AT&T Inc. (NYSE:T)
Historical Stock Chart
1 Year : From Jan 2018 to Jan 2019
By Brent Kendall and Drew FitzGerald
WASHINGTON -- AT&T Inc. is considering an unusual bid to seek testimony from the Justice Department's antitrust chief in the coming trial over its $85 billion purchase of Time Warner Inc., part of the companies' effort to challenge the legitimacy of the government's lawsuit.
In the months since the Justice Department sued to block the deal last November, AT&T has publicly questioned the department's motives in light of President Donald's Trump's campaign pledge to disallow the deal and his repeated disparagement of CNN, a unit of Time Warner.
AT&T and Time Warner have drafted a list of people they may put on the witness stand at trial, and, according to people familiar with the matter, the roster includes Justice Department antitrust chief Makan Delrahim, a Trump nominee who made the decision to challenge the deal in court.
AT&T could choose not to call Mr. Delrahim at trial. But if he is called, it could escalate tensions in a dispute that already has seen its share of tense moments and is shaping up as a pitched legal battle between a corporate giant and an unorthodox administration whose president is given to off-the-cuff comments.
The trial is scheduled to begin March 19, representing one of the biggest antitrust cases in a generation.
Legal observers said they couldn't recall a situation in which merging companies sought court testimony from the government official who made the decision to sue them. "It's quite remarkable that they listed him," said Wayne State University law professor Stephen Calkins.
Legal impediments could arise to obtaining testimony from Mr. Delrahim especially on internal government deliberations that led to the lawsuit.
In their initial answer to the lawsuit, AT&T and Time Warner listed six defenses to the government's claims, including touting cost savings and benefits for consumers. Another of the defenses argued the case reflected "improper selective enforcement of the antitrust laws." AT&T has been combative in public, saying the lawsuit defies logic.
Mr. Delrahim, for his part, has offered veiled criticisms of AT&T's claim that it needs the deal to compete effectively.
The case isn't a typical antitrust dispute. Mr. Trump has been a relentless critic of CNN and referenced the news network when he vowed as a candidate to block the deal, saying, "AT&T is buying Time Warner, and thus CNN, a deal we will not approve in my administration because it's too much concentration of power in the hands of too few."
Mr. Delrahim was a private practice lawyer in October 2016 when the deal was announced and Mr. Trump made his remarks. He appeared on Canadian television at the time and said the deal didn't seem to be "a major antitrust problem," though he did say it could raise some concerns.
AT&T has sought to make use of Mr. Delrahim's 2016 television interview. The company played the clip during a press conference last November. Nothing would appear to prevent the companies from playing the video in court unless U.S. District Judge Richard Leon disallows it.
In a CNBC interview Friday, AT&T Chief Executive Randall Stephenson cited Mr. Delrahim's previous remarks on the deal as well as Mr. Trump's opposition, saying, "Those are all the kinds of things that everybody looks at and says, 'What's going on?' "
Last July, Mr. Trump tweeted a video of himself punching a figure with the CNN logo. In December, after the network issued a correction on a story, the president tweeted that "Fake News CNN made a vicious and purposeful mistake." In January, Mr. Trump included CNN and other news organizations as recipients of his "Fake News Awards."
Mr. Delrahim has pledged to keep politics out of enforcement decisions and has said he didn't talk to the White House about the deal. Roughly 30 career staffers at the Justice Department signed the lawsuit.
The Justice Department's review of the AT&T-Time Warner transaction had been under way for about a year when Mr. Delrahim took the helm as the department's antitrust chief. He had previously served as a deputy White House counsel.
The Justice Department is alleging the AT&T-Time Warner deal would create a giant firm that could hobble rivals, force higher prices for video programming and slow innovation in the age of cord-cutting.
Advocates for strong antitrust enforcement have argued the government's concerns are legitimate, though some also say Mr. Trump's comments were ill-advised. "No good can come of it, and you just give the defendants something to talk about," said Cleveland State University law professor Chris Sagers.
Mr. Sagers, who supports the lawsuit, said a content creator like Time Warner "will feel more free to raise its prices once it's integrated into a big distribution network. Likewise, AT&T seems very likely to intend to use control of Time Warner content to stall the threat posed to its most profitable video business -- subscription cable -- by the new streaming-video firms."
Mr. Sagers said Mr. Trump's criticisms and Mr. Delrahim's comments before he joined the Justice Department aren't necessarily relevant in the case, absent some hard evidence that the administration targeted the deal because the president doesn't like CNN.
AT&T and Time Warner's main defense will likely focus on what they see as the deal's potential benefits to media consumers and advertisers. They say integrating AT&T's video and wireless distribution with Time Warner's movie and television content will allow the newly-combined company to compete with disruptive firms like Netflix, Google and Amazon that are offering video content in nontraditional ways.
AT&T also emphasizes that its deal is a "vertical" merger of complementary companies, rather than one that eliminates a direct competitor. The Justice Department hasn't litigated a challenge to a vertical merger in decades, though it came close to doing so during the Obama administration and has imposed conditions on some vertical deals, including Comcast Corp.'s takeover of NBCUniversal.
(END) Dow Jones Newswires
February 14, 2018 06:28 ET (11:28 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.