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American Cable Association Urges Appeals Court to Reverse AT&T Antitrust Decision

WASHINGTON — The American Cable Association, which represents small- and medium- sized cable providers, says that a district court judge erred in the way that he analyzed basic economic principles in ruling in favor of AT&T and Time Warner in the recent antitrust trial.

U.S. District Court Judge Richard Leon’s decision allowed the two companies to complete their merger in June, but the Justice Department is appealing.

ACA, in an amicus brief filed this week, joined with Northwestern University Professor William Rogerson in arguing that Leon’s rationales were contradictory.

“In economics, it is generally accepted that an increase in the cost of providing a good (whether increased opportunity costs or otherwise) will ordinarily cause a provider to demand more compensation for the good and increase the price as a result,” they wrote in their brief. They said that Leon rejected that principle when it came to the Justice Department’s claim that Time Warner’s Turner channels would charge higher rates to AT&T’s distribution rivals. But they say that contradicts Leon’s acceptance of AT&T’s claim that digital competition had decreased ad revenue and forced it to charge higher distribution fees.

The DOJ argued that the incentives of the Turner channels would change once it was owned by AT&T, which also owns distributor DirecTV.

Leon rejected that argument and the economic theory that companies will act to maximize profits of the company as a whole, ACA and Rogerson contend. But Leon also assumed that AT&T would “maximize its profits as a whole” when it came to assessing the efficiencies that would be gained by the merger.

“As a formal matter, those inconsistencies require reversal and a remand for reconsideration by the district court,” ACA and Rogerson said in their brief. “As a practical matter, they cast serious doubt on the correctness of the district court’s reasoning, which departs substantially from standard economic theory.”

When the Justice Department filed its appeal brief last week, AT&T’s general counsel David McAtee said, “The Court’s decision could hardly have been more thorough, fact-based, and well-reasoned.  While the losing party in litigation always has the right to appeal if it wishes, we are surprised that the DOJ has chosen to do so under these circumstances.  We are ready to defend the Court’s decision at the D.C. Circuit Court of Appeals.”

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