AT&T, DOJ Squabble Over Trial Start Date

­­­­Satellite Business News — The procedural wrangling between the Department of Justice and AT&T began in earnest yesterday, with the sides, among other things, disagreeing over when the trial should begin in the lawsuit the government filed last week to prevent AT&T from acquiring Time Warner.

The AT&T/Time Warner camp asked the court to set Feb. 20 for the start of the trial, and that it last 10 days. The Justice Department told the court the trial should not begin any earlier than May 7, and should take at least 15 days.

And for the first time, AT&T and Time Warner publicly disclosed that either one of the companies has the unilateral right to walk away from the deal if it is not closed by April 22, while both had one unilateral option to extend the closing date deadline.

As reported, Time Warner and AT&T both agreed to extend the closing date from Oct. 22 until April 22.

If the transaction is eventually scrapped, AT&T will be obligated to pay Time Warner a $500 million break-up fee.

The disagreement about the overall schedule for the case was included among the close to 25 documents the two sides filed with the federal court in Washington this week.

Another key dispute between the sides involves how much access AT&T/Time Warner lawyers should have to documents provided to the Justice Department by outside parties.

A Justice Department filing suggested that dozens of industry companies and individuals provided information to the government, on the basis such cooperation would remain confidential.

As reported, Judge Richard Leon will decide the case.

It would appear he will have to first rule on a schedule for a trial. In its filings, AT&T indicated there has been considerable discussions between the two sides since the filing of the lawsuit 10 days ago about the schedule, but the documents do not appear to suggest the two sides have been negotiating a possible settlement of the case since.

In one of its filings, AT&T/Time Warner argued the government “with AT&T’s and Time Warner’s cooperation, spent more than one year investigating the transaction” and the companies “produced to the government nearly 25 million pages of documents from more than 100 different custodians, and the government deposed 17 AT&T and Time Warner witnesses over 19 days.”

The companies said “further delay [beyond Feb. 20] is unwarranted and unfair to the [companies], their shareholders, and their customers” because “the government has already obtained substantial discovery from the parties and, indeed, has had much of it since earlier this year.”

AT&T and Time Warner said “because a prompt trial is essential to this merger, [the companies] are willing to shoulder the disproportionate burden [their] schedule places on them in order to obtain timely adjudication of this case.

A prompt trial date is particularly important in this case. Under the merger agreement, [AT&T and Time Warner] must begin closing the transaction by April 22, 2018.”

Under the proposed scheduled submitted to the court by the Justice Department, AT&T and Time Warner argued “the government could effectively run out the clock on this merger without ever having to prove its case.

“The government’s contention that the parties can simply extend the merger deadline unjustifiably disregards the risks and uncertainty inherent in any re-negotiations of a complex agreement affecting numerous stakeholders.”  

AT&T and Time Warner almost seemed incredulous that the government, with its resources, cannot be ready for a trial by Feb. 20, stating: “The government cannot plausibly claim it will be prejudiced by [the companies’] proposed trial date. It has been investigating, gathering evidence, and preparing for this litigation for one year.”

In opposition, the Justice Department pointed to the importance of the case in advocating for its proposed timeline. 

“AT&T’s proposed $108 billion acquisition of Time Warner is a huge deal, not just in dollars, but also in the number of consumers affected and the potential impact on the present and future of the media and communications industries.

At trial, the United States will demonstrate that the proposed merger would allow AT&T to use control of Time Warner’s valuable and popular networks to hinder its rivals by forcing them to pay hundreds of millions of dollars more per year for the right to distribute those networks, resulting in higher bills for American consumers.”

If AT&T is allowed to buy Time Warner, the Justice Department contended, the new company “would also be able to use its increased power to slow the industry’s transition to new video distribution models that provide greater choice for consumers.

“Given what is at stake, the United States’ allegations deserve to be litigated based on facts fully developed through discovery and pre-trial preparation.”

The government argued it “wants to move these cases to trial expeditiously,” but “objects to [AT&T and Time Warner’s] attempts to rush to a trial without a full and fair opportunity for the United States to present its case and test [their] defenses.”

The schedule proposed by the companies would “shortchange the United States and the court” of the “full benefit” of complete discovery, the Justice Department wrote.

As for the April 22 date, the government wrote, AT&T and Time Warner “can change it with the stroke of a pen. Or they can simply leave the merger agreement unaltered pending the court’s decision.”

AT&T and Time Warner also mounted a general defense of their deal. “The proposed merger of AT&T and Time Warner is a pro-competitive, pro-consumer response to an intensely competitive and rapidly changing video marketplace.” The companies repeated their often-stated position that “no competitor will be eliminated by this merger” and so the deal is “a classic vertical deal, combining Time Warner’s video content with AT&T’s video distribution platforms so that the merged company can compete more effectively against market-leading cable incumbents and insurgent tech giants.”

In order for the government “to challenge a vertical merger,” AT&T and Time Warner wrote, it “must prove that the merging parties enjoy sufficient market power in their respective markets to cause antitrust concern. Otherwise, the vertical combination of two companies occupying different levels of the supply chain cannot substantially lessen competition in violation of [federal antitrust law]. On this threshold issue, the government cannot meet its burden of proof.”

Moreover, the companies said, for a number of reasons their proposed “transaction presents absolutely no risk of harm to competition or consumers.”

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