AT&T and the Justice Department will have to hang on to their opening statements as a winter storm has delayed their antitrust trial until Thursday.
According to CNN, Judge Richard Leon, who is presiding over the DOJ’s court challenge to AT&T’s proposed $85 billion merger with Time Warner, has pushed back opening statements by one day as a major winter storm bears down on Washington, D.C.
Thus far, the trial has consisted of introducing evidence on both sides. But the report said that Tuesday also saw AT&T provide a glimpse of its defense. Early on, AT&T lead counsel Dan Petrocelli played the “FAANG” card, warning Leon that Facebook, Amazon, Apple, Netflix and Google have irreversibly altered the video landscape and that it’s now crucial for legacy programmers like Time Warner to bulk up through consolidation in order to continue competing.
The argument implementing AT&T’s and Time Warner’s digital competitors echo comments made by AT&T leadership like CEO Randall Stephenson in the build up to the trial. Last month, Stephenson told CNBC that Amazon and Netflix are the real vertically integrated companies that should pose concerns to the video industry.
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“There’s this concern about vertical integration, having everything from content creation, content aggregation to content distribution,” Stephenson said. “Reality is, the biggest distributor of content out there is totally vertically integrated. This happens to be somebody called Netflix. They create original content, they aggregate original content and they distribute original content. They have 100 million subscribers. Look at Amazon; they’re doing the exact same thing.”
But in pretrial briefs, the potential financial impact on consumers became a focus of arguments for and against AT&T and Time Warner merging.
The DOJ has argued that a combined AT&T and Time Warner would result in raising the total annual U.S. pay TV bill by $436 million.
"If TV program distributor AT&T acquires TV-program producer Time Warner, American consumers will end up paying hundreds of millions of dollars more than they do now to watch their favorite programs on TV," the DOJ wrote in a brief. "In short, the transaction violates Section 7 of the Clayton Act, because its effect 'may be substantially to lessen competition.' Prices for current services will go up and development of emerging competition will slow down.”
AT&T pointed toward calculations from University of California, Berkeley economics professor Carl Shapiro as a means of shooting down the DOJ’s allegations of price hikes.
“In his initial report, the government’s expert claimed, with startling and implausible precision, that the merger will cause consumer pay TV prices to rise by a monthly total of 27 cents per subscriber, or less than 0.2% of a consumer’s average monthly bill,” AT&T wrote in its brief. “Just a few weeks later, after fiddling with some input dials, the expert managed to almost double that insubstantial result to a still-insubstantial 45-cent monthly increase, all of 0.4% per bill, which is where the government currently stakes its case.”