Department of Justice attorney Craig Conrath urged Judge Richard Leon to reject AT&T Inc.'s (T) purchase of Time Warner Inc. (TWX) outright, as the government made closing arguments in the antitrust trial against the merger on Monday.
Leon might also present the companies options, Conrath suggested, such as selling either the Turner networks or DirecTV. The remedies and pledges to reduce prices that the merger partners have made are not enough, Conrath told the court.
AT&T Chairman and CEO Randall Stephenson and Time Warner Chairman and CEO Jeff Bewkes were in attendance in the U.S. District Court in Washington on Monday. The defendants make their closing arguments after the lunch break.
Conrath argued that AT&T would have the incentive and ability to drive up cable bills by $400 million a year, based on 2017 market data, and by more than $500 million by 2021.
"That's a risk the Clayton Act says consumers should not have to bear," Conrath said, citing the Federal antitrust law.
Justice argues that DirecTV parent AT&T will threaten rivals pay-TV companies with blackouts, to drive up the price of Turner's content. The government also suggests that AT&T and NBC parent Comcast Corp. (CMCSA) will cooperate to prevent online rivals such as Alphabet Inc.'s (GOOGL) YouTube TV and Dish Network Corp.'s (DISH) Sling TV from obtaining content.
AT&T and Time Warner say the merger will let the companies sell targeted ads on Time Warner's Turner Networks, and to sell more expensive, targeted ads akin to Facebook Inc. (FB) and Alphabet. They argue that pay-TV prices will actually fall, and that they have an economic incentive to get Time Warner's content on as many pay-TV networks as possible—and not to black out distributors.
AT&T's ambitions in digital advertising "doesn't give them a free pass to reduce competition in the pay-TV market," Conrath told the court. If pro-consumer promises from CEOs were taken at face value, he said, "every merger would be approved."
The Justice lawyer also noted that AT&T's Stephenson called the government's theory "absurd" in testimony.
Conrath cited emails that Stephenson sent when he learned, before the proposed merger, that Time Warner was taking a stake in Hulu LLC, which planned to offer an online bundle of cable channels that would rival DirecTV. Stephenson expressed concern in the email that AT&T and DirecTV would be able to get programming on the same terms, in the email that Conrath cited to the court.
"Maybe that concern isn't so absurd after all," Conrath suggested to the court.
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