AT&T/TW Settlement Seen More Remote Given DOJ Tone Against Behavioral Conditions

DOJ's seeming doubling down on its presumption against behavioral remedies in antitrust consent decrees reinforces the idea settlement of its lawsuit to block AT&T's buy of Time Warner could be remote, experts said. Justice wouldn't be going to court on AT&T/TW if it thought a behavioral remedy could restore the competition lost by the deal, said American Antitrust Institute President Diana Moss. The odds of a settlement have been hazy (see 1801050010). DOJ and AT&T didn't comment.

Behavioral conditions "are fundamentally regulatory, imposing government supervision on what should be free markets," according to a speech DOJ Antitrust Division Chief Makan Delrahim prepared for delivery Thursday to the New York State Bar Association antitrust section. Delrahim was being ill and unable to give the talk directly. Pointing to recent consent decrees that involved divestitures and not behavioral conditions (see here, here and here), he said they contained procedural provisions that are going to become standard in future civil transaction and other settlements. Those three consent decrees involved vertical deals, like AT&T/TW, said Cornell Law School professor George Hay.

The procedural provisions set a preponderance of evidence standard for proof if the defendant violates the decree and the U.S. pursues contempt charges, requiring defendants to agree to reimburse the government for costs such as attorney and expert fees in any successful consent decree enforcement effort. Delrahim said there will be terms that let the department apply for extension of conditions if a court finds the defendant violated the consent decree, and a notice DOJ can terminate the decree after a certain number of years. The intent seems to be to make decrees "more effective" by equalizing the burden of showing the underlying antitrust violation and that a decree has been violated, Moss said.

Most antitrust divisions, Republican and Democratic, come in saying they prefer structural conditions to behavioral, though when confronted with actual consent decrees, "people find those strong statements ... just may not be sustainable," said antitrust lawyer Kelsey Shannon of Lynn Law Firm.

The sides conceivably could end with a settlement in the AT&T/TW litigation, especially since U.S. District Judge Richard Leon of Washington, who's handling it, might question why there hasn't been one since the buyer has indicated it's amenable to behavioral conditions, Hay said. Cases often also settle on eve of trial, when parties' positions might get softer, he said.

Despite the speech and other comments, the proverbial jury still is out on how Delrahim's division will look at competition issues, experts told us. Before AT&T/TW, the safe bet was he was going to be a conservative, restrained antitrust head without a lot of aggressive enforcement, said Cleveland State University law professor Chris Sagers. Conventional wisdom after that suit "became 'Makan is a cowboy,'" Sagers said, saying it's unclear whether antitrust enforcement will be aggressive. The AT&T challenge could "be a one-off," and the fate of vertical deals before Justice is still up in the air, he said.

The speech likely wasn't messaging about AT&T/TW or any other current case but more guidance for future takeovers, said antitrust lawyer Ethan Glass of Quinn Emanuel. He said it's always hard to read the tea leaves on a new administration and what types of deals it will and won't challenge, saying it could take a couple more years and multiple transactions before this DOJ's thinking is clear.

Delrahim's remarks said DOJ plans to set up discussions this year about ways the division can support "a deregulatory business environment." Those events will look at eliminating old consent decrees, regulatory exemptions to antitrust law, and consumer costs of anticompetitive regulation.

Closing of old consent decrees -- such as federal oversight of ASCAP/BMI, which dates back to the first half of the 20th century -- goes along with the deregulatory approach, Sagers said. Vested interests will fight to keep some of them alive, he said.

Unaffected are DOJ Comcast/NBCUniversal conditions set to expire later this year; the FCC-imposed conditions expired earlier this month (see 1801220030). Justice, even when not so heavily interested in deregulation, generally doesn't seek to extend conditions unless serious wrongdoing is evident, Sagers said. Experts generally don't anticipate DOJ extending that deal's conditions (see 1712210018).