With Antitrust Trial Looming, AT&T, DOJ Each Claim Other Side Bolsters Its Case

AT&T arguments against Comcast's buy of NBCUniversal show that if AT&T/Time Warner goes through, prices for current services will increase and emerging competition development will slow, DOJ said in a docket 17-2511 trial brief (in Pacer) to U.S. District Court in Washington. On the contrary, AT&T and TW said (in Pacer), also filed Friday, the agency's lead economic expert concedes it wouldn't be profitable for New AT&T to withhold its TV networks from rival MVPDs, and prices paid by New AT&T subscribers will decrease. The trial, to begin Monday, is expected to last 15 days (see 1803080047).

DOJ said it will produce at trial internal documents and expert witnesses showing the deal is a competitive threat, with higher costs charged rival MVPDs and virtual MVPDs. It said that for current pay-TV subscribers, the takeover "will mean paying for the equivalent of 13 months of Turner content per year, while getting only 12." It said allowing the deal would mean video-content delivery in the future will be likely controlled by "vertically integrated, well-funded silos," and New AT&T would be able to coordinate easily with Comcast/NBCU, the other major vertically integrated distributor.

AT&T's proposed condition of baseball style arbitration (see 1711280063) "is no cure at all" since the offer to behave opposite to New AT&T's incentives and interests comes without oversight, DOJ said, saying the arbitration offer "would turn into a pumpkin after seven years." It called FCC program access rules "not a remedy for an anticompetitive merger" since they wouldn't prevent New AT&T from using permanent foreclosure as a threat in negotiations with rival MVPDs. The department said it discussed divestiture-based structural conditions before bringing the complaint, but didn't give specifics.

Justice assertions about Comcast collusion and keeping content such as HBO from rivals "do not reflect the realities" of the over-the-top world, UBS analyst John Hodulik wrote investors Monday.

DOJ arguments come from "a purely theoretical realm" not backed by business realities, AT&T/TW said. They said withholding Turner programming would result in "immediate, catastrophic losses in licensing and advertising revenue" that wouldn't be any more sustainable post-deal. They said their own expert witnesses will show the government modeling predicts a rise in consumer prices "statistically indistinguishable from zero." They said a government economic expert, in deposition, acknowledged he had no opinion on whether collusion with Comcast/NBCU is any more likely post-merger.

The proposed deal is about making TW more competitive, particularly with emerging digital competitors that operate direct to consumer, since TW "never had the access, assets, or expertise required to support a direct-to-consumer business" on its own, AT&T/TW said. They said it has been unable to get enough distribution rights from unaffiliated programmers to allow such services as a lower-cost, ad-supported version of DirecTV Now, and the TW deal would solve that problem.

The common criticism of behavioral conditions is they force companies to make decisions contrary to their profit-maximizing incentives and require ongoing monitoring, American Enterprise Institute Visiting Scholar Babette Boliek blogged Monday. She said DOJ's increased focus on structural remedies is arguably a shift in preference on antitrust remedies and not a change in the underlying economic analyses. She said the bigger box office market share Disney would pick up with its proposed Fox deal traditionally wouldn't be enough to trigger DOJ intervention, but "a submarket of concern," such as cable sports networks, could require concessions.

Justice also is fighting a watchdog group's proposed amicus brief urging the court to allow discovery on whether the White House politically interfered in the deal review (see 1803090022). In a response (in Pacer) Friday, DOJ said the proposed amicus curiae seemingly doesn't "meaningfully ... add" to unresolved issues in the upcoming trial. The Protect Democracy Project in a Monday filing said DOJ's objection was conflating PDP -- which is suing DOJ seeking White House communications about the deal (see 1803060004) -- with the former DOJ officials who are PDP clients.