AT&T and Time Warner do not directly compete in any significant way, making this a vertical merger of a major multichannel video programming distributor and a major provider of program content. At trial, Judge Richard Leon, acknowledging the potential for vertical mergers to lead to economic harm, was careful to ground his analysis in standards from established antitrust precedent, which the DOJ does not appear to dispute.
DOJ claimed that the merger will allow AT&T to use Time Warner programming content to raise the costs of AT&T’s rivals, and also that, after the merger, AT&T will withhold Time Warner programming from other rivals to place them at a disadvantage. As a result, DOJ argued, cable television subscribers will be harmed by having to pay higher prices, while less video content will be produced. But after a careful review of the evidence presented at trial by DOJ based on its "economics of bargaining" theory, Judge Leon concluded that DOJ failed to provide persuasive evidence of any such harm, while DOJ’s expert witness had conceded that the merger will lead to at least some positive efficiency benefits.
To prevail, DOJ must show that Judge Leon’s decision was clearly erroneous. In other words, DOJ has to do more than show that Judge Leon was wrong in how he interpreted the economic evidence – it must show that the judge was clearly wrong and overcome the deference the appeals court is required to show to the judge's findings of fact. This is a much more difficult test for DOJ to meet than the test at trial, where DOJ had only to show by a preponderance of the evidence that the merger more likely than not will lead to more economic harm than benefits.
It is always risky to predict the outcome of an appeal from the judges’ questions. But most of the questions from the judges focused on whether DOJ had shown enough to overcome the presumptions favoring the trial court's ruling. The DOJ brief filed before the oral argument fell well short of that standard, and the appellate judges rightly showed skepticism about DOJ’s attempt to relitigate the case on appeal. From their questioning, it appears that the judges didn’t hear enough from DOJ to overcome the deference the appeals court is required to show to Judge Leon’s findings of fact.
* Theodore Bolema is a member of the Free State Foundation’s Board of Academic Advisors and Executive Director of the Institute for the Study of Economic Growth at Wichita State University. Mr. Bolema is a former trial attorney in the Antitrust Division of the Department of Justice.
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