When two large companies prepare to merge, especially if the companies control a sizable amount of the market in a particular industry on their own, sometimes the federal government gets the right to make the final determination on whether or not the merger can go through. The federal government can even sometimes set conditions, like telling a business they have to ‘spin off’ portions of their corporation before the merger is allowed.
One of the most interesting proposed mergers in recent years has been the AT&T and Time Warner merger. Today, June 12, a federal judge decided that this huge merger could go forward without any conditions. This could allow the company to monopolize certain television channels, and could set a horrific precedent in the already shady industry, as well as denying a Justice Department lawsuit that does have some basis to it.
Judge Leon decided that the purchase and merger were entirely legal, and in doing so paved the way for AT&T to acquire a wide variety of properties. Among the assets that the phone company stands to acquire are such properties as HBO, CNN, and even the famed film studio Warner Bros.
The District Court Judge imposed no conditions, which suggests that he didn’t see a need to force either company to reduce its market control before the merger could occur, despite the Justice Department’s objections.
The decision by the court also means that a federal judge rejected the federal government’s lawsuit, which attempted to block the merger between the two entities.
Delrahim even said that she believed that the ‘pay-TV market’ would be less competitive and less innovative due to the merger.
She also signaled that this might not be the end of legal attempts to block the merger between the two large companies.
Some legal experts suggest that the decision could signal to other companies that they can also merger ‘vertically.’ A vertical merger is generally a situation where a company buys the entity that supplies it with something.
In this case, AT&T, via services like U-Verse and DirecTV, provides cable television access to millions of customers. Time Warner and its various subsidiaries were producing the content that U-Verse and DirecTV offered.
The large cellular service provider said that they hope to close the merger on or before June 20, and both saw increases in the value of their stock on the stock market.
Comcast has said that it is eyeing a similar acquisition, and is set to put in a bid for Fox, which they could announce as soon as tomorrow, now that the merger was approved.
It took six weeks for Judge Leon to decide the case. The Justice Department sued to block the merger last year, suggesting that AT&T might give DirecTV and U-Verse preferential prices for Time Warner content, while charging services like Spectrum, Comcast, and more.
The company countered that claim, pointing out that the only people who would lose in that scenario would be their own company. They stated that much of the profit the company receives comes from affiliate fees and advertising revenue, and pointed out that limiting access to their channels would only server to rob them of the wider distribution needed to raise both.
The merger further diversifies the markets that AT&T is involved in. They’re currently the second largest wireless provider in the United States, and they also offer television and internet services via DirecTV and their U-Verse product.
Now, they will also own actual television channels as well.
This could lead to companies like AT&T and other firms, which generally lean left of center, having more power to make choices about content produced and what viewers will get to watch, which some consumers may not enjoy.
It will be interesting to see if the move, and the legal confirmation by a federal court, leads to more companies merging vertically where television is concerned.
It could lead to the consolidation of many channels under the control of a handful of conglomerates. Whether or not that’s a good thing, only time will tell. Many people, however, know what will happen: television will become a tool of propaganda even stronger than before.