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AT&T, Time Warner Merger Approved by Judge

13 June 2018

The ruling blesses the $85 billion merger, one of the biggest media deals ever. Therefore, AT&T would likely increase the rates that other content distributors must pay to air Time Warner content - forcing its rivals to either raise prices on their subscribers (which would inspire some consumers to switch to DirectTV), or else accept lower profit margins (which would impair their ability to compete with AT&T in the long term).

Comcast's deal is expected to be announced tomorrow.

Leon said the government's objections "rested on improper notions" and warned against an appeal.

AT&T Chairman and CEO Randall Stephenson argued the company's proposed $85.4 billion takeover of Time Warner is necessary to compete against companies like Amazon, Facebook, and Google.

The merger was approved without conditions and is seen as a turning point for a media industry that has been upended by companies like Netflix Inc and Google which produce content and sell it online directly to consumers, without requiring a pricey cable subscription.

The judge in a scathing opinion urged the USA government not to seek a stay of his ruling, saying it would be "manifestly unjust" to do so and not likely to succeed.

"We are pleased that, after conducting a full and fair trial on the merits, the Court has categorically rejected the government's lawsuit to block our merger with Time Warner", David McAtee, AT&T's general counsel said in a statement.

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With or without Time Warner, AT&T is very focused on its media business. The Department of Justice had sued AT&T to block the merger. At a campaign rally in 2016, Trump said his administration would not approve the deal, raising concerns over political interference.

A Comcast-Fox deal would be another vertical merger, like the AT&T-Time Warner deal.

The media world has been holding their breath for weeks, awaiting the final decision from Judge Richard Leon as to whether or not he would allow for the two companies to merge in a deal valued at more than $80 billion.

In making its case, the USA government argued that the merger of AT&T could harm consumers in a number of ways. From Comcast's bid for 21st Century Fox to CVS's acquisition of Aetna, massive corporations increasingly have sought to expand their reach by buying up companies in different lines of business. That's not to say that vertical mergers get through regulatory approval free and clear - the FTC has fought 22 vertical mergers since 2000 - but they receive less scrutiny than horizontal mergers.

After the ruling, Time Warner's stock dropped almost 5 percent in after-market trading.

The government argued that AT&T would gain outsize market power, jacking up the prices it charges cable providers to carry networks in the Time Warner stable. Or it could hurt Netflix and other content producers by locking them out of AT&T's multi-channel distribution network. And Leon's decision is likely to trigger a wave of new mergers, as many executives were waiting to for the outcome of AT&T's bid before pushing forward with their desired deals. Trump weighed in again after the justice department filed its suit: "Personally, I've always felt that that was a deal that's not good for the country".

AT&T, Time Warner Merger Approved by Judge