Appeals Court Upholds AT&T-Time Warner Deal

With respect to its acquisition of Time Warner Inc., keeping the status quo is a good thing for AT&T.

The U.S. Court of Appeals for the D.C. Circuit ruled Tuesday that the $84 billion AT&T-Time Warner merger, closed in June 2018, can continue to go forward, shooting down a challenge lodged by the US Department of Justice.

Last summer, the DoJ argued that Judge Richard Leon, who approved the deal without conditions, did so without applying "fundamental principles of economics and common sense." Judge Leon held that the combo would not yield higher prices and reduce competition in the pay-TV arena, and that the government failed to prove the deal would not be in the public interest.

The DoJ had argued that the merger, which was also opposed by President Donald Trump, will enable AT&T to use Time Warner's programming to raise the costs for other pay-TV providers and maximize the profits of its own video business. It also claimed that the AT&T-Time Warner marriage would boost their bargaining position and reduce competition in violation of Section 7 of the Clayton Act, which governs M&A and joint ventures.

The appeals court decision today clears AT&T to plow ahead with its plans involving Time Warner and its recently rebranded WarnerMedia unit. Part of that plan involved the development and rollout of a set of SVoD services that are slated to launch in Q4 2019. On the pay-TV side, AT&T is striving to boost margins and profits of its various OTT, IPTV and satellite-delivered video products. (See AT&T CEO: Our SVoD Service Won't Be 'Another Netflix' and AT&T's Pay-TV Biz Takes Big Hit as Promotional Subs Flee .)

"The merger of these innovative companies has already yielded significant consumer benefits, and it will continue to do so for years to come. While we respect the important role that the U.S. Department of Justice plays in the merger review process, we trust that today's unanimous decision from the D.C. Circuit will end this litigation," AT&T general counsel David McAtee said in a statement, according to CNBC.

The ruling by the appeals court didn't have much effect on AT&T's stock, which was up 12 cents, to $31.25 each in late morning trading Tuesday.

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— Jeff Baumgartner, Senior Editor, Light Reading

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