AT&T-Time Warner Antitrust Trial: Opening Arguments Moved to Thursday

Randall Stephenson, Chairman & Chief Executive

WASHINGTON — The judge in the AT&T-Time Warner antitrust trial moved opening arguments to Thursday because of the uncertainty over whether there will be a court shutdown because of an incoming snowstorm.

AT&T CEO Randall Stephenson and Time Warner CEO Jeff Bewkes were expected to attend the opening arguments, but it is unclear if they will make it with the change in the schedule.

The trial, which started on Monday and Tuesday, has so far focused on evidentiary objections, although both sides have given extensive glimpses of their strategies ahead and of what they will say in their opening arguments.

It’s also been revealed which AT&T rivals will be offering testimony about the potential harmful effects of the merger. U.S. District Judge Richard Leon ran down a list of competitors who have provided documents and indicated that the DOJ would call their executives to testify. They include representatives from Comcast-NBCUniversal, Charter, RCN, CenturyLink, Google YouTube, CableOne, and Sony Playstation. The Justice Department’s legal team said that one of the first executives they plan to call to testify would come from Cox Communications.

The Justice Department wants to submit documents into the record from the companies to try to make the case that the merger of AT&T-Time Warner will enable the companies to gain leverage to allow them to demand higher prices for networks like TBS, TNT and CNN from rival distributors.

Among the objections that AT&T-Time Warner’s legal team has raised is to the admission of draft documents, including those written by an executive who was “fresh out of business school,” in the words of the companies’ lead counsel, Daniel Petrocelli.

Don Kempf, attorney for the Justice Department, argued that such documents are telling because they are “instructive to figuring out what the business people really think,” before attorneys have had a chance to “sanitize” them. As an example, he said that one of the documents, written by the young AT&T executive, described the merger as “ensuring stability,” but was changed to say that it would “encourage stability.”

“They can attack [the young executive] as a dope who doesn’t know what he is talking about,” he said. “But he’s the one they chose” to write it.

Part of the afternoon on Tuesday was spent discussing the extent to which the Justice Department bears the burden of proof in the case. Petrocelli argued that the DOJ had to not only show consumers would be harmed by the transaction, but that the detrimental aspects of the merger would still outweigh its benefits.

Leon said that the case was even a “little unsettling” because it put him in the position of deciding who which side offered the better prognostication of what will happen in the competitive landscape.

“This case is about who is the better guesser,” he said, with a bit of a smile.

He added that he thought that the case was someone unique. “I like telling parties, ‘You don’t have a crystal ball. I don’t have a crystal ball.’ In this case, I guess I have to get one.”

Thomas Claps, a legal analyst at Susquehanna Financial Group and former litigator at Skadden Arps, said that Leon’s comments highlighted “the difficulty the DOJ will have in convincing the Judge of the potential future harms of the merger. Leon said that this was his first antitrust trial, even though he presided over the settlement agreement that the DOJ reached with Comcast and NBCUniversal to pave the way for their 2011 merger.

“Because the DOJ’s case is based on predictions of future harm caused by the merger (e.g., AT&T potentially withholding content, raising prices, departure rates), we believe that it will be difficult for Judge Leon to definitively conclude that the merger is anticompetitive, especially when AT&T and TWX will also be presenting their own theories of future conduct,” Claps wrote in a note.

The proceedings had a bit more levity than on Monday and in previous pre-trial hearings, with Leon deadpanning at times about the sheer number of PowerPoint presentations that the sides have tried to put into evidence. Kempf, a veteran antitrust litigator who is deputy assistant attorney general at the DOJ, told Leon that he would find the proceedings “fascinating and fun.” He then quoted from “The Taming of the Shrew.”