By Brent Kendall and Drew FitzGerald
WASHINGTON -- AT&T Inc. is considering an unusual bid to
seek testimony from the Justice Department's antitrust chief in the
coming trial over its $85 billion purchase of Time Warner Inc.,
part of the companies' effort to challenge the legitimacy of the
government's lawsuit.
In the months since the Justice Department sued to block the
deal last November, AT&T has publicly questioned the
department's motives in light of President Donald Trump's campaign
pledge to disallow the deal and his repeated disparagement of CNN,
a unit of Time Warner.
AT&T and Time Warner have drafted a list of people they may
put on the witness stand at trial, and, according to people
familiar with the matter, the roster includes Justice Department
antitrust chief Makan Delrahim, a Trump nominee who made the
decision to challenge the deal in court.
AT&T could choose not to call Mr. Delrahim at trial. But if
he is called, it could escalate tensions in a dispute that already
has seen its share of tense moments and is shaping up as a pitched
legal battle between a corporate giant and an unorthodox
administration whose president is given to off-the-cuff
comments.
The trial is scheduled to begin March 19, representing one of
the biggest antitrust cases in a generation.
Legal observers said they couldn't recall a situation in which
merging companies sought court testimony from the government
official who made the decision to sue them. "It's quite remarkable
that they listed him," said Wayne State University law professor
Stephen Calkins.
Legal impediments could arise to obtaining testimony from Mr.
Delrahim especially on internal government deliberations that led
to the lawsuit.
In their initial answer to the lawsuit, AT&T and Time Warner
listed six defenses to the government's claims, including touting
cost savings and benefits for consumers. Another of the defenses
argued the case reflected "improper selective enforcement of the
antitrust laws." AT&T has been combative in public, saying the
lawsuit defies logic.
Time Warner has kept a lower profile, but in a meeting between
top company officials and the Justice Department before the lawsuit
was announced, its general counsel Paul Cappuccio told Mr. Delrahim
and his colleagues to be ready for a "shit show" if they challenged
the deal, people familiar with the matter said.
Mr. Delrahim, for his part, has offered veiled criticisms of
AT&T's claim that it needs the deal to compete effectively.
Daniel Petrocelli, lead trial counsel for AT&T and Time
Warner, said "this is a matter to be discussed in court, not the
press."
The case isn't a typical antitrust dispute. Mr. Trump has been a
relentless critic of CNN and referenced the news network when he
vowed as a candidate to block the deal, saying, "AT&T is buying
Time Warner, and thus CNN, a deal we will not approve in my
administration because it's too much concentration of power in the
hands of too few."
Mr. Delrahim was a private practice lawyer in October 2016 when
the deal was announced and Mr. Trump made his remarks. He appeared
on Canadian television at the time and said the deal didn't seem to
be "a major antitrust problem," though he did say it could raise
some concerns.
AT&T has sought to make use of Mr. Delrahim's 2016
television interview. The company played the clip during a press
conference last November. Nothing would appear to prevent the
companies from playing the video in court unless U.S. District
Judge Richard Leon disallows it.
In a CNBC interview Friday, AT&T Chief Executive Randall
Stephenson cited Mr. Delrahim's previous remarks on the deal as
well as Mr. Trump's opposition, saying, "Those are all the kinds of
things that everybody looks at and says, 'What's going on?' "
Last July, Mr. Trump tweeted a video of himself punching a
figure with the CNN logo. In December, after the network issued a
correction on a story, the president tweeted that "Fake News CNN
made a vicious and purposeful mistake." In January, Mr. Trump
included CNN and other news organizations as recipients of his
"Fake News Awards."
Mr. Delrahim has pledged to keep politics out of enforcement
decisions and has said he didn't talk to the White House about the
deal. Roughly 30 career staffers at the Justice Department signed
the lawsuit.
The Justice Department's review of the AT&T-Time Warner
transaction had been under way for about a year when Mr. Delrahim
took the helm as the department's antitrust chief. He had
previously served as a deputy White House counsel.
The Justice Department is alleging the AT&T-Time Warner deal
would create a giant firm that could hobble rivals, force higher
prices for video programming and slow innovation in the age of
cord-cutting.
Advocates for strong antitrust enforcement have argued the
government's concerns are legitimate, though some also say Mr.
Trump's comments were ill-advised. "No good can come of it, and you
just give the defendants something to talk about," said Cleveland
State University law professor Chris Sagers.
Mr. Sagers, who supports the lawsuit, said a content creator
like Time Warner "will feel more free to raise its prices once it's
integrated into a big distribution network. Likewise, AT&T
seems very likely to intend to use control of Time Warner content
to stall the threat posed to its most profitable video business --
subscription cable -- by the new streaming-video firms."
Mr. Sagers said Mr. Trump's criticisms and Mr. Delrahim's
comments before he joined the Justice Department aren't necessarily
relevant in the case, absent some hard evidence that the
administration targeted the deal because the president doesn't like
CNN.
AT&T and Time Warner's main defense will likely focus on
what they see as the deal's potential benefits to media consumers
and advertisers. They say integrating AT&T's video and wireless
distribution with Time Warner's movie and television content will
allow the newly-combined company to compete with disruptive firms
like Netflix, Google and Amazon that are offering video content in
nontraditional ways.
AT&T also emphasizes that its deal is a "vertical" merger of
complementary companies, rather than one that eliminates a direct
competitor. The Justice Department hasn't litigated a challenge to
a vertical merger in decades, though it came close to doing so
during the Obama administration and has imposed conditions on some
vertical deals, including Comcast Corp.'s takeover of
NBCUniversal.
AT&T is deploying a rarely used legal defense with its claim
that the Justice Department is improperly enforcing the antitrust
laws against the deal. One of the few instances experts could cite
dates to the 1970s. That involved a Nixon-era lawsuit alleging that
the then-Big Three television networks were monopolizing prime-time
entertainment programming. The networks claimed improper motives by
the administration and sought documents related to Richard Nixon's
communications on the matter.
A California judge dismissed the case after Mr. Nixon left
office and the government said it was unable to turn over some of
the former president's materials. But the judge allowed the Justice
Department to refile the case under new leadership, which it did.
The case ultimately settled.
Write to Brent Kendall at brent.kendall@wsj.com and Drew
FitzGerald at andrew.fitzgerald@wsj.com
(END) Dow Jones Newswires
February 14, 2018 16:35 ET (21:35 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
AT&T (NYSE:T)
Historical Stock Chart
From Apr 2024 to May 2024
AT&T (NYSE:T)
Historical Stock Chart
From May 2023 to May 2024