NEW YORK (TheStreet) -- The DOJ is suing AT&T (T) and its satellite TV provider DirecTV for colluding with rival pay-TV competitors Cox Communications, and Charter Communications to keep from carrying Los Angeles sports network SportsNet L.A. This is said to have taken place prior to AT&T's acquisition of DirecTV, which was completed in July of last year.
The 57-page lawsuit that was filed in a federal L.A. court accuses the four companies of illegal conduct, including sharing nonpublic information among each other in order to secure leverage in negotiations with cable provider Time Warner (TWX), the Los Angeles Times reported. Time Warner was responsible for recruiting other pay-TV companies to carry SportsNet L.A.
AT&T announced its intention to acquire Time Warner on October 22, 2016 for $85 billion.
Former FCC advisor Adonis Hoffman appeared on Thursday afternoon's "Closing Bell" on CNBC to discuss what impact, if any, this lawsuit will have on the AT&T, Time Warner merger.
"This lawsuit really points out some of the long standing problems we've seen with carriage agreements," Hoffman said. "These agreements are fiercely negotiated, they're often the source of great lawsuits. Rarely does the Department of Justice jump into these kinds of disputes."
Hoffman is "troubled" by the fact that the DOJ has decided to weigh in on this issue, which he says should be the subject of private negotiations. Hoffman believes the DOJ's involvement sets a "dangerous precedent" and the parties should figure this out on their own.
"I think it bodes ominously for the future in terms of governmental intervention and regulation in these kinds of private disputes," Hoffman said.
As far as impact on the pending AT&T, Timer Warner merger Hoffman says that the two cases are separate and one does not have to do with the other, however the same group of lawyers looking at the lawsuit will be the ones looking at the merger.
"I would hope that in the course of the review the Department of Justice would look at perhaps curing some of the intrinsic problems with carriage agreements, rather than seeking to compel some kind of specific performance," Hoffman said.
Separately, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:
We rate AT&T INC as a Buy with a ratings score of B. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, increase in net income, revenue growth, good cash flow from operations and solid stock price performance. We feel its strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.
You can view the full analysis from the report here: T