DOJ Appeal of AT&T/TW Sees Antitrust, Public Interest, Cable, Programmer Support

Public interest groups, think tanks and antitrust scholars are backing DOJ's appeal of the U.S. district court ruling letting AT&T buy Time Warner (see 1807120068), in amicus briefs filed Monday with the U.S. Court of Appeals for the D.C. Circuit. They follow DOJ's appellant brief filed last week (see 1808070025). New AT&T's appellee brief is due Sept. 20, with amicus briefs in support due Sept. 27. AT&T didn't comment Tuesday.

The FCC also filed an appellant amicus brief, not in support of either party. It was made out of concern the U.S. district court opinion (see 1806120060) could lead to misunderstanding of FCC adjudicatory proceedings in a way that hurts the evidentiary value of documents given the agency.

The district court saying it didn't give much weight to documents AT&T and DirecTV filed with the FCC during consideration of AT&T/DirecTV ignores that agency rules require regulated parties meet a truthfulness standard in adjudicatory proceedings, the agency said (in Pacer). It said the lower court suggestion that AT&T/DirecTV filings were less probative because of differences between the FCC's public interest standard and the DOJ's antitrust standard misses that the commission has long included competition analysis as part of its public interest review.

The lower court's rejection of basic principles of bargaining theory and profit maximization, if allowed to stand, "promises to lead other courts astray" and could spur "even more anticompetitive vertical mergers," the American Antitrust Institute, Consumers Union and Public Knowledge said (in Pacer). They said DOJ made a persuasive case that AT&T's suggested behavioral fix to anti-competitive worries -- its arbitration offer -- wasn't enough given anticompetitive harms. They said it was "extraordinary" the lower court dismissed the government's case out of hand and the court put an excessively high burden of proof on Justice.

Twenty-seven antitrust scholars similarly argued U.S. District Judge Richard Leon of Washington "made significant errors of economics, law, and logic" about the government's competitive harm theory. They didn't take a position on the ultimate outcome of the appeal. They said (in Pacer) the court erred in accepting TW assertions AT&T ownership wouldn't affect Turner's economic incentives or demands when negotiating with rival MVPDs. They said the lower court, in asserting blackouts aren't any more likely, given how costly they are to both sides, missed the key point of the government's bargaining model: if a merger makes effects of a blackout less costly, that gives that party more leverage and ultimately a better deal. Signers include former FCC Chief Economist Jonathan Baker, American University research professor of law; Rutgers law professor Michael Carrier; Harvard law professor Einer Elhauge; former FTC Economics bureau Director Martin Gaynor, Carnegie Mellon University economics professor; and former DOJ Antitrust Division Chief Economist David Sibley, University of Texas-Austin economics professor.

The American Cable Association and former FCC Chief Economist William Rogerson, now research director-competition, antitrust and regulation, Northwestern Law Searle Center on Law, Regulation and Economic Growth, said (in Pacer) internal inconsistencies in Leon's decision about profit maximization intentions of companies and about how bargaining affects pricing require a remand for reconsideration. They "cast serious doubt on the correctness of the district court’s reasoning," especially since it's far from standard economic theory.

DOJ met its burden to show New AT&T "creates a reasonable probability" that there could be sizable exclusionary effects in the video programming distribution market, said (in Pacer) the Open Markets Institute. It said vertical mergers in general can open the door to a merged firm using its market power to exclude upstream and downstream rivals, to increased risk of collusion and to elimination of new rivals.

Cinemoi said indie programmers like it will face even more limited access and foreclosed competition in an already concentrated market. Calling New AT&T "especially concerning" because a national MVPD would own content for the first time, it said (in Pacer) the deal should be enjoined to foster competition.