In a clever gambit, AT&T and Time Warner are seeking to circumvent a potentially problematic FCC review of their merger pact by keeping Time Warner's broadcast licenses under that company's control. But the maneuver could easily turn out to be too clever, backfiring badly on the two media companies.
That's because US President-elect Donald Trump has made it clear that he opposes the proposed $85.4 billion deal because it would put "too much concentration of power in the hands of too few." Trump, who slammed the deal on the campaign trail in late October right after it was announced and regularly battles with Time Warner's CNN outlet over its coverage of him, has reiterated his opposition to the pact, according to a report by Bloomberg late last week. (See Trump: Dump AT&T/TW & Comcast/NBC and this story on our sister site, Telecoms.com.)
So, even if this regulatory filing by AT&T Inc. (NYSE: T) and Time Warner Inc. (NYSE: TWX) succeeds in making an end run around the Federal Communications Commission (FCC) , it could just stir up more opposition from Trump, who might not take kindly to such legal maneuvers.
AT&T and Time Warner are no doubt counting on a more favorable merger review by the Antitrust Division of the U.S. Department of Justice , which weighs all major corporate mergers for their market impact. Unlike the FCC, which has a broad, more subjective and more political "public interest" mandate, the Justice Department reviews proposed mergers on strictly legal anti-trust grounds. While the FCC has generally steered clear of addressing the merger proposal knowing that it might or might not have to consider the deal, the DoJ has already started its anti-trust review, asking the two companies for detailed information.
As AT&T has stated several times, the Justice Department has never rejected a vertical integration merger proposal before. Indeed, in recent years under a Democratic president, the DoJ has approved such major media vertical integration deals as AT&T's acquisition of DirecTV and Comcast Corp. (Nasdaq: CMCSA, CMCSK)'s purchase of NBCUniversal. So, the argument goes, there's no reason why DoJ should act differently this time under a new Republican president with an aggressive agenda for loosening regulatory restrictions on American business.
But that argument ignores the Trump factor. While the DoJ has never blocked a vertical integration deal before, Trump's anti-trust officials could make the case that the extreme market consolidation over the last few years makes the situation different today. AT&T and Time Warner could then take the federal government to the court but that would be a lengthy, costly battle.
Or, as he's already notorious for doing, Trump could just short-circuit the whole regulatory process by taking to Twitter, tweeting his opposition to the deal and denouncing the two media monoliths in no uncertain terms. While such posts by the tweeter-in-chief would have no legal impact, they would likely embarrass the two publicity sensitive companies and prompt their stock prices to plummet, making it harder for them to move forward.
Sound preposterous? If so, you clearly haven't been paying attention to US politics for the past year.
— Alan Breznick, Cable/Video Practice Leader, >Light Reading