By Geoffrey Smith
November 9, 2017

Good morning.

Rumors that the federal government would intervene to stop the $85 billion AT&TTime Warner merger have been borne out, and the implications are not encouraging.

According to various reports, the DoJ has decided that the combined company will have to divest either Turner Broadcasting or DirecTV to get approval for the deal. That’s despite a broad consensus that the merger is a sensible reaction to changing media trends, a ‘vertical’ one that extends internal value chains rather than a ‘horizontal’ one that crowds out competition.

AT&T is preparing to fight any such demands in court, on the grounds that the intervention is politically motivated.

The red flags around this story are almost as numerous as those that greeted Donald Trump in Beijing yesterday.

For one, Turner Broadcasting is home to CNN, President Trump’s ‘Fake News’ nemesis.

For another, Makan Delrahim, who was appointed to head the DoJ’s antitrust division less than two months ago, had said before he joined the Trump administration that he didn’t think the merger represented a big antitrust problem (while his boss was against it from the start).

Some will fear that the request aims essentially to silence, or at least tone down, CNN’s criticism of the administration by bringing it under new ownership. That may owe something to paranoia, but it’s hard to deny that a business unit like Turner will struggle to survive as an independent company in the age of streaming. That’s one of the big reasons for the merger in the first place, after all. The Disney-Fox talks reported earlier this week also make it clear that this is a sector reacting to structural weakness, not exploiting structural strength.

A further sign that this is more than just your usual antitrust squabble is how this has now spilled out into the media. The Wall Street Journal‘s sources told it that AT&T’s CEO Randall Stephenson had offered to sell CNN to get the deal through. That forced Stephenson to take the unusual step of having to deny the claim outright yesterday.

More news below.

Geoffrey Smith


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