US government’s appeal

The US Justice Department (or DoJ) is appealing a judge’s decision to allow AT&T’s (T) $85.4 billion acquisition of Time Warner, raising the possibility that the deal could be blocked. Last month, AT&T won approval against the DoJ to move ahead with its agreement with Time Warner without any conditions.

The deal closed on June 14 after the Justice Department didn’t apply for a stay of the judge’s ruling and let the deal go forward. However, the US government can still appeal the court’s decision within 60 days even after the merger has been completed.

Will Justice Department Undo AT&T’s Merger with Time Warner?

DoJ concerns

The DoJ has not disclosed the reasons for filing an appeal in the US District Court in Washington, but last November, the DoJ sued to block the AT&T-Time Warner deal, citing concerns that the combination of AT&T’s wireless and satellite businesses with Time Warner’s movies and television shows would raise costs and thus harm consumers. The merger, first announced in October 2016, was also opposed by President Donald Trump.

The DoJ was concerned because the acquisition could give AT&T access to Time Warner-owned Turner Broadcasting, which owns CNN, when it already owns the satellite television provider DIRECTV. As a result, AT&T could charge rival distributors more for Time Warner content, resulting in higher prices for consumers to stream TV and movies. The DoJ, therefore, asked AT&T to sell its Turner networks, which include CNN, in 2016 to get merger approval.

AT&T’s view

AT&T said that it would manage separate units of Turner and AT&T Communications, which include DIRECTV and U-verse, to prevent improper sharing of information or pricing. The company also stated that it would not set Turner prices or employee compensation. However, John Bergmayer, senior counsel for advocacy group Public Knowledge, stated that AT&T has raised prices for some video and wireless services since the deal was approved.

Merger benefits

The merger will likely boost AT&T’s revenues and add premium media assets to its portfolio. Time Warner’s movies and television shows could also help the telecom company to compete with established digital rivals like Netflix (NFLX), Amazon (AMZN), and Alphabet’s (GOOGL) Google amid the declining pay-TV subscriber base.

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