On Big Media, the Court Speaks
In our jokey times, it is perhaps fitting that the entire media and technology sector had been waiting on the outcome of a Justice Department antitrust suit that never should have been brought in the first place. We refer, naturally, to the department’s lawsuit opposing the merger of AT&T and Time Warner , which Judge Richard Leon so handily rejected in his much-awaited decision Tuesday in favor of the two companies.
Indeed, the case probably would not have been brought if Donald Trump had not spontaneously and inappropriately denounced the deal during the 2016 campaign. It would not have brought, too, if his subsequently appointed antitrust chief, Makan Delrahim, had not been on record being generically critical of negotiated consent decrees, which his agency had in the past imposed on big-media deals to mollify critics without resorting to an unpersuasive and high-risk lawsuit.
Voilà. Mr. Delrahim boxed himself into a corner. An unpersuasive lawsuit was his only non-embarrassing way forward given his own and his president’s statements. Unfortunately the lawsuit he filed lacked another important ingredient: any grounding in reason.
AT&T may be the nation’s “biggest” TV distributor, but 85% of its customers are subscribers to its DirecTV satellite business, which everyone agrees is becoming obsolete in a world where a two-way connection is necessary for video streaming. And the idea that control of Time Warner channels like CNN and TBS would be like owning a cure for cancer was silly on its face and belied by the data pouring in from the real world where customers are fleeing traditional cable in droves.
To cover its exposed hindquarters, the department put forward a little-noticed second argument. It asserted an expansive reading of the 1914 Clayton Antitrust Act that would make the modern economy impossible if accepted. Justice essentially argued that even a 0.1% possibility that a merger might raise prices by 0.1% could be reason enough for a judge to reject it under the law.
The case was idiotic, and yet it hung over the entire industry as a signal of what might be expected from the unpredictable and woolly Trump administration in a slew of deals coming down the pike. Let’s not over-intellectualize this: If a court had sided with the Justice Department in a case involving CNN’s parent company, Trump trustbusters would be tempted to play the same antibusiness, populist card against a bunch of proposed deals. These include Sprint’s pending tie-up with T-Mobile as well as the Murdoch family’s apparent plan to sell big parts of 21st Century Fox to either Disney or Comcast .
On the other hand, the court now having decided against the Justice Department, the Trump administration might be expected to revert to standard GOP permissiveness on antitrust, a development that would be very welcome right now by shareholders and managements. Megadeals are in the air as media companies adapt to a marketplace being transformed by high-speed broadband. Ditto in the health-care marketplace, where big deals like the one uniting Aetna and CVS have been broached to cope with rapid changes in technology and regulation.
Don’t be misled by much of the antitrust thumb-sucking Judge Leon’s decision will call forth. Tuesday’s ruling was less important for any precedents it invokes than for what it says about the incentives guiding Trumpian regulators in the frenzy of deals that are about to turn business-channel pundits into overexcited Pekingese.
Still, the matter may remain not fully settled until Mr. Trump himself tweets or fails to tweet. Will he acknowledge Tuesday’s ruling or at least leave it undenounced? Or will he use the occasion to renew his claim that the AT&T merger represents “too much concentration of power in the hands of too few” and is “an example of the power structure I’m fighting”?
Mr. Trump may have the last word here, not Judge Leon, not even the Justice Department’s Mr. Delrahim, who must decide whether to pursue an unpromising appeal. A Trump tweet that calls for renewed regulatory vigilance against the president’s media enemies may leave the peanut gallery CEOs who were wishing for Tuesday’s outcome feeling like they snatched defeat from the jaws of victory.
Then again, Mr. Trump’s preference for Fox News over CNN has been noted by many analysts. Rich Greenfield, of BTIG Research, has been particularly insistent that any deal by the Murdoch family (who also control this newspaper) to sell their Fox entertainment assets will fly through regardless of who the buyer might be.
Maybe so, though how Mr. Trump sees his interests from day to day is not always easy for outsiders to make sense of. One thing is certain: Mr. Trump’s perceptions of friend and foe in the media business will remain an irresistible talking point when possible media deals are being evaluated.
Appeared in the June 13, 2018, print edition.