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AT&T: Justice Department Cannot Meet ‘Burden of Proof’ to Block Time Warner Merger

AT&T responded to the Justice Department’s lawsuit seeking to block its proposed merger with Time Warner, arguing that the government had failed to meet its burden of proof and that its opposition marked an “abrupt departure from precedent.”

In a filing on Tuesday in U.S. District Court in the District of Columbia, AT&T said that “this is not a vertical combination of two firms with an imposing market share or anything near it.”

“To the contrary, the relevant distribution markets in which AT&T operates are highly competitive — and becoming more so by the day — and by no conceivable measure does Time Warner have anything but insignificant market shares in a rapidly-expanding content marketplace with low barriers to entry and new participation by several of the most well-funded companies in the world,” the company stated in its filing. It cites the huge investments that Netflix, Apple, Google, and Facebook have put into their own video content.

The Justice Department filed suit last week to block the $85 billion transaction, arguing that AT&T would use its market power to withhold content or raise the price of channels in carriage agreements with rivals. The DOJ claims that this ultimately will mean higher prices for consumers.

AT&T argued that there are examples that disprove that Time Warner’s channels, which include TBS, CNN, and HBO, would be so essential that no multichannel service could launch without them. They pointed to Google’s YouTube TV service, which does not include any Time Warner networks, something that “confirms not only that the television ecosystem is awash in content, but that Time Warner’s networks are not, in any antitrust sense of the word, essential to attracting and retaining subscribers.”

AT&T also makes a point of noting that the Justice Department approved the merger of Comcast with NBCUniversal in 2011, with a seven-year set of conditions that included binding arbitration for carriage disputes.

“Based on that precedent — as well as the government’s own guidelines to consider ‘tailored conduct remedies designed to prevent conduct that might harm consumers while still allowing the efficiencies that may come from [a vertical] merger to be realized’ — AT&T and Time Warner fully expected to resolve the government’s review of this merger by agreement, rather than litigation,” AT&T argued in its filing.

AT&T said that it offered to extend arbitration terms should its merger with Time Warner close. That included provisions that would forbid Turner from “going dark” during the arbitration process.

“Under this approach, if a distributor reaches an impasse with AT&T/Time Warner over access to Turner content, the parties will submit their respective ‘best offers’ to the arbitrator, and the arbitrator will choose the one that best represents fair market value, subject to a right of judicial review under the Federal Arbitration Act,” AT&T said.

“To that end, while the Complaint’s allegations of competitive harm are wholly without merit, Turner’s commitment eliminates even the theoretical risk that lies at the heart of the government’s case — the risk that, post-close, Turner would be more inclined to threaten to ‘go dark’ on a distributor,” AT&T said.

The AT&T response also was signed by attorneys for Time Warner and DirecTV.

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