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by on June 12, 2018
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AT&T and Time Warner are not competitors; their proposed merger would be a so-called "vertical integration" of complementary companies.

A federal judge on Tuesday gave his blessing to telecom giant AT&T's drive to take over the Time Warner media conglomerate. Judge Richard Leon rejected arguments by Justice Department lawyers that the combined company would be too large and too powerful, and that the $85 billion deal would harm competition and hurt consumers.

Time Warner owns CNN, HBO, Warner Bros. Entertainment, and a passel of cable channels including TNT, TBS and the Cartoon Network.

The two companies seeking to unify had argued that a new crop of competitors cast an ominous shadow over their businesses: Netflix, Amazon and Apple in content and distribution; Google and Facebook in advertising.

In his decision, Leon weighed in on a case that carried political overtones, scrambled typical ideological alignments, and triggered close attention from corporate executives beyond media.

On the campaign trail in October 2016, then candidate Donald Trump spoke in Gettysburg, Pa. He noted Time Warner owned CNN, and then declared his opposition to the $85 billion proposed sale. It is, he said then, "a deal we will not approve in my administration because it's too much concentration of power in hands of too few."

Trump's call holds a populist appeal and won some support across the ideological divide. As Gigi Sohn, a former top aide to the Federal Communications Commission chairman under President Obama put it during the trial, "If we return to a place where ... there's a presumption that big is bad — bad for democracy, bad for consumers — I think that's a good place for antitrust law and antitrust enforcement to be." Trump's appointment as the antitrust chief at the Justice Department, Makan Delrahim, is widely well-regarded.

Yet Trump's antipathy for CNN is so strong and well-known that it colored public perception of the case. In those remarks at Gettysburg, Trump preceded his declaration about corporate ownership with a dig at the "corruption" of what he called "the dishonest mainstream media."

Trump's frequent attacks on CNN led to much speculation, including from AT&T Chairman and CEO Randall Stephenson, that the president's opposition stemmed from anger over the network's coverage rather than concern over greater corporate consolidation. AT&T lawyers initially sought email correspondence between Trump's White House and the Justice Department, but Leon declared any communications were not relevant to the trial, and AT&T relented.

Even so, the case brought last year by the antitrust lawyers at Trump's Justice Department to block the AT&T and Time Warner marriage is an outlier.

AT&T and Time Warner are not competitors; theirs would be a so-called "vertical integration" of complementary companies: Time Warner makes the TV shows (and movies and news programming, etc.), while AT&T offers the satellite and cable TV services and mobile phone systems on which people consume such content.

The case is commonly characterized as the first major "vertical" deal challenged by federal lawyers in court in more than four decades. Had Leon ruled in favor of the government, the consequences would have reached far beyond media, to tech, health care, finance and other major fields.

Trump's antitrust lawyers and regulators have not pursued a consistent line against increased consolidation; under newly elevated chairman Ajit Pai, a Republican, the FCC has swept away many regulations limiting how many stations a single company could own.

That has worked to smooth the path of Sinclair Broadcast Group as it seeks to acquire Tribune Media. Sinclair owns more TV stations than any other broadcasting company; Tribune would give it several dozen more. While federal regulators did require the disposal of some properties to satisfy what they characterized as anti-competitive local market situations, Sinclair appears poised to sell some of them to owners with whom it has strong corporate history and ties.

Similarly, when the Walt Disney Co. announced it would acquire most of 21st Century Fox, Trump called Fox's controlling owner, Rupert Murdoch, not to bemoan but tocongratulate him — and reportedly to make sure that Murdoch wasn't selling Fox News. (He's not.) Comcast is circling Fox as well, making it clear it plans to disrupt the Disney-Fox union, but did not want to make a formal offer until after Leon's ruling.

Trump has suggested he might want to re-open a review of an earlier deal that has many parallels to the AT&T takeover of Time Warner: Comcast's takeover of NBC Universal. Such suggestions have been accompanied by frequent denunciations of MSNBC and NBC journalists — who work within the Comcast empire.

By David Folkenflik

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