AT&T can buy Time Warner as judge shuts down Department of Justice

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AT&T has demonstrated considerable optimism about the deal in recent weeks. But looking beyond today, the merger could have a strong effect on future deals.

When the trial ended, Judge Leon suggested the parties consider some remedies both could deal with depending on how he ruled. Between that now-pending battle and the approved merger of AT&T with Time Warner, the media landscape is undergoing a dramatic shift. Instead, they argued the media industry is going through a massive change as fewer people subscribe to paid TV service and instead stream content via the internet. He has also discouraged the government agency from pursuing a stay of his decision if it will pursue an appeal.

The US Department of Justice-the nation's antitrust authority-sued to block the deal late a year ago, arguing that Time Warner's media brands like HBO, Warner Bros., and CNN would give AT&T outsized power, hurt competition, and lead to higher prices for consumers.

Prior to the news on the decision in the case, AT&T stock closed up 0.5% (to $34.50 per share) and Time Warner closed up 0.05% in regular trading (to $96.22 per share) which concluded at 4 p.m. ET.

The Justice Department claimed that AT&T's acquisition of Time Warner would give the No. 1 pay-TV provider increased bargaining leverage over rivals like Dish Network Corp. that pay for Time Warner programming.

"I conclude that the government has failed to meet its burden" to show that the merger was likely to substantially lessen competition, U.S. District Judge Richard Leon told the court.

In making its case, the US government argued that the merger of AT&T could harm consumers in a number of ways. CNBC is reporting that Comcast will try to buy Twenty-First Century Fox if AT&T buys Time Warner. That's not to say that vertical mergers get through regulatory approval free and clear - the FTC has fought 22 vertical mergers since 2000 - but they receive less scrutiny than horizontal mergers. Ultimately, the government argued this would harm competition and innovation as well as raise prices for consumers.

AT&T General Counsel David McAtee now expects its purchase of Time Warner to close by June 20. Time Warner shares are up about 5% at $100.91.

Because of AT&T's ownership of DirecTV, it can drive a harder bargain with other distributors that want Time Warner content, the government's lawyers argued during the trial.

The mega-merger is a high-stakes bet by AT&T Inc. on the synergy between companies that produce news and entertainment and those that funnel it to consumers - who spend more time watching video on phones and tablets and less time on traditional live TV on a big screen. Other acquisitions on the table include Disney's offer to buy 21st Century Fox, drug store CVS's bid for Aetna and T-Mobile's potential merger with Sprint.

Leon described part of the government's case as "gossamer thin", saying that during the trial the Justice Department's expert witness declined to back some of the government's own theories.

Some critics of President Trump have questioned whether the case was brought as political payback against Time Warner's CNN for unfavorable coverage of President Trump, who often called the cable news channel "fake news".