President Donald Trump has made no secret of his distaste for CNN. Now his Justice Department is trying to block a merger with huge implications for the cable network’s parent company, Time Warner.
The question is whether Trump’s past tweets could derail the government’s case.
The US Justice Department in November filed a lawsuit to block AT&T’s proposed $85 billion takeover of Time Warner. The companies are seeking to combine AT&T’s distribution networks with Time Warner’s news and entertainment content in their potential tie-up.
While many agree the government does have a legitimate antitrust case against the megamerger — the combined, vertically integrated company could potentially freeze out competitors, withhold or increase the price of premium content, and in turn harm consumers — the president’s ongoing public battle with Time Warner’s CNN has cast a heavy political shadow over the deal and the government’s objection to it.
Trump has engaged in a highly publicized battle with CNN for quite some time, often dismissing the network as “fake news” and criticizing its coverage. As recently as last week he advocated for a CNN boycott, calling it a “complete waste of time” on Twitter.
Great, and we should boycott Fake News CNN. Dealing with them is a total waste of time! https://t.co/8zJ3j7g5el
— Donald J. Trump (@realDonaldTrump) November 29, 2017
Trump has also weighed in on the AT&T–Time Warner deal, wading into antitrust territory presidents normally avoid.
He criticized the deal soon after it was announced while he was still on the campaign trail, telling supporters it would put “too much concentration of power in the hands of too few” at an October 2016 campaign rally in Gettysburg, Pennsylvania. He cited the merger as “an example of the power structure I am fighting.”
Just last month Trump again commented when speaking with reporters. “Well, I’m not going to get involved in litigation,” he said. “But personally, I’ve always felt that that was a deal that’s not good for the country.”
I reached out to eight experts on antitrust matters and megamergers to find out whether they think Trump’s public comments, specifically when it comes to CNN, might impact the Department of Justice’s case if and when its lawsuit heads to court.
Some thought it would be a distraction and agreed that AT&T is likely to bring it up in court to argue that the government’s case is skewed. Others said Trump’s CNN battle wouldn’t have any effect, even if it is brought up before a judge.
Their full responses, edited for clarity and style, are below.
Randy Stutz, associate general counsel, American Antitrust Institute
I don’t see a significant concern, for two reasons. First, the government’s case is now spelled out in a detailed complaint, which alleges that the merged firm would have the ability and incentive to charge rival cable companies and other content distributors more than they pay now for Time Warner’s stable of television networks and other content assets. CNN is one horse in that stable, but there are many, many more, including TNT, TBS, and HBO.
With the case framed this way, CNN is not meaningfully distinguishable from Time Warner’s other assets for purposes of assessing the deal. You can’t seriously argue that CNN is being picked on or singled out when it’s being evaluated in unison with all the other news, entertainment, and sports content implicated in the merger. It’s not even clear how blocking the merger would harm CNN at all.
The merging parties are sure to bring up the president’s public statements, particularly in discussing the government’s pursuit of a structural remedy, unlike the behavioral remedy implemented in Comcast/NBCUniversal. [Comcast acquired NBCUniversal, one of several investors in Vox Media, Vox.com’s parent company, in 2011 after agreeing to dozens of behavioral conditions, such as promising not to use its cable infrastructure to give NBCUniversal content favorable treatment. As Vox’s Matt Yglesias recently pointed out, such remedies are notoriously difficult to enforce — Bloomberg TV has repeatedly complained that its business television channel is exiled in the channel guide away from other business channels, including CNBC. Makan Delrahim, who heads the DOJ’s antitrust division, has in the past expressed skepticism about the effectiveness of behavioral remedies.]
But antitrust scholarship and recent history is littered with good reasons to prefer structural over behavioral remedies, and the government will have plenty of ammunition in justifying its approach. To the extent the companies continue to push the “CNN vendetta” narrative, it may well be part of a PR strategy rather than a legal strategy.
Second, and relatedly, this is now in the hands of the federal judiciary. Unless the case is settled, or the merging parties walk away from the deal, it will be litigated as a bench trial in federal district court (and perhaps appealed). That means from here on out, it will be evaluated through a legal lens, with a focus on facts, evidence, and legal and economic arguments. And both the government’s complaint and proposed remedy are on sound legal and economic footing. The alleged implications for the telecom industry seem far too serious for this case to be written off as a political attack.
Daniel Lyons, visiting fellow, American Enterprise Institute
I think it can. I think that if I’m AT&T’s counsel, one of my arguments would be that these divestiture requirements are not motivated by the fact that the Justice Department thinks that divestiture is necessary to prevent consumer harm but instead that this is motivated by a more political purpose, and the president’s comments and his tweets have certainly indicated some animus toward CNN.
We saw in the Muslim travel ban cases that courts have been fairly open about using those public statements in order to try to impute motive to governmental action.
Norm Armstrong, partner, King & Spalding LLP
I don’t believe Trump’s public battle with CNN will have any impact on the outcome of the DOJ’s case against AT&T–Time Warner. The district court judge must apply the law to the facts and evidence in the case and will not be influenced by the media surrounding the case.
Andre Barlow, partner, Doyle, Barlow & Mazard PLLC
President Trump’s opinionated tweets and public comments will certainly be a distraction for the DOJ’s Antitrust Division. The cloud of political interference makes it more difficult for the DOJ lawyers and puts them on the defensive against allegations that the case is really not about legitimate antitrust concerns and rather it is about the Trump administration’s ongoing battle with CNN.
That being said, President Trump’s tweets and statements do not tell the full story regarding the DOJ’s substantive case.
The bottom line is that this case will be decided on the merits of the DOJ’s case. Antitrust cases are typically decided based on economics and hard facts. The court is going to want to understand whether the DOJ properly defined the relevant markets and whether the DOJ has evidence that supports its anticompetitive theory of harm. In other words, do the DOJ’s allegations make economic sense?
At the end of the day, the court is going to decide this case based on the economic realities of the video distribution and content markets and not on President Trump’s public battle with CNN. While it may cast a shadow over the DOJ’s motivation for bringing the case, it should not influence the court’s decision on whether the acquisition is illegal or not.
Mark Lemley, law professor, Stanford Law School
I think it complicates the government’s case. I think the government has a reasonable case, but it definitely pushes the boundaries of existing law. A judge who suspects this is really a political vendetta might be less willing to go out on a limb to rule for the government, even if the government ought to win on the merits.
Matt Stoller, fellow, Open Markets Institute
It’s unlikely. There are two separate questions here.
One, does this merger challenge have merit? Clearly, there’s a case here. Vertical mergers sometimes cause conflicts of interest, and that’s not new or partisan. For example, the Comcast-NBC deal was affixed with behavioral remedies by the Obama DOJ because the DOJ saw conflicts of interest in that merger. They just chose a different remedy approach.
More fundamentally, the Department of Justice is full of nonpolitical staff attorneys who think carefully about how and whether to bring cases. They have the ability and will to protest vehemently against unseemly interference. That they haven’t done so suggests that they believe there is a case and that it is being brought with sufficient good will. The outcome is unclear, but it’s a reasonable case.
Two, how do we prevent an administration from exercising inappropriate influence over the antitrust division? We have two ways of doing that. The first and most important is the courts. This merger isn’t blocked by the DOJ, it’s challenged by the DOJ. The courts have the final say. So this isn’t up to Trump. AT&T will have ample ability to make its case. The company may ask for a special process to see if there is meddling from the White House, and the judge should consider granting it. There could also be congressional hearings, which would be useful as well. If evidence comes to light on political interference, Congress needs to act aggressively.
I would also add that as frightening as Trump is, the increasing concentration and control over our communications environment by corporate actors is equally disturbing. While Trump attacks CNN in a highly inappropriate manner, there seems to be a bad faith public relations campaign from AT&T that is designed to destroy antitrust enforcement, and that is equally dangerous. The Monday after Thanksgiving, contributors at the Financial Times, the New York Times, and the Atlantic, as well as Larry Summers at the Washington Post, all used similar talking points about the sinister nature of the deal.
There are a lot of anti-Trump people who have suddenly become antitrust experts these days, but anyone serious in this area, with the exception of a few fringe libertarians, believes these kinds of mergers could be problematic. I suspect the judge will see it that way and judge the case on the merits.
Eleanor Fox, law professor, New York University
The case against AT&T and Time Warner is a credible case, but an uphill fight, because of the trend of the law. It is unfortunate that Trump has made public his battle with CNN, because it could, in the judge’s mind, undercut the seriousness of the case. It could color it with politics rather than applying the law.
I would hope that a judge can separate the two, and maybe the judge will, but there is always the possibility that the judge will be influenced by the political aspects.
Sonny Allison, partner, Perkins Coie LLP
I think there’s no question that AT&T will use those comments in its defense if they do end up in court, the Department of Justice did sue to block the deal. If they do end up litigating, I think there’s no question that they’ll use his prior statements and tweets to show that this is politically motivated and not based in law or competitive harm.
Whether or not they’ll be successful in that is a different question, but there’s no doubt they’ll use them.
Traditionally and historically, the DOJ has not sought to block vertical mergers where a competitor is not being eliminated from the market as it would a horizontal merger, there’s just not the same competitive harm concern. And so, historically, vertical mergers are able to go forward without scrutiny. This is a bit of a departure from historical practices. Again, that doesn’t mean that there’s not a basis for doing it, and if they end up litigating, that’s what the parties will end up arguing about in court.
What’s interesting here is clearly AT&T will use the comments if they wind up fighting this in court. But the reports all are that the DOJ has not demanded the sale of CNN, they’ve demanded the sale of Turner Broadcasting or DirecTV on the theory that the vertical integration of a content provider with a distributor would cause competitive harm, and so if you get rid of one or the other, you’re fine.
The government is certainly going to argue, look, we’re not saying that CNN has to be divested because the president has an axe to grind, we are saying that the distribution channels combined with the content channels create competitive harm, and so one or the other has to be divested in order to create the structural change we think is necessary to make this merger not harm consumers.
To me, that’s an interesting argument for the government, because they can rebut the comments about CNN and say: “We have no interest, keep CNN if you want, divest DirecTV, get rid of the distribution channel.”
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