Judge Richard Leon cleared AT&T's purchase of Time Warner for $85.4 billion, or $108.7 billion including debt, after the market close on Tuesday.
Shares of AT&T are down about 1.6% to $33.78 after hours. Time Warner gained $4.9% to $100.96.
AT&T and Time Warner argued that the government rarely blocks vertical mergers that do not remove a competitor from the market. Vertical deals theoretically can lead to lower prices if the merger partners can lower their costs while maintaining the same field of competitors.
Disney (DIS - Get Report) agreed to buy most of Fox's film, television and pay-television distribution assets in December for $52.4 billion, or more than $66 billion including assumed debt, over a deal with Comcast. Rupert Murdoch was not comfortable selling the business to Comcast after the government sued to block AT&T's purchase of Time Warner.
Comcast and AT&T both own pay-TV distribution systems. If the cable group were to acquire Fox's media businesses, Murdoch feared, the deal could encounter the same resistance to vertical consolidation that caused Justice to sue AT&T and Time Warner.
Department of Justice anti-trust chief Makan Delrahim suggested that Disney's purchase of Fox could work at The Deal's Corporate Governance conference in June. "They, I think, had good advice and carved out surgically what a transaction that might be doable, and again, who knows where that transaction leads," Delrahim said at the event.
Comcast dropped 3.5% to $31.25 after hours on the prospect of a bidding war. Fox gained 4.8% to $42.50 while Disney dropped 1.75% to $102.50.
Like AT&T-Time Warner, the combination represents vertical consolidation.
CVS rose 0.5% to $67.10 after hours, and Aetna gained 2.9% to $186.00.
Unlike AT&T's vertical merger with Time Warner, the combination of Sprint and T-Mobile is a vertical merger that would remove a national wireless carrier from the market.
The Department of Justice based its lawsuit against the AT&T and Time Warner on the potential increase in cable bills. A merger that would reduce the field of wireless competitors could trigger an increase in wireless prices. However, Delrahim has Suggested that a reduction from four wireless carriers to three is not necessarily verboten. "I just said I am not smart enough to figure out any magical number in any market," Delrahim said at The Deal's conference.
Sprint rose 3% to $5.46 after the market close. T-Mobile dropped 0.1% to $58.30.
AT&T and Time Warner argue that they will actually reduce cable bills. The companies plan to use data from AT&T's wireless, satellite and cable television subscribers to sell targeted advertising on the Turner networks, which include CNN, TBS and TNT.
In court testimony, AT&T Chairman and CEO Randall Stephenson compared the post-merger company to Facebook (FB - Get Report) and Alphabet (GOOGL - Get Report) , which have used personal data to dominate digital advertising. AT&T can sell the targeted ads for 3 to 5 times the amount it gets for a traditional television spot.
A merged AT&T and Time Warner could also borrow from the playbooks of Netflix (NFLX - Get Report) and Amazon (AMZN - Get Report) , by using data about popular programs, films and actors to tailor their productions, Stephenson testified.
Facebook was flat at $192.40 after hours, while Alphabet was stable at $1,148.19.
Netflix dropped about 0.1% to $363.40, and Amazon dropped 0.2% to $1,695.86.