The Department of Justice is suing AT&T to stop its $85 billion purchase of Time Warner, setting the stage for an epic legal battle with the telecom giant, the Associated Press reports.
The government claims that consumer cable bills will rise if the merger goes through, saying the deal would "substantially lessen competition, resulting in higher prices and less innovation for millions of Americans." AT&T would be able charge rival distributors such as cable companies "hundreds of millions of dollars more per year" for Time Warner's networks, the Department of Justice charged in a press release.
Those payments are ultimately passed down to consumers through their cable bills. The government also said the combined company would use its power to slow the TV industry's shift to new ways of watching video online. Web TV services are cheaper than traditional cable.
The government's objections to the deal have surprised many on Wall Street. AT&T and Time Warner are not direct competitors. Mergers between such companies have typically had an easier time winning government approval.
AT&T CEO Randall Stephenson said earlier this month that he would not sell "key franchises" of Time Warner to get the deal done. A person familiar with the matter, who could not go on record, had previously told the AP that DOJ wanted the company to sell either Turner, the parent of CNN, TBS and other networks, or DirecTV.
In an emailed statement Monday, AT&T general counsel David McAtee said “Today’s DOJ lawsuit is a radical and inexplicable departure from decades of antitrust precedent. Vertical mergers like this one are routinely approved because they benefit consumers without removing any competitor from the market. We see no legitimate reason for our merger to be treated differently."
“Our merger combines Time Warner’s content and talent with AT&T’s TV, wireless and broadband distribution platforms. The result will help make television more affordable, innovative, interactive and mobile. Fortunately, the Department of Justice doesn’t have the final say in this matter. Rather, it bears the burden of proving to the U.S. District Court that the transaction violates the law. We are confident that the Court will reject the Government’s claims and permit this merger under longstanding legal precedent,”said McAtee.