The president has long criticized the deal. When the deal was announced in October 2016, candidate Trump said: “As an example of the power structure I’m fighting, AT&T is buying Time Warner and thus CNN, a deal we will not approve in my administration because it’s too much concentration of power in the hands of too few.”
The Justice Department is using AT&T’s own words against it.
AT&T and Time Warner had trumpeted the competitive advantages the deal would bring in making their case to shareholders, Bloomberg BusinessWeek’s Peter Coy points out. Now the Justice Department has turned to the two companies’ past comments to build its argument for blocking the transaction.
Here’s a sampling from the Justice Department’s complaint:
As AT&T has expressly recognized, however, distributors that control popular programming “have the incentive and ability to use (and indeed have used whenever and wherever they can) that control as a weapon to hinder competition.”
As DirecTV has explained, such vertically integrated programmers “can much more credibly threaten to withhold programming from rival [distributors]” and can “use such threats to demand higher prices and more favorable terms.”
As AT&T/DirecTV’s strategic merger documents state, after the merger, disruption need not occur immediately—the merged firm can “operate [its] pay-TV business as a ‘cash cow’ while slowly pivoting to new models.”
As DirecTV itself has explained: “[V]ertical integration of programming and distribution can, if left unchecked, give the integrated entity the incentive and ability to gain an unfair advantage over its rivals. This ultimately results in higher prices and lower quality service for consumers.”
AT&T/DirecTV executives have concluded that the “runway” for the decline of traditional payTV “may be longer than some think given the economics of the space,” and that it is “upon us to utilize our assets to extend that runway.”
AT&T itself has previously stated that access to some of the most popular television programming is “critical to preserve and promote competition and diversity in the distribution of video programming.”
“After reviewing DOJ’s lawsuit against AT&T-Time Warner and watching AT&T’s press conference, we still see a settlement as possible and, failing that, we believe AT&T would prevail in court.”
The F.C.C. chairman wants to ‘stop micromanaging the internet.’
The Federal Communications Commission announced Tuesday that it planned to dismantle landmark net neutrality regulations that ensure equal access to the internet.
“Under my proposal, the federal government will stop micromanaging the internet,” F.C.C. chairman Ajit Pai said in a statement. “Instead, the F.C.C. would simply require internet service providers to be transparent about their practices so that consumers can buy the service plan that’s best for them and entrepreneurs and other small businesses can have the technical information they need to innovate.”
The move is a win for the giant telecoms like AT&T and Verizon as well as the big cable providers such as Comcast.
“The losers could be internet sites that will have to answer telecom firms to get their content in front of consumers. And consumers may see their bills increase for the best quality of internet service.”
Is Big business quietly rooting for AT&T and Time Warner?
Andrew worked the phones yesterday and hears:
Media executives at the other big content and distribution providers privately tell me that they hope AT&T and Time Warner do not find a way to settle. They are confident that the companies will win in court and hope that would put pressure on the Justice Department as it examines future deals.
A Justice Department official told reporters yesterday that the regulator isn’t reflexively against “vertical” mergers, despite the department’s legal complaint arguing that this particular one would concentrate too much power in one company.
There’s a question of whether the Justice Department’s lawsuit would chill a busy period for mergers. Yet if the government wins, some deal making will continue — including some involving Time Warner. The WSJ points out that the forces that compelled Time Warner to sell itself aren’t going away.
As Michael Nathanson of the research firm Moffett Nathanson told the WSJ: “I don’t think things will stay quiet.”
Extra credit: See how frequently AT&T has factored into the history of American antitrust law.
Critics’ corner, Time Warner edition.
• Jennifer Saba and Gina Chon write of AT&T’s chief, Randall Stephenson, “Anything less than all-out victory this time would be fatal.” (Breakingviews)
• Ken Brown writes, “The flaw in Wall Street’s thinking was that precedent would hold in an administration that doesn’t highly value precedent.” (WSJ)
• Tara Lachapelle writes, “Both Time Warner and AT&T have plunged as the U.S. Justice Department tries to stop their merger, but AT&T needs the deal far more because it’s the linchpin of its video strategy.” (Gadfly)
The F.C.C.’s plan to repeal net neutrality is good news for AT&T.
The telecommunications giant and its peers have lobbied hard against the Obama administration’s efforts to prevent broadband providers from charging higher fees to access particular websites or online services like Netflix. Now the F.C.C. under Chairman Ajit Pai is poised to roll those initiatives back.
More from Cecilia Kang of the NYT:
Mr. Pai plans to accompany the repeal of net neutrality with several other measures that will also benefit broadband companies, said the people with knowledge of the matter. That includes suggesting that the Federal Trade Commission, which has traditionally not brought many cases, be the enforcement agency of net neutrality violations, they said.
Extra credit: Politico notes that Mr. Pai promised to take a “weed whacker” to regulations. So far he has moved to relax restrictions on ownership of local TV stations and lower the standard by which internet service can be called “broadband.”
The latest in sexual misconduct coverage.
• Charlie Rose has been suspended by CBS after several women said he made crude sexual advances toward them. PBS and Bloomberg TV said they would suspend the distribution or airing of “Charlie Rose.” Mr. Rose said he did not believe all the allegations were accurate, but apologized. (NYT, WaPo)
• A former employee of Representative John Conyers of Michigan said she was harassed by the lawmaker, and that she had settled the case. (BuzzFeed)
• The New York Times suspended the reporter Glenn Thrush after he was accused of inappropriate sexual behavior. (NYT)
• 21st Century Fox said it would create an oversight panel to provide written reports on workplace culture, as part of a legal settlement in the wake of sexual harassment scandals at Fox News. (NYT)
Keep track of the scandals here.
Deficit hawks have been awfully quiet about the tax bill.
And that silence has been deafening, particularly from C.E.O.s like Jamie Dimon who formed a “Fix the Debt” campaign on the issue. (Remember that the Tax Policy Center now estimates that the House’s tax overhaul proposal would add $1.3 trillion to the national debt over the next 10 years.)
Here’s how Steven Rattner, the financier who oversees Michael Bloomberg’s wealth and was on the steering committee of Fix the Debt, explained the apparent conundrum in Andrew’s latest column:
“It’s not completely irrational to say the tax code is a disaster,” Mr. Rattner said. “What’s going on here is that the importance of reforming the tax code trumps, excuse the pun, fixing the debt.”
But Pete Peterson, the Blackstone co-founder and perhaps the most outspoken billionaire on the issue of the federal deficit, is having none of it. He told Andrew:
“Mortgaging our fiscal future for trillions in temporary tax cuts will hurt our economy over time, and every C.E.O. should know that,” he said. “True business patriots need to advocate for their country as well as their company.”
Extra credit: The NYT explains the delicate balancing act that the Senate majority leader, Mitch McConnell, must perform to woo Republican colleagues wary of the Senate’s tax bill.
Goodbye, London. Bonjour, Paris. Hallo, Frankfurt.
Goldman Sachs employees in Europe may have to brush up on their French and German, as the firm prepares to open two new European hubs post-Brexit: Paris and Frankfurt. Employees would choose where they wanted to live, though Lloyd Blankfein has a sense of where the Americans will gravitate.
“I can imagine that many Americans would prefer to live in Paris than in Frankfurt for many reasons,” he told the French newspaper Le Figaro.
Other banks have already picked Frankfurt as their new hubs, including Citigroup, Morgan Stanley and Nomura. Many firms are expected to start moving staff out of London starting early next year, according to Bloomberg.
The European Union has already decided to move top regulatory agencies outside of London: The European Medicines Agency will leave London for Amsterdam, while the European Banking Authority will relocate to Paris.
The loser in all this is London: “There is no upside for the City of London” from Brexit, Nicolas Véron, a senior fellow at the Belgian think tank Bruegel, told the NYT. “It will lose business, not gain.”
The Fed, otherwise known as a Carlyle Group alumni club.
That’s per a tweet by Dan Primack at Axios. It’s not necessarily a huge accomplishment: The Fed will be down to three governors once Janet Yellen steps down in January. The two former Carlyle partners are Jerome Powell and Randal Quarles.
A tribute to Ms. Yellen: Andrew Levin, a Dartmouth economist who worked as an adviser for her, praised her ability to lead a large group of independently minded voices. “Sometimes they call it a cacophony,” he told the NYT. “She managed to turn it into a symphony.”
A peek behind Uber’s big bet on self-driving cars.
Its deal to buy as many as 24,000 self-driving Volvo vehicles reflects the ride-hailing giant’s broad ambitions to make autonomous driving part of its future.
Here’s what Jeff Miller, Uber’s head of automotive alliances, told Mike Isaac of the NYT:
“The only way we could control our own destiny was to work with this technology that had the potential to disrupt our business, and have direct involvement in the creation of it.”
But Shira Ovide of Bloomberg Gadfly says that the deal shows Uber doesn’t know what its own future looks like: “Far from being ‘asset light,’ Uber’s purchase suggests the company in a few years may own a rapidly depreciating fleet of cars.”
• Ropes and Gray said that its partners have elected Julie Jones as its next chairwoman, the first time the law firm has been led by a woman. (Ropes & Gray)
The Speed Read
• Recent deals show that the fear of Amazon and companies like Netflix, Google and Facebook has spread through multiple sectors, including the media and health care industries. (WSJ)
• Nestlé is one of the companies exploring a purchase of Hain Celestial Group, an American producer of organic and vegetarian food, according to people familiar with the matter. (Bloomberg)
• Starboard Value took a 10.7 percent stake in the Israeli networking company Mellanox Technologies and urged it to improve its margins, bolster its stock and explore a potential sale, according to people familiar with the matter. (WSJ)
• Marvell agreed to take over another chip maker, Cavium, in a $6 billion deal, continuing a wave of consolidation in the semiconductor industry. (NYT)
• Jana Partners disclosed a stake of about 8.74 percent in Bloomin’ Brands, which owns Outback Steakhouse. It plans to push for change, perhaps including a sale. (WSJ)
• Harvard University’s $ 37.1 billion endowment is in talks to have Bain Capital manage a portion of its real estate investments, according to people familiar with the matter. (Bloomberg)
• WPP agreed to a $1.35 billion tender offer from Bain Capital for Asatsu-DK of Japan, of which WPP owns 25 percent, according to a draft statement from Bain. (Reuters)
• The former labor secretary Robert Reich is the star of a new documentary film on Netflix, “Saving Capitalism,” which follows him around a tour of the United States, talking to rural voters, politicians and small business owners. (NYT)
• Venture capitalists are betting on the Midwest. They see as an undervalued area with budding entrepreneurs that could be an antidote to the scalding-hot tech market on the West Coast. (NYT)
• Amazon’s cloud storage unit has a new service called the Amazon Web Services Secret Region to handle classified information for United States spy agencies. (WaPo)
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