AT&T to Seek Dismissal of DirecTV as Defendant in DOJ Suit

AT&T will move to have its DirecTV subsidiary dismissed as a defendant in the DOJ lawsuit seeking to block its Time Warner takeover, AT&T/TW outside counsel Dan Petrocelli of O'Melveny said Monday, the opening day of trial. Opening argument will be Wednesday, U.S. District Judge Richard Leon of Washington said, saying the sides estimated a trial of four or so weeks, but "it's looking more like six to eight." AT&T will move for the dismissal by the time Justice has finished presenting its case, Petrocelli said.

Leon and the sides spent hours going over a long list of evidentiary issues in anticipation of the trial. Much of the discussion involved exhibits DOJ hopes to enter that cite DirecTV opposition to Comcast's 2010 buy of NBCUniversal. Petrocelli said there also are proposed exhibits that came from FCC regulatory proceedings on retransmission consent. But none of those is relevant evidence of competitive harm specifically in the AT&T/TW case, he said.

DirecTV isn't a merging party and isn't buying or selling anything in the deal, Petrocelli said. He said DOJ added DirecTV as a defendant only so it could use that as a route to using as evidence those past DirecTV comments made in other contexts, but statements the satellite-TV provider made before it was part of AT&T can't be considered admissions of the successor company. He said Justice likes those past DirecTV statements, such as those it made during Comcast/NBCU, because they challenged that deal and sought conditions. The video market is a "completely different world" from 2010, Petrocelli said, saying that unlike in Comcast/NBCU, no stations are involved in AT&T/TW. But prior transactions aren't completely off the table, since the defense plans to bring up how Comcast/NBCU affected pricing, Petrocelli said.

DirecTV -- which AT&T bought in 2015 -- was named a defendant because it's a key player in video and because it's a part of the merger, DOJ attorney Eric Welsh said. He said those past DirecTV statements go to central issues in the agency's case and help define issues about what happens in vertical mergers and vertical integration. And he said past statements of DirecTV should be attributable to AT&T since AT&T now owns DirecTV.

But Leon said five years passed between those statements and AT&T's buy of DirecTV, and Comcast/NBCU and AT&T/TW share some common elements but also differ in key ways. He said he "was not inclined" to enter the DirecTV filings and related expert reports.

Leon expects evidentiary issues about business record exceptions and relevance of exhibits to come up frequently during the trial. Petrocelli said DOJ has "thousands of pages" of emails it wants to enter into the record and argued against allowing that without there also being a witness available to testily to the documents. Welsh said in many cases, the emails in question were from upper-level sources not "someone just hired off the street."

DOJ's trial brief (see 1803120003) avoided any harm theory that could also be a justification for open internet rules, but it's clear the agency sees the broadband transmission market as "less rosy" than the FCC does, former FCC Chairman Tom Wheeler blogged Monday for Brookings, where he's a visiting fellow. He pointed to Justice highlighting how incumbents have largely expanded their networks within their footprints instead of competitively. He said the DOJ trial brief "then attacks the heart of the Trump FCC’s decision" to stop an investigation into zero rating by pointing out how AT&T saw virtual MVPDs as a threat to its MVPD business, but that threat is manageable with DirecTV Now.