It’s been almost a year since then-presidential candidate Donald Trump voiced his opinion on blocking the AT&T (T) – Time Warner (TWX) deal. Despite not having much intrusion from the President’s part, the deal is still yet to take off. The deal that was initially expected to get cleared by the end of 2017, has now hit a fresh snag. The US Department of Justice (DOJ) argues that the proposed merger would drastically increase the total amount Americans would have to pay for TV services by a whopping $436 million.
In the trial brief filed last week, the DOJ sued satellite TV titan AT&T, which owns DirecTV, to block its purchase of Time Warner. The lawsuit claims that the proposed merger would violate Section 7 of the Clayton Act, as it is a threat to competition. The act was passed in 1914 and bans business practices that tend to form monopolies.
Meanwhile, AT&T has opposed a set of estimations proposed by an economics professor Carl Shapiro from the University of California in Berkeley. In the antitrust trial that is expected to begin on March 19, Shapiro is said to be one of the government’s expert witnesses. According to AT&T, even if there is a price hike post-merger, customers would pay not more than 45 cents, indicating the deal would cause minimal consumer harm. AT&T sees this merger as an effective strategy to battle rivals like Comcast (CMCSA) and Netflix (NFLX) and increase the consumer base.
This mega-deal is what is known as a vertical merger as it involves two companies that are not direct competitors. Vertical mergers have never been blocked in the last 40 years.
Though there is a lot of uncertainty surrounding the deal, it is not sure whether this deal can survive the regulatory challenge. Even without Time Warner, AT&T will continue to be an attractive investment.
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