Sen. Amy Klobuchar (D-Minn.) and three other Senate Democrats are pressing President Trump on whether the White House is attempting to influence the Justice Department’s review of the proposed AT&T-Time Warner merger, following reports that administration officials saw the potential for using the pending transaction as leverage over CNN.
“The AT&T-Time Warner merger should be judged solely on its impact on competition, innovation and consumers, now as ‘leverage’ for political gain,” the senators wrote. It was signed by Klobuchar, Sen. Dianne Feinstein (D-Calif.), Sen. Al Franken (D-Minn.) and Sen. Richard Blumenthal (D.Conn.).
The letter asks a series of questions of whether White House officials have tried to interfere with the DOJ’s antitrust investigation, and asks Trump for a commitment to “not negotiate any settlement of an antitrust investigation.”
The New York Times reported last week that White House advisers had discussed that the AT&T-Time Warner review would be a point of leverage over CNN, which Trump regularly has attacked for its coverage.
Just that prospect set off alarm bells among antitrust experts, who see the Department of Justice review as independent and transparent, not a bargaining chip over news coverage. Klobuchar last week sent a letter to Attorney General Jeff Sessions, in which she asked for contacts between the White House and the Justice Department on the pending merger.
The reports beg the question of just how much influence the White House can have over an antitrust review, which the Justice Department conducts in private, but is set up to be independent of political interference.
During the presidential campaign, Trump said he opposed the transaction, saying that they “will not approve in my administration because it’s too much concentration of power in the hands of too few.” Asked in December about Trump’s opposition, AT&T CEO Randall Stephenson said that he’s “heard rumors he’s not happy with CNN, so that might have come into it.”
A president, however, can’t just order a merger be blocked. Instead, the Justice Department has to file a lawsuit against it, but the case has to be based on antitrust law.
In other cases, the DOJ’s Antitrust Division has reached settlements with the merging parties to impose conditions on the transaction, as it did with the case of Comcast and NBCUniversal. In another instance, after the DOJ made it clear that it was ready to reject a deal, the parties call it off. That was the case when Comcast tried to buy Time Warner Cable.
“The Justice Department cannot block the transaction unless they do so on grounds that are well established in merger jurisprudence. They would need a principled basis to stop the deal,” said William Bill Kovacic, professor of law at George Washington University and former chairman of the Federal Trade Commission. “If they were being pressed to block the deal, they couldn’t succeed in court unless they had a sound basis to do that,” he said.
A spokesman for AT&T said the company had no comment.
Many on Wall Street took Trump’s anti-merger comments as campaign rhetoric, and since then have seen brighter prospects for the merger since Trump took office.
In March, Trump nominated Makan Delrahim as his antitrust chief. Shortly after the AT&T-Time Warner merger was announced in October, Delrahim said that he didn’t see a major antitrust problem with the transaction. At his confirmation hearing in June, he pledged to maintain the division’s independence, and told lawmakers, “Politics will have no role in the enforcement of the antitrust matters.”
Trump’s meetings with parties to mergers has raised concerns about interference. Shortly before taking office, he met with the CEOs of Monsanto and Bayer before taking office, and then talked up the deal. He also met with Stephenson, although an AT&T spokesman said that the merger was not discussed.
Around that time, the American Antitrust Institute, a nonprofit public interest group, issued a statement warning of interference, saying that it can “not only abuse the process, they imperil our markets, our economy, and our society.”
Diana Moss, the president of the American Antitrust Institute, said that the idea of the White House trying to use the merger as leverage against CNN “really usurps power in the worst possible way, with a direct effect on the market system and our underlying democratic values.”
But the process can get murky. Companies can spend millions in lobbying public and lawmaker support for transactions, and in retaining an antitrust legal team, even while the Department of Justice insists that it is conducting an process independent of politics.
The DOJ, however, does have “prosecutorial discretion,” the power to decide which cases to pursue which ones to let through, Moss noted. Moss says that the Antitrust Division is “resource constrained,” and the funds and employees to litigate just a few big cases a year. That could play a factor in cases where the antitrust issues are not so obvious.
“There is a bit of a gray area in terms of cases that can go one way or another,” she said.
The AT&T-Time Warner merger is a vertical merger, in that the transaction will not remove a competitor from the table. But vertical mergers can still “create those incentives to exclude, to push out rivals.” For example, by buying Time Warner, the concern is whether AT&T could withhold HBO, or Warner Bros. movies, or other cable channels from a distribution rival.
“Those types of cases are challenging for antitrust enforcers. They are very complex,” Moss said. “You to have to do a lot of math. You have to talk to a lot of stakeholders.”
She adds, “Regardless of which way it goes, it should go whatever way on the merits.”
Larry Downes, project director at Georgetown’s Center for Business and Public Policy, believes that AT&T and Time Warner would have a strong legal case if the Justice Department attempted to block the merger.
He says that the Antitrust Division “would be up against their own guidelines and a long string of cases where there is just no basis to block it.”
He reiterated that the DOJ would have to have an antitrust rationale for blocking the transaction, not a political one.
“I understand that the White House is angry with CNN, but I am not sure how not Time Warner merging with AT&T makes that a better or worse situation,” he said. “I can’t imagine what objective the White House has that would be served by that.”