In a surprising twist, the regulation-loathing, business-boosting Trump administration is threatening to block AT&T’s proposed $85-billion buyout of Time Warner on antitrust grounds, potentially derailing the creation of yet another media behemoth. Specifically, the Justice Department is reportedly telling the companies that it will sue to stop the merger unless AT&T sells DirecTV, one of the nation’s largest pay-TV providers, or Time Warner sells Turner Broadcasting, whose holdings include the popular cable news channel CNN.
Vigorous antitrust enforcement by the Justice Department would ordinarily be a cause for celebration, given that antitrust law is the last line of defense for consumers when federal agencies go on the sort of deregulatory jihad that President Trump has directed. But in this case, it’s impossible to tell whether the DOJ is being principled or a puppet. In fact, its motives are completely suspect.
That’s because the DOJ operates under a poisonous cloud of presidential rhetoric. Beyond Trump’s corrosive efforts to direct, interfere with and intimidate the federal government’s supposedly independent law enforcers on issues ranging from the Russia probe to the prosecution of high-profile criminals, he has been a constant, bitter critic of CNN, going so far as to call it “the enemy of the American people” on Twitter a few weeks after his inauguration.
Here, the unspoken yet unmistakable message coming from the DOJ is that CNN is radioactive. Any pay-TV company looking to buy Time Warner with CNN as a part of it, as AT&T is trying to do, will face a withering antitrust review and may have to divest some of its holdings to avoid a lawsuit. That can’t help but affect CNN’s value on the market, and Time Warner’s — which may be just the sort of payback Trump has in mind.
Some observers have suggested that forcing Time Warner to sell off CNN won’t hurt the channel or Time Warner — CNN’s audience has boomed in the past two years, thanks in no small measure to its coverage of Trump. But how eager will media companies be to snap up CNN after watching what AT&T has run into?
AT&T and Time Warner may have expected the DOJ just to wave this deal through. After all, the two companies don’t compete directly — AT&T is mainly a distributor of content (via satellite TV and high-speed Internet services), and Time Warner is a creator of content (through its Warner Bros. film studio and its cable TV networks). The federal government hasn’t put up too much resistance to deals like this in recent years; in fact, the merger seemed like a direct response to cable operator Comcast’s purchase of NBC-Universal during President Obama’s first term.
Makan Delrahim, the attorney Trump chose to lead the Justice Department’s antitrust division, lobbied for that deal on Comcast’s behalf. And months before he was nominated for his current post, he spoke favorably about the the AT&T-Time Warner deal in an interview with a Canadian news broadcaster, saying, “I don’t see this as a major antitrust problem.”
Meanwhile, Trump’s appointees across the government have been removing barrier after barrier to companies growing larger and more dominant in their markets. The best examples have been at the Federal Communications Commission, where the new Republican majority is proposing to lift limits on media ownership and erase tough rules to stop broadband providers (such as AT&T) from pushing customers to favored sites and services (like, say, DirecTV’s streaming video service).
So what happened? The Justice Department insists that there’s been no interference from the White House. And real antitrust issues arise when a leading cable or satellite TV operator snaps up a company producing popular pay-TV content. The merged company has an incentive to steer its cable, satellite or Internet customers to its newly purchased channels, potentially reducing the advertising and subscription revenue earned by rival content companies. There’s also the risk that the merged company will threaten to withhold the popular channels it now owns from rival cable or satellite operators in a bid to lure away customers or extract higher fees. That’s why the Obama Justice Department imposed a host of conditions on Comcast when it approved the NBC Universal acquisition.
But the Trump Justice Department apparently isn’t fond of that sort of “behavioral” remedy. (Nor are a number of conservative legal scholars.) It’s demanding much stronger medicine, a restructuring that eliminates the need for ongoing federal oversight.
Foes of media consolidation have been calling on the federal government for years to take a tougher line on mergers and stop popular TV, film and video studios from being concentrated into so few hands. Perhaps the Trump administration will be their champion. But thanks to the Meddler in Chief, who can’t seem to abide the notion of an independent Justice Department, we fear the administration’s concern about consolidation extends to just one cable news channel.
Follow the Opinion section on Twitter @latimesopinion and Facebook