{"id":1956,"date":"2018-03-25T22:31:16","date_gmt":"2018-03-26T02:31:16","guid":{"rendered":"http:\/\/journals.law.harvard.edu\/jsel\/?p=1956"},"modified":"2023-07-25T11:44:57","modified_gmt":"2023-07-25T15:44:57","slug":"u-s-v-att-time-warner-the-antitrust-trial-of-the-century","status":"publish","type":"post","link":"https:\/\/journals.law.harvard.edu\/jsel\/2018\/03\/u-s-v-att-time-warner-the-antitrust-trial-of-the-century\/","title":{"rendered":"U.S. v AT&T\/Time Warner: The Antitrust Trial of the Century"},"content":{"rendered":"

\"\"<\/a>On Monday, March 19th, the U.S. Department of Justice faced off against Time Warner and AT&T in what is called the\u00a0Antitrust Trial of the century.<\/a><\/u> With the rise of direct-to-streaming companies such as Netflix and Amazon, Hollywood has seen aggressive\u00a0content consolidation, such as Disney’s proposed purchase of\u00a021st Century Fox<\/a>.\u00a0The Hollywood Reporter\u00a0<\/a>has reported that the outcome of this lawsuit could greatly impact the future of Hollywood.<\/p>\n

In the brief\u00a0<\/a>filed by the U.S. government in early March, the Department of Justice alleged that the outcome of the case “will chart the course for the future of video-content delivery in the United States.”\u00a0The case involves<\/a>\u00a0AT&T’s attempt to vertically integrate with Time Warner, a content company that owns the likes of HBO, Warner Brothers, CNN, and Turner. Though AT&T does not produce substantial content by itself, it owns DirecTV, which serves to distribute content to consumers.\u00a0The DOJ argues<\/a>\u00a0that if AT&T is allowed to acquire Time Warner, this new conglomerate would own too many content\u00a0properties, and would allow AT&T “the ability an incentive to substantially lessen competition” by withholding content and raising the price for subscribers.<\/p>\n

The government argues\u00a0<\/a>that this impact subjects the proposed merger to the\u00a0Clayton Act<\/a>,\u00a0which states that “[n]o person … shall acquire [assets] … where in any line of commerce … or in any section of the country, the effect of such acquisition may be substantially to lessen competition, or tend to create a monopoly.”\u00a0The government contends<\/a>\u00a0in their brief that they just need to prove that the effect of the merger “will likely be anticompetitive.”<\/p>\n

The government<\/a>\u00a0alleges that AT&T will either raise the cost of licensing out content like Game of Thrones to its competitors, as a way to lure subscribers to DirecTV, or stop licensing Games of Thrones altogether\u00a0and then raise their subscription price. Because “the vast majority of American households still subscribe<\/a>” to some form of cable and\/or satellite access, this would have a widespread impact. Furthermore,\u00a0the brief argues<\/a>\u00a0that with two vertically integrated conglomerates\u00a0in the media space (the Comcast\/NBCUniversal merger was approved by the government in 2011), AT&T\/Time Warner and Comcast\/NBCUniversal would coordinate their activities in order to block out emerging virtual rivals, like Dish Sling or Playstation Vue.<\/p>\n

However,\u00a0AT&T alleges<\/a>\u00a0that because of the economies of scale that would be garnered by this acquisition, it will actually lower subscription prices for consumers. Because AT&T no longer has to pay to license HBO shows, consumers will see a\u00a0reduction in the prices they have to pay<\/a>. Furthermore,\u00a0AT&T contends<\/a>\u00a0that it would actually be against the interest of AT&T to limit their content on their platform. Content needs far more promotion to attract people than cable and satellite companies, and limiting Game of Thrones to DirecTV would hurt the popularity of the show. Lastly, on the question of coordination with Comcast\/NBCUniversal,\u00a0AT&T argues<\/a>\u00a0that Time Warner currently “receives substantial affiliate fees and advertising revenue<\/a>” from the emerging virtual rivals. It is therefore\u00a0in the interest of AT&T\/Time Warner<\/a>\u00a0that consumers sign up for Playstation Vue over “non-network-based services like Netflix” that would not pay AT&T\/Time Warner any fees.<\/p>\n

The U.S. government has rarely blocked vertical integrations, but\u00a0Hollywood has had<\/a>\u00a0a history with antitrust cases of this nature. In United States v Paramount Pictures<\/a>, the Supreme Court in 1948 ruled that the major entertainment studios had to “divest themselves of ownership of movie theatres.”\u00a0The Court found<\/a>\u00a0that these “giant producer-distributors” had too much control over the movie industry, and could control what films were played in the theatre, what prices the theatres were charging and pushing out independent producers from the industry. If the government prevails and the merger is blocked,\u00a0it could raise questions\u00a0<\/a>of whether\u00a0Comcast and NBC<\/a>\u00a0should be broken up, or if\u00a0Disney should divest itself of its ownership in Hulu<\/a>. More generally, tech companies like Amazon have adopted an aggressive vertical integration strategy (Amazon’s acquisition of WholeFoods<\/a>\u00a0is one example), and this decision could affect the technology sector moving forward.<\/p>\n

Adele Zhang is the Online Content Chair and an Entertainment Highlight Contributor for the Harvard Journal of Sports and Entertainment Law and a current first year student at Harvard Law School (Class of 2020).<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

On Monday, March 19th, the U.S. Department of Justice faced off against Time Warner and AT&T in what is called the\u00a0Antitrust Trial of the century. With the rise of direct-to-streaming companies such as Netflix and Amazon, Hollywood has seen aggressive\u00a0content consolidation, such as Disney’s proposed purchase of\u00a021st Century Fox.\u00a0The Hollywood Reporter\u00a0has reported that the outcome 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