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Judge Sets First Hearing Date in AT&T-Time Warner Merger Lawsuit

AT&T and the Justice Department will square off in court over the Time Warner merger for the first time early next month.

Judge Richard J. Leon of the D.C. U.S. District Court has set Dec. 7 as the date for the initial status conference on the lawsuit filed by the DOJ on Nov. 20 to block AT&T’s $85.4 billion merger with Time Warner.

AT&T and the DOJ are already tussling over the timing of the trial. On Tuesday, AT&T filed a motion asking the judge to set the trial start date at Feb. 20 or thereabouts. The DOJ is pushing for a May 7 start date.

The DOJ maintains AT&T will gain too much market power over the pay TV business if it is allowed to bring HBO, Warner Bros. and Turner under the same roof as its telco and wireless operations and satcaster DirecTV. AT&T counters that the merger is a vertical transaction that will not take any competitors out of the marketplace as there are virtually no overlapping operations. The DOJ reportedly told AT&T it would have to divest DirecTV or Turner to win approval of the deal.

AT&T asserted in its response to the lawsuit that it would agree to a strict condition designed to address one of the pillars of the DOJ’s suit. The Justice Department argues that AT&T will use its ownership of Turner’s collection of cable entertainment channels to charge significantly higher carriage fees to rivals or withhold access to them altogether in an effort to gain competitive advantage over DirecTV’s MVPD rivals.

AT&T has offered to submit to a condition that would mandate arbitration in carriage disputes with rival distributors for seven years following the completion of the merger. AT&T would also agree that it could not pull any Turner channels from a rival MVPD while that arbitration was in process.

Michael Nathanson, analyst with MoffettNathanson, said AT&T’s arbitration proposal makes it harder for Leon to rule against AT&T in the suit. Leon signed off on the same condition in a DOJ consent decree that cable giant Comcast submitted to in 2011 to secure approval for its takeover of NBCUniversal.

“This both reduces pressure on Judge Leon – he no longer has to consider the deal as if it has no behavioral remedies whatsoever, as would have been the case absent this commitment – and increases it, as it now becomes much harder to reject the deal when AT&T is committing to exactly the same behavioral remedy to which Comcast committed (and for the same amount of time),” Nathanson wrote in a note Wednesday. “Irrespective of the merit of all of the other arguments (about Google and Facebook and nice-to-have-versus-must-have content), this commitment alone makes it reasonably likely, in our view, that Judge Leon will ultimately approve this transaction.

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