WASHINGTON — The Justice Department on Monday laid out its case against a federal court’s approval of the AT&T and Time Warner merger, criticizing a judge for “erroneously ignoring fundamental principles of economics and common sense.”
The argument, made to the United States Court of Appeals for the District of Columbia, is the start of the government’s second attempt to stop the $85.4 billion deal. The Justice Department lost its case in June, and AT&T and Time Warner, the owner of CNN and HBO, have since hurried to stich their operations together.
Legal experts say the government faces high hurdles to win its appeal. If it does, the companies could be forced to break apart the combined company. The legal battle could eventually be taken to the Supreme Court.
The central antitrust arguments presented by the Justice Department in the appeal were unchanged from the trial. The antitrust regulators say the combination of a major distributor of entertainment with a creator of video content will harm competitors. AT&T could threaten to withhold Time Warner content or charge higher prices from competitors like Dish Network and Comcast, leading to hundreds of millions of dollars in higher cable bills for consumers, the government argued.
But the Justice Department also plans a sweeping attack of the judge who decided the trial, Richard J. Leon of the United States District Court in Washington. Judge Leon said that the antitrust officials had not adequately proved their claims that competition and consumers would be harmed.
The Justice Department said Judge Leon did not appear to grasp basic concepts of bargaining theory among companies, and that he limited the government’s case by excluding some evidence. Among its list of accusations, the government said that the judge, rejected the Justice Department’s attempt to use AT&T’s internal analysis of the marketplace, and he refused to close the court to the public so the Justice Department could present more confidential testimony.
The government’s star witness, an economist, was only given 2.5 hours to present his claims of competitive harms from the deal. That was not enough time, the Justice Department said, for the economist to explain his findings. The government noted Judge Leon’s comment to the witness: “If you don’t finish, well, it’s too bad.”
“These errors distorted its view of the evidence and rendered its factual findings clearly erroneous, and they are the subject of this appeal,” the Justice Department stated in its brief.
AT&T said it would defend its merger. The company is scheduled to file its argument to the court by Sept. 20, and the appeals court is expected to choose the three judges that will preside over the case in October. Oral arguments are likely to begin in early fall and the case could be wrapped up before winter.
“Appeals aren’t ‘do-overs.’ After a long trial, Judge Leon weighed the evidence and rendered a comprehensive 172-page decision that systematically exposed each of the many holes in the government’s case,” said David R. McAtee II, AT&T’s general counsel. “There is nothing in D.O.J.’s brief today that should disturb that decision.”
Orignially published in NYT.