Trump Can't Deny A broadcasting License But He Can Deny A Merger (Control or Punish CNN)
"We Are changing from a nation of laws into a nation of bullies"LAG
It seemed like a match made in media heaven. AT&T is a telecommunications giant whose reach stretches to millions of people all over the country, and Time Warner, the owner of CNN, HBO and Warner Bros., has content galore. Together, the two companies would create a colossus straddling the worlds of internet access, news and entertainment.
Until last week, AT&T’s pending $85.4 billion acquisition of Time Warner seemed destined to close by the end of the year. On Wednesday, however, tensions between the Justice Department and executives at the two companies spilled out into the open.
Now it seems possible that the Justice Department and AT&T will end up battling each other in court. The ongoing negotiations have also demonstrated how the Trump administration may regulate big-ticket mergers and acquisitions, representing the first major test for the government’s antitrust strategy.
A central component of the dispute, according to people from both companies and the Justice Department, is CNN — the network that Mr. Trump has frequently attacked as a purveyor of “fake news.”
Late last week, AT&T called the Justice Department to request a meeting between top antitrust officials and AT&T’s chief executive officer, Randall L. Stephenson. On Monday, at the Justice Department headquarters in Washington, Mr. Stephenson and AT&T’s general counsel, David McAtee, met with Makan Delrahim, the new assistant attorney general for the department’s antitrust division, and other Justice Department officials.
In one account of the meeting, Justice Department officials called on AT&T to sell Turner Broadcasting — the group of cable channels under the Time Warner banner that includes CNN — as a potential requirement for gaining government approval, according to three people from the companies involved, who spoke on the condition that they not be named because of the delicacy of the negotiations.
Or, the people said, AT&T could sell off DirecTV, the satellite television provider that it bought two years ago for nearly $49 billion. But AT&T and Time Warner executives say privately that such a concession is not realistic, given that DirecTV and its DirecTV Now streaming service would be crucial to a combined AT&T-Time Warner.
A different account emerged later: It was Mr. Stephenson who had offered to sell off CNN as part of a strategy to win governmental approval, according to two Justice Department officials who declined to speak publicly about the meeting. The officials also insisted that selling the cable news channel would not be enough to address antitrust concerns.
Mr. Stephenson responded with a public denial. “Until now, we’ve never commented on our discussions with the D.O.J.,” Mr. Stephenson said. “But given D.O.J.’s statement this afternoon, it’s important to set the record straight. Throughout this process, I have never offered to sell CNN and have no intention of doing so.”
The Justice Department said it was committed to carrying out its duties in accordance with the laws and the facts. “Beyond that, the department does not comment on any pending investigation,” it said in a statement.
AT&T and Time Warner are poised to fight to keep all their assets intact, believing that the government has no legal grounds for blocking the transaction, according to the company officials.
At stake is a deal that, if completed, would join one of the nation’s biggest wireless internet providers to HBO, CNN, Warner Bros. and DirecTV. Behind it is the desire to create a powerful provider and distributor of content, with AT&T able to both produce hits like “Game of Thrones” and distribute them to wireless service customers and DirecTV subscribers.
The deal is designed to help AT&T counter slowing growth in its core wireless, internet and satellite businesses while fending off online video upstarts like Netflix and Hulu.
Because the proposed deal involves two companies that do not compete directly with each other, executives at both AT&T and Time Warner believe there is little legal basis to block it.
Mr. Trump, who has long accused CNN of being biased against him, has spoken against the proposed deal — most notably during a speech in the final month of the 2016 presidential campaign, in Gettysburg, Pa.
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After mentioning the “crooked” media, he seemed to oppose AT&T’s bid for Time Warner on populist grounds. “As an example of the power structure I’m fighting,” Mr. Trump said, “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.”
In response to news articles speculating that the president had pressured the Justice Department concerning the proposed deal, White House Deputy Press Secretary Raj Shah said, “The President did not speak with the Attorney General about this matter, and no White House official was authorized to speak with the Department of Justice on this matter.”
Mr. Delrahim, the assistant attorney general, also denied that Mr. Trump had been involved in the discussions.
“I have never been instructed by the White House on this or any other transaction under review by the antitrust division,” he said.
Critics of the merger have described it as a sign that there is too much consolidation in the media and telecommunications industries. Even lawmakers who have otherwise been critical of Mr. Trump have offered support for the Justice Department’s continued review.
Senator Richard Blumenthal, Democrat of Connecticut, said on Twitter that the deal still needed a “thorough” and “exacting” review.
The uncertainty has weighed on Time Warner’s stock, as investors have worried that the deal may founder on antitrust grounds. Those fears began to crystallize on Wednesday, when AT&T’s chief financial officer, John Stephens, said at an investor conference that the timing of the deal’s closing was in doubt.
“We are in active discussions with the D.O.J.,” Mr. Stephens said. “I cannot comment on those discussions. But with those discussions, I can now say that the timing of the closing of the deal is now uncertain.”
To win approval of the deal, AT&T early on hired lobbyists close to Vice President Mike Pence and others in the Trump administration. AT&T was among the top donors to Mr. Trump’s inauguration.
Mr. Stephenson, the AT&T chief, has attended at least two meetings with Mr. Trump this year. Shortly after the first one, Mr. Trump lashed out at CNN on Twitter, saying that “their credibility will soon be gone!” After the second meeting, the president complimented Mr. Stephenson, saying he was doing “really a top job.”
Fighting the deal could prove challenging for regulators, antitrust experts said. The Justice Department would have to argue that AT&T would have an incentive to withhold Turner channels from rival broadband distributors like Verizon and Comcast. It could also try to demonstrate that AT&T would give channels like CNN or TNT preferential treatment over their competitors.
A potential requirement to sell DirecTV is rooted in the idea that AT&T would otherwise have too much control over the distribution of content. The company could block competing networks like Starz or ESPN from running on DirecTV’s satellite or streaming services, the argument goes.
A counterargument to that line of thinking is the Obama administration’s approval of Comcast’s acquisition of NBC Universal in 2011. In that case, the Justice Department and Federal Communications Commission attached several conditions to Comcast’s business practices, including promises that Comcast would not withhold content from rival streaming services.
Mr. Trump, however, was also critical of the Comcast-NBC deal in his Gettysburg speech last year.
A version of this article appears in print on November 9, 2017, New York Times
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