AT&T is accusing the U.S. Justice Department of "improper selective enforcement" of antitrust laws in its attempt to block the telecommunications giant's proposed purchase of media company Time Warner Inc.
AT&T on Tuesday filed its response to the Justice Department's high-profile lawsuit that seeks to derail AT&T's acquisition of the media company that owns HBO, CNN, Cartoon Network, TNT, TBS and the Warner Bros. movie and TV studio.
Dallas-based AT&T, in a separate motion, asked that the trial begin Feb. 20 — two and a half months before the government's suggested May 7 trial date. AT&T has argued that is too long of a delay because its merger agreement with Time Warner expires April 22. After that, either Time Warner or AT&T can walk away from the $85-billion deal.
"Further delay is unwarranted and unfair to the defendants, their shareholders, and their customers," AT&T said in its Tuesday motion, adding the government has been assembling its case for nearly a year and that AT&T already has turned over 25 million pages of documents to the Justice Department.
Los Angeles litigator Daniel Petrocelli of the O'Melveny & Myers law firm is handling the legal case for AT&T and Time Warner. He criticized the government's lawsuit in a 29-page rebuttal submitted to U.S. District Judge Richard J. Leon in Washington, who will be overseeing the case.
Leon, 67, was appointed by President George W. Bush and joined the federal bench in 2002. He has experience in high-profile media mergers. In 2011, Leon criticized the Justice Department's initial settlement agreement with Comcast Corp., when that pay-TV giant was poised to gobble up media company NBCUniversal.
The Justice Department did not sue to block the Comcast-NBCUniversal merger and instead negotiated a long list of conditions that Comcast agreed to follow in an effort to win the government's blessing. Leon initially questioned whether Comcast would abide by the agreement, but he ultimately signed off on that merger when additional safeguards were added.
This time around, the Justice Department decided to fight the AT&T-Time Warner merger rather than negotiate conditions, and it filed a lawsuit last week. The government contends the merger would harm competition.
Several legal experts have suggested the government will have a tough time proving its case, in part, because it allowed the Comcast-NBCUniversal to go through. Also, the government has not successfully blocked a "vertical" merger in court since Jimmy Carter was in the White House.
Vertical mergers are consolidations of companies that do not directly compete with each other. AT&T provides telephone, internet and television services, while Time Warner produces programming through its cable networks and the Warner Bros. production studio in Burbank.
The Justice Department is arguing that AT&T could withhold HBO or Turner programming from competing pay-TV services so that consumers would switch to AT&T's DirecTV or U-Verse services. The government also contends the AT&T-Time Warner combination would hinder the development of online video streaming services.
"Were this merger allowed to proceed, the newly combined firm likely would … use its control of Time Warner's popular programming as a weapon to harm competition," the Justice Department said in its lawsuit.
In its court filing Tuesday, AT&T alleged the government failed to make its case that AT&T and Time Warner were dominant enough to control their individual markets — particularly in an era when rival Netflix has more than 100 million customers and advertising behemoth Google Inc. launched its own YouTube TV service.
AT&T's position is that the proliferation of content has diminished the clout of Time Warner's television channels. It offered as proof Google's $35-a-month YouTube TV streaming service, which does not carry Time Warner's networks.
"Google's `YouTube TV' service is a powerful and recent example that disproves the government's central thesis," Petrocelli wrote. "The fact that Google, one of the most sophisticated and well-funded companies in the world, launched its video platform without any Time Warner channels confirms not only that the television ecosystem is awash in content, but that Time Warner's networks are not, in any antitrust sense of the word, essential to attracting and retaining subscribers."