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Trump administration sues to block AT&T-Time Warner merger

The Justice Department filed a lawsuit Monday to block the AT&T-Time Warner merger, amid a growing political storm over whether the administration has tried to use its review of the $85 billion deal to force the sale of CNN, a frequent target of President Donald Trump’s media criticism.

A DOJ official told reporters Monday that the agency is concerned the combined company will charge competitors hefty fees to distribute Time Warner content, providing an unfair advantage to AT&T-owned DirecTV. Such an arrangement would have a negative impact on American TV viewers, said the official, who spoke on condition of anonymity to discuss the litigation.

“We believe, and our investigation has found, the merger would harm competition, resulting in higher bills and less innovation for millions of American consumers,” the official said, adding that the agency made a “good faith effort” to resolve the conflict through negotiations.

The official denied that ownership of CNN was a factor in the DOJ’s thinking and said the Trump White House had no influence over the decision to challenge the merger in court. No state attorneys general have signed onto the DOJ legal complaint, though the department remains “hopeful” that will change, the official said.

AT&T meanwhile blasted the government’s move, with the company’s general counsel David McAtee calling the lawsuit a “radical and inexplicable departure from decades of antitrust precedent.”

“Vertical mergers like this one are routinely approved because they benefit consumers without removing any competitor from the market. We see no legitimate reason for our merger to be treated differently,” McAtee said in a statement. “We are confident that the Court will reject the Government’s claims and permit this merger under longstanding legal precedent.”

Sources familiar with the deal told POLITICO earlier this month that the DOJ gave the companies an ultimatum to either sell Time Warner’s Turner Broadcasting, which includes CNN as well as networks like TBS and TNT, or shed satellite television provider DirecTV. The sources said it’s clear the government’s main sticking point is CNN, which Trump often maligns as “fake news.”

Unnamed DOJ officials later offered reporters a much different account, saying the companies themselves offered to sell CNN in order to close the deal — an option the officials said they rejected. AT&T CEO Randall Stephenson has called that untrue, saying his company “never offered to sell CNN and have no intention of doing so.”

As the negotiations hit an impasse in recent weeks, the two sides gave signs of preparing for a court battle. Stephenson, speaking at a Nov. 9 conference, said AT&T is fully prepared to litigate if the Justice Department rejects the transaction and would ask for an expedited hearing. The company also hired attorney Daniel Petrocelli, who once represented Trump, in preparation for the legal fight.

AT&T spent most of this year confident the government would approve the mega-deal because it’s considered a “vertical” merger that doesn’t eliminate a competitor from the market. But the arrival of Makan Delrahim, Trump’s nominee for DOJ antitrust chief, in late September appears to have changed the equation, and the issue of divestitures took center stage.

Trump, who has repeatedly derided CNN’s coverage of his administration, has loomed over the deal since the companies announced it a little over a year ago. Shortly after the merger was announced in October 2016, then-candidate Trump said in a speech in Gettysburg, Pa., that his administration would block the deal on populist grounds — that it would place “too much concentration of power in the hands of too few.”

Since then, he has kept up his Twitter-fueled attacks on the news network, tweeting as recently as last week that he was “forced” to watch CNN while in the Philippines and “again realized how bad, and FAKE, it is. Loser!”

Trump’s history of statements about the merger and CNN — including tweeting an edited professional wrestling video that showed him striking a man whose head is replaced by a CNN logo — are expected to be fodder for AT&T’s arguments in the court case. Even Democratic lawmakers who oppose the deal on ideological grounds have expressed concern that politics has poisoned the merger’s review.

The words of Delrahim — a former tech and telecom industry lobbyist and antitrust official in the George W. Bush administration — may also come into play. In an October 2016 television interview, prior to his nomination by Trump, Delrahim said the merger did not seem to pose a “major antitrust problem.”

As the CNN issue burst into the open this month, Trump administration officials denied any White House interference in the DOJ’s review of the deal. Delrahim said he’s “never been instructed by the White House on this or any other transaction under review” by his unit, while White House spokesman Raj Shah said Trump “did not speak with the Attorney General about this matter, and no White House official was authorized to speak with the Department of Justice on this matter.”

The New York Times reported in July that White House advisers had discussed using the merger as “a potential point of leverage over their adversary” — i.e., CNN — prompting Democratic senators to warn the White House against meddling in the deal. Since then, Democrats have continued to seek assurances that the White House has stayed out of the DOJ’s deliberations.

Attorney General Jeff Sessions, testifying at a House Judiciary oversight hearing last week, declined to answer a question on whether the White House tried to influence DOJ’s merger review, saying the department has a longstanding policy of not revealing privileged conversations.

Trump on Nov. 11 sought to distance himself from DOJ’s handling of the review. Asked by a reporter aboard Air Force One en route to Hanoi, Vietnam, about whether he wants AT&T to sell CNN, Trump cut off the question, saying, “Well, I didn’t make the decision.” He later said the situation will “probably end up being maybe litigation, maybe not. We’ll see how it all plays out.”

Delrahim, for his part, made clear in a speech last week that his office would seek “structural” remedies, such as divestitures, when mergers are considered problematic, rather than behavioral conditions often favored by the Obama administration.

The merger would allow AT&T, one of the nation’s largest wireless and pay-TV providers, to bulk up its media holdings with brand names including HBO and Warner Bros. in addition to CNN. Stephenson this month framed his interest in buying CNN as part of a larger effort to compete with tech companies like Google and Facebook to attract advertisers.

AT&T has been thwarted before when pursuing a big deal in Washington. The company made a $39 billion bid for T-Mobile in 2011 but dropped the deal after the Obama Justice Department sued to block it.

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