Someone pass the smelling salts. The D.C. Circuit Court of Appeals on Tuesday issued another rebuke to the Justice Department in its quest to block the AT&T -Time Warner merger and unanimously affirmed the trial judge’s ruling. As a legal matter this is a stone-cold knockout.
Justice sued to enjoin the merger in November 2017, arguing it would increase the leverage of Time Warner networks in carriage-fee negotiations with other distributors. AT&T, which owns DirecTV, would supposedly suffer less pain if negotiations deadlocked and Time Warner channels went dark since it might lure customers from other distributors. If carriage fees went up, non-AT&T customers might wind up paying more.
We won’t rehash the reams of evidence to the contrary, but suffice to say the government’s theory ignores the competitive nature of fast-evolving media markets, as federal Judge Richard Leon detailed last June. “Generic statements that vertical integration ‘can’” lead to “’an unfair advantage over its rivals’ do not come close to answering the question before the Court,” Judge Leon noted in a biting 127-page opinion.
The three-judge appellate panel comprised of two Democratic appointees largely agreed, notwithstanding some nits with Judge Leon’s legal diction. As is its custom, the D.C. Circuit judges reviewed the trial court ruling for “clearly erroneous” misstatement of facts, and they did identify misrepresentations by the government.
For instance, Judge Judith Rodgers noted the government ignored that Turner Broadcasting had “sent letters to approximately 1,000 distributors ‘irrevocably offering’ to engage in ‘baseball style’ arbitration at any time within a seven-year period.” This would prevent an AT&T monopoly over content. The government’s models also did not take into account long-term network contracts, “which would constrain Turner Broadcasting’s ability to raise content prices for distributors,” she wrote.
We repeatedly advised Justice to drop the suit, and the Trump Administration should be glad the D.C. Circuit’s liberals didn’t take up the opportunity to rewrite antitrust law along European lines as some on the left urged. Rather than suffer another humiliation at the Supreme Court, the antitrust cops should drop the case and consider why they lost so thoroughly.
The above editorial was published Feb. 26 by the Wall Street Journal. Its views are its own.