A federal judge issued a ruling not in favor of the government’s effort to stop AT&T’s attempted merger with Time Warner on Wednesday, a decision which could have widespread implications.
Because the judge’s opinion favors the merger, not only can AT&T merge with Time Warner, but a whole slew of companies can use the precedent to go ahead with mergers and acquisitions. If the judge didn’t allow the merger to go through, executives would have to scale back their aspirations, according to the New York Times.
“It could have a collateral effect on every other transaction,” said Blair Levin, an adviser to New Street Research and a former chief of staff at the Federal Communications Commission.
Corporations like Disney were watching Judge Richard Leon’s ruling on the Department of Justice lawsuit to block AT&T Inc.’s purchase of Time Warner Inc. Disney wants 21st Century Fox and could get into a bidding war with Comcast now. The ruling has implications for other major proposed mergers and acquisitions like CVS with Aetna and T-Mobile with Sprint.
The Justice Department’s filing of the lawsuit came as a surprise to investors and experts, with some suggesting a political motivation. The New York Times explained that “deals between such companies, called vertical mergers, typically pass regulatory scrutiny with minimal roadblocks.” Because one company creates content and the other distributes it, they don’t compete with each other.
Fortune reports that the government argued that the merger would force consumer costs to rise, a claim denied by AT&T. Fortune goes on to report that the company said the antitrust laws are antiquated and that even if the cost savings projections were wrong, consumer costs would rise by only a few cents a month.
Analysts believed AT&T had the stronger argument because of similar cases that got the green light, according to the New York Times. The New York Times reports that the judge ultimately said the Justice Department failed to prove that the telecom company’s acquisition of Time Warner would lead to fewer choices for consumers and higher prices for television and internet services.
Thomson Reuters reports about $816 billion worth of transactions Analysts believed AT&T had the stronger argument because of similar cases that got the green light, according to the New York Times. T in the United States were announced this year through May, a 71 percent increase from last year. The New York Times said that “companies need growth, and buying other companies remains one of the fastest and most effective ways to achieve it.” The article went on to say borrowing a lot of money for deal making is still cheap by historical standards.
By: Michael Eric Rosenthal