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Justice Department appeals ruling that let AT&T buy Time Warner

Justice Department appeals ruling that let AT&T buy Time Warner
AT&T completed its $85.4-billion purchase of Time Warner in June, days after a federal judge ruled in the company's favor in an antitrust trial. (Alan Diaz / Associated Press)

The Justice Department is appealing the ruling a federal judge issued last month that allowed AT&T Inc. to buy Time Warner Inc. in the biggest antitrust case of this century.

Craig Conrath, one of the Justice Department lawyers who argued the case, submitted the formal notice of its appeal to the U.S. Court of Appeals for the District of Columbia Circuit on Thursday.

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The notice was one sentence, and a Justice Department spokesman declined to comment further.

The Justice Department’s move comes after lawyers there decided not to seek an emergency stay of U.S. District Judge Richard Leon’s June 12 ruling that cleared the way for the $85.4-billion deal after a six-week trial.

The appeal is surprising given that Leon issued a sweeping repudiation of the government’s arguments. In the trial, the Justice Department took the stance that the deal violated antitrust law because it would harm competition in the pay-TV market and raise consumer prices.

The ruling was a stinging defeat for the Trump administration. President Trump has had a long-standing feud with Time Warner’s CNN and said during the 2016 campaign that the merger would concentrate too much media power in one company.

In delivering his ruling, Leon strongly urged the Justice Department not to seek a stay pending appeal, warning it could cause the merger to collapse because of a June 21 deadline the companies had set to close.

AT&T and Time Warner closed the deal June 15. The new company combines AT&T’s 100 million wireless customers and 25 million pay-TV customers with Time Warner’s wide array of content, including TV shows and movies from HBO, CNN, TBS and Warner Bros.

AT&T General Counsel David McAtee said the company did not expect the Justice Department to appeal.

“The court’s decision could hardly have been more thorough, fact-based and well-reasoned,” he said in a statement.

“While the losing party in litigation always has the right to appeal if it wishes, we are surprised that the DOJ has chosen to do so under these circumstances,” McAtee said. “We are ready to defend the court’s decision at the D.C. Circuit Court of Appeals.”

AT&T and Time Warner executives have said that because Leon so thoroughly repudiated the Justice Department’s arguments, they felt confident about winning any appeal.

Analysts also were taken aback by the appeal, saying Leon’s decision was unlikely to be overturned.

"There aren't a lot of arguments you can make for appealing this, so it has to be a surprise," media analyst Craig Moffett told CNBC.

He noted that in exchange for not seeking a stay that would block the deal, the Justice Department stipulated that AT&T would keep the assets separate for a period of time in case the government decided to appeal the ruling.

Larry Downes, project director of the Georgetown Center for Business and Public Policy, said there were a few possible explanations for the appeal, including that “it could be just a tantrum from the government."

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"It's very unlikely that they would win," he said. "The facts are against the government, and the laws are against the government."

The Justice Department’s decision in 2017 to challenge the deal was unusual because the combination was a vertical merger, meaning the two companies did not directly compete in their primary business.

The Justice Department hasn't successfully blocked that type of merger in nearly 50 years.

Vertical mergers are different from horizontal ones, which involve companies that compete directly. Those deals remove competitors from the marketplace and are more frequently blocked.

AT&T shares rose 36 cents, or 1.1%, to $32.23 on Thursday but fell more than 1% in after-hours trading after news of the Justice Department’s move.

4 p.m.: This article was updated with comments from Larry Downes of the Georgetown Center for Business and Public Policy.

3 p.m.: This article was updated with comment from AT&T General Counsel David McAtee, media analyst Craig Moffett and additional details.

This article originally was published at 2 p.m.

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