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Analysis: DOJ's New Antitrust Chief Keeping AT&T-Time Warner Options Open

Capitol Forum expects decision around Thanksgiving 11/02/2017 12:57 PM Eastern

The Wall Street Journal was reporting Thursday (Nov. 2) that the Justice Department is "weighing" filing suit against the AT&T-Time Warner deal, but it was not immediately clear whether that was a new flashpoint or a matter of of leaving options open in the ongoing process of negotiations leading ultimately to either conditioning approval of the deal, or conceivably blocking it, either of which would require Justice to file suit.

A source familiar with the ongoing talks between the companies and Justice suggested it was the latter.

Related: Time Warner Shares Plunge on Reports DOJ Will Block AT&T Deal

Some conditions were anticipated if the deal was approved, which would necessitate Justice first filing suit in court to block the deal, then filing a settlement agreement with the merging parties to revolve its antitrust issues.

But if Justice did sue to block the deal, that could raise questions about whether the Trump Administration viewed media mergers as creating too large and powerful media outlets. The President as a candidate suggested the deal created too large a company, and since being elected has slammed CNN as the poster-outlet for fake news.

AT&T and Time Warner only have to worry about resolving any antitrust issues with the meld since the deal was structured to avoid a public interest review by the FCC.

In a note to clients, analysis firm Capitol Forum said Justice's new antitrust chief, Makan Delrahim, was delving into the merger and had been talking with independent programmers pushing for various conditions.

"If Delrahim accepts the programmers’ criticisms of AT&T-Time Warner, it could add to the list of conditions DOJ is pressing the companies to accept," said Capitol Forum. "Until now, the negotiations largely have centered on conditions that would protect rival video programming distributors’ access to Time Warner content and create an arbitration system to resolve disputes."

The note said Delrahim had "not ruled out the possibility" of suing to block the deal. It also said to look for a Thanksgiving time frame for a decision.

AT&T declined comment. Justice does not comment on the status of merger reviews.

“When the DOJ reviews any transaction, it is common and expected for both sides to prepare for all possible scenarios,” said AT&T in a statement. “For over 40 years, vertical mergers like this one have always been approved because they benefit consumers without removing any competitors from the market. While we won't comment on our discussions with DOJ, we see no reason in the law or the facts why this transaction should be an exception.”

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