The views expressed by contributors are their own and not the view of The Hill

DOJ’s AT&T-Time Warner suit exemplifies government overreach


When reports began to filter out that the Department of Justice (DOJ) had filed suit against AT&T to block its acquisition of Time Warner, I couldn’t help channeling former President Ronald Reagan:

“There you go again.”

The government is still deciding who will be the key players in markets. It’s time to stop. Enough is enough. 

{mosads}It was over-regulation of the telecommunications industry that helped AT&T build and maintain its original “Ma Bell” monopoly for nearly a century. It wasn’t until 1982 when its government-sanctioned monopoly ended. 


The end of the company’s supposed stranglehold over communications could have been in the works organically due to technology ranging from satellites to microwave towers to compete with AT&T’s network.

AT&T, a shadow of its former self, was purchased by Southwestern Bell in 1982 and began its transformation into the flourishing multinational conglomerate it is today. Its original stock in trade — landline telephone service — is now a shrinking share of its business compared to wireless, internet access and television via its U-Verse and newly acquired DirecTV service. 

But now the government wants to step in again, ostensibly in the name of consumers, in a rare action against a vertical merger to either slam the brakes on AT&T’s purchase of Time Warner or impose stringent and, frankly, perplexing restrictions.

To build its case, the DOJ has highlighted statements by both companies that depict them as plotting to restrict rival services (as any company with a survival instinct and responsibility to shareholders should.) One citation has executives noting that AT&T considers DirectTV’s model a “cash cow” and “golden goose.” So, it’s a crime to make money?

While some of these snippets may sound damning, statements in the exploratory phase of a merger should not be viewed as inevitable policy points.

For the case against AT&T to make sense, Assistant Attorney General Makan Delrahim would have to be counting on the communications giant to cut off its proverbial nose to spite its face.

In an attempt to manipulate the market, the thinking goes, AT&T might charge rival delivery services a higher premium to carry its newly owned Time Warner content. But in doing so, they’d then be giving rival content creators, with their lower prices, an opening to boost market share.

Conversely, it makes far more sense for the merged AT&T-Time Warner entity to push content onto as many platforms as possible to compete with the flood of original programming from sources like Netflix, Amazon, and Hulu.

If these firms could not get away with raising rates on the consumer before the merger, they will not have an interest in doing so after the merger. This shows a lack of understanding of modern economics: If Ford buys a spark plug producer, they are not going to jack up prices on spark plugs or their cars.

To recoup its $86 billion investment in Time Warner — parent company of HBO, Warner Brothers, CNN and Castle Rock Entertainment, among many entities — AT&T would logically want to maximize viewership and loyalty to such offerings as “Justice League,” “Game of Thrones” and “Gossip Girl,” as well as its substantial sports programming. 

In their talks with DOJ, AT&T executives were reportedly willing to accept decrees requiring licensing of content to rivals at fair terms, but even that would be an unnecessary overreach, and it seems to have been rejected because DOJ doesn’t want to bother with monitoring any agreement.

Since AT&T doesn’t create content and Time Warner has sold off its cable operation, there was no substantial market competition between the companies. The DOJ lawsuit is largely seen as weak, as exemplified by the fact that no state attorney general is willing to join.

Add to that the complication of what AT&T CEO Randall Stephenson called the “elephant in the room”: President Donald Trump’s persistent criticism of Time Warner property CNN over what he considers unfair coverage. That criticism has been so boisterous that it once included his retweeting an image of a train running over a CNN reporter.

CNBC reported that the DOJ wants AT&T, as a condition of merger approval, to sell off Turner Broadcasting, which includes CNN. Presumably, an orphaned CNN would flounder without the shelter of its wealthy parent. Does anyone watch CNN anyway?

Their whole approach fairly well illustrates why government regulators have no place in open market business deals between companies: Its own parochial interests will always prevail over the needs of consumers. 

If DOJ succeeds in scuttling this deal, on the heels of its successful block of AT&T’s proposed $39-billion merger with T-Mobile in 2011, it will hamper the company’s ability to craft future deals while punishing its shareholders and handing out a gift to competitors such as Disney, Amazon and Viacom.

Worst of all, at a time of growing hope against pervasive and intrusive regulatory overreach, it would be a giant leap backward. 

There we go again.

Edward Pr. Stringham is president of American Institute for Economic Research and a professor of economics at Trinity College. He is the author of “Private Governance” (Oxford University Press).

Tags AT&T CNN Donald Trump Mergers and acquisitions Time Warner United States Department of Justice

More Finance News

See All

Most Popular

Load more


See all Video