## Facts

- AT&T Inc., through its video distribution business (including DirecTV), agreed to acquire Time Warner Inc., a major supplier of video programming (including Turner networks and HBO).
- The United States, acting through the Department of Justice Antitrust Division, sued to block the transaction under § 7 of the Clayton Act, seeking a permanent injunction.
- The government alleged the merger would give the combined firm added bargaining leverage over rival video distributors, enabling it to raise affiliate fees and threaten or impose programming blackouts, leading to higher consumer prices.
- The government also alleged the merger would harm emerging online video distribution and reduce innovation by raising rivals’ costs and impeding industry transition toward newer distribution models.
- Defendants argued the video and advertising markets were undergoing rapid change driven by high-speed internet, cord-cutting, and competition from online services and digital advertising platforms.
- Defendants also asserted the merger would generate significant cost savings for customers and that post-litigation “no-blackout” arbitration commitments reduced the plausibility of blackout-based leverage.
- After a six-week bench trial, the district court entered judgment for defendants and denied the requested permanent injunction.

## Issues

1. Whether the United States proved that AT&T’s acquisition of Time Warner was likely to substantially lessen competition in violation of § 7 of the Clayton Act.
2. Whether the government’s “increased bargaining leverage” theory and economic modeling reliably established likely post-merger price increases to rival distributors and consumers.
3. Whether alleged harms to online video competition, coordination risks, and innovation were supported by evidence sufficient to warrant injunctive relief.

## Decision

- The court denied the United States’ request for a permanent injunction and entered judgment for defendants.
- The court held the government failed to prove the vertical merger was likely to substantially lessen competition in any relevant market.
- The court rejected the government’s principal leverage theory and found its economic model insufficiently supported and sensitive to disputed assumptions.
- The court credited evidence of rapid market change and competitive constraints that weakened the claim of durable post-merger market power.
- The court found other asserted harms (to online rivals, innovation, and through coordination) too speculative or inadequately tied to likely competitive effects under § 7.

## Legal Principles

- Section 7 of the Clayton Act prohibits acquisitions whose effect “may be substantially to lessen competition,” and the government bears the burden to prove likely anticompetitive effects.
- In a vertical merger, the absence of direct head-to-head elimination does not preclude § 7 liability, but predicted harms must be supported by credible evidence rather than speculation.
- Courts may closely scrutinize quantitative economic models and require that key assumptions and market inputs be supported and responsive to record evidence.
- Post-transaction mechanisms affecting bargaining dynamics (including commitments addressing blackout risk) may be relevant to assessing the likelihood and magnitude of asserted price effects.
- Efficiencies are not a standalone defense, but evidence of cost savings and market realities may be considered in evaluating whether the government has shown a likely substantial lessening of competition.

## Conclusion

The district court refused to block AT&T’s acquisition of Time Warner, holding that the government did not carry its burden under Clayton Act § 7 to show the vertical integration was likely to substantially lessen competition through higher programming costs, reduced innovation, or other asserted theories of harm.


United States v. AT&T Inc., 310 F. Supp. 3d 161 (D.D.C. 2018)