticism of news network CNN, owned by Time Warner, including in a new tweet on Wednesday.

In talks with AT&T, the Justice Department has voiced concern that if the merger goes through, the combined company would raise costs for rival entertainment distributors and stifle innovation.

The department reached out to a group of state attorneys general -- the top law enforcement officials at the state level -- that earlier joined the review, the source said. State attorneys general have been assessing whether the deal could harm competition, and they interviewed industry officials this summer as part of the review, the source added.

The Justice Department declined comment on the matter.

The AT&T logo is seen on a store in Golden, Colorado United States July 25, 2017. REUTERS/Rick Wilking

The Justice Department could file suit on its own to try to stop the merger. Its Antitrust Division often works with states on big, complex deals to figure out how a transaction would affect them. Once the department files a complaint, it typically does the bulk of the courtroom fight, not the states.

The Justice Department has a winning record in fighting mergers in recent years. It forced AT&T to scrap a plan to buy T-Mobile USA in 2011 and last year successfully battled in court to stop two insurance industry mergers, among others.

AT&T’s shares closed up slightly on Wednesday at $33.81 while Time Warner edged lower to end at $87.37.


Beyond worries over potential political influence in the department’s review, critics including Democratic lawmakers, consumer advocates and smaller television networks have raised anti-competition concerns about an AT&T-Time Warner marriage.

The proposed merger would give AT&T control of cable TV channels HBO and CNN, film studio Warner Bros and other coveted media assets. It has prompted concerns that AT&T might try to limit distribution of Time Warner content.

AT&T, the No. 2 U.S. wireless carrier and a major pay-TV provider, and Time Warner have struggled to keep viewers who have flocked to online services like Netflix Inc and Inc’s Prime Video.

AT&T wants to buy Time Warner so it can bundle mobile service with video entertainment and take online advertising from Facebook Inc and Alphabet Inc.

Justice Department staff members have recommended that AT&T sell either its DirecTV unit or Time Warner Inc’s Turner Broadcasting unit, which includes CNN, in order to win approval of the deal, a government official said last week.

Trump, just back from a trip to Asia, attacked the news network again on Wednesday morning, writing on Twitter: “While in the Philippines I was forced to watch @CNN, which I have not done in months, and again realized how bad, and FAKE, it is. Loser!”

U.S. Attorney General Jeff Sessions on Tuesday refused during congressional testimony to say whether the White House had contacted his department about its review of the deal.

Reporting by David Shepardson and Diane Bartz in Washington; Additional reporting by Supantha Mukherjee in Bengaluru; Editing by Will Dunham and Tom Brown