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U.S. sues to stop AT&T buying Time Warner, says would hike rates

Chief Executive Officer of AT&T Randall Stephenson (C) sits with David McAtee (L), SEVP and General Counsel for AT&T, and Daniel Petrocelli (R), counsel from O'Melveny & Myers LLP., during a press conference in New York City, New York, U.S. November 20, 2017. REUTERS/Shannon Stapleton

By Diane Bartz, David Shepardson | Reuters

WASHINGTON (Reuters) – The U.S. Department of Justice sued AT&T Inc (T.N) on Monday to block its $85.4 billion acquisition of Time Warner Inc (TWX.N), saying the deal could raise prices for rivals and pay-TV subscribers while hampering the development of online video.

The lawsuit is the first major challenge to a merger by the administration of U.S. President Donald Trump, who has repeatedly criticized Time Warner’s CNN news unit and announced his opposition to the deal before the election last year, saying it would concentrate too much power in AT&T’s hands.

The Justice Department is arguing that AT&T would use Time Warner’s films and movies to force rival pay-TV companies to pay “hundreds of millions of dollars more per year for Time Warner’s networks” in the lawsuit filed late Monday in federal court in Washington.

The government cited documents where AT&T and its satellite broadcast unit DirecTV described the traditional pay-TV model as a “cash cow” and “golden goose,” suggesting customers were at risk of price hikes.

The 23-page complaint also said the deal would slow the industry’s transition to online video and other new distribution models.

AT&T, which sees the deal as a way to compete against emerging technology companies such as Netflix Inc (NFLX.O) and Inc’s (AMZN.O) Prime Video, described the lawsuit as ”a radical and inexplicable departure from decades of antitrust precedent.”

AT&T head lawyer David McAtee said vertical mergers, between companies on different steps in a supply chain, are routinely approved.

”We see no legitimate reason for our merger to be treated differently,” said McAtee, adding that AT&T is confident a judge will reject the Justice Department’s case. The Obama administration approved a similar vertical deal in 2011 to allow cable company Comcast Corp (CMCSA.O) to acquire NBCUniversal.

AT&T Inc is prepared to…

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