Belief Widespread AT&T/TW Will Get DC Circuit OK, Giving DOJ Some Options
Given the high bar for reversing a facts-based district court ruling and the seemingly skeptical reception the agency received last week from a U.S. Court of Appeals for the D.C. Circuit panel (see 1812060015), antitrust experts told us it's likely AT&T will prevail in DOJ's appeal of the lower court allowing it to acquire Time Warner. Whether DOJ appeals again, either seeking a D.C. Circuit rehearing or petitioning the Supreme Court, is tougher to ascertain, they said.
Sign up for a free preview to unlock the rest of this article
Timely, relevant coverage of court proceedings and agency rulings involving tariffs, classification, valuation, origin and antidumping and countervailing duties. Each day, Trade Law Daily subscribers receive a daily headline email, in-depth PDF edition and access to all relevant documents via our trade law source document library and website.
There's no clear consensus whether a loss before the D.C. Circuit would make DOJ antitrust more gun-shy about pursuing similar such vertical merger challenges in the future. An antitrust lawyer said DOJ might be more hesitant, but the FTC is more likely to take that risk, especially since vertical mergers come up more often in areas like healthcare. Justice might feel bolder in the future since it has a better idea of how to substantiate its argument, said Penn State University law professor John Lopatka. U.S. District Judge Richard Leon didn't reject the principal theory of the government's claim, just how Justice tried to prove it, and the appellate court isn't likely to toss out the theory, either, Lopatka said. But DOJ might take more pains in the future to make sure it has the data to convince the court, he said.
In the unlikely event the department wins at the D.C. Circuit, the defendants "will most definitely take further action," probably by seeking certiorari since the Supreme Court "is likely very friendly to their position," emailed Cleveland State University law professor Chris Sagers. He said a DOJ loss would likely be followed by it seeking en banc review -- which is a relatively small commitment of resources and the D.C. Circuit is "a little bit on the liberal side" and thus friendlier to the government -- but not certiorari, given that the high court "is decidedly hostile to the government and especially to antitrust." The agency didn't comment.
It would be surprising if the Supreme Court took up a DOJ appeal, since there's no clear issue of law here, the antitrust lawyer said. Lopatka said odds of the D.C. Circuit doing a rehearing en banc of the decision "are very small." But that doesn't mean DOJ won't try, especially since it might help send a message that it's willing to pursue the case even after the D.C. Circuit loss. Antitrust lawyer Seth Bloom said the fact it has been decades since the Supreme Court heard a merger case could prompt the court to take up AT&T/TW if DOJ does file a cert petition.
Judges at oral argument often play devil's advocate, so it can be tough to get a sense of outcome just because of seemingly hostile questions. That judges particularly challenged DOJ, and less so AT&T, shows Justice's case is facing difficulties, said Bloom. DOJ questioning by the D.C. Circuit -- even Democratic-appointed Judges Judith Rogers and Robert Wilkins, who seemingly would be more sympathetic to Justice's case -- "seemed uncommonly skeptical of the government," Sagers said.
To get reversed, the District Court has to be clearly wrong on prejudicial fact determinations since there haven't been arguments that Judge Richard Leon made big errors of law, said Lopatka. But DOJ arguments that Leon didn't understand the government's economic model aren't quite right, since he was skeptical particularly of the variables underlying the model, Lopatka said. Leon at times wasn't circumspect in his opinion, for example giving the government some ammunition when he characterized its economic model as a Rube Goldberg contraption, but that kind of colorful characterization likely won't matter, Lopatka said.
Bloom said the D.C. Circuit decision is likely to come before February's end -- that being when AT&T in an agreement with DOJ after the trial said it would hold the TW assets separately (see 1806140041).
At a Capitol Forum antitrust seminar Thursday, American Cable Association Senior Vice President-Government Affairs Ross Lieberman said New AT&T could encourage more consolidation, with other firms bulking up to be able to compete with it. The Disney/Comcast bidding war over Fox assets was evidence of that, he said. New AT&T also is the first big wireless carrier to own substantial content, and that could drive Verizon into the content business as well, he said. He said DOJ's worries about the harms posed by New AT&T make it more likely the agency will monitor Comcast behavior closely with the expiration of conditions on its NBCUniversal deal.
Antitrust lawyer Amanda Reeves of Latham & Watkins said merging parties are going to be more incentivized than ever to propose conditions or terms voluntarily on their deals, like the arbitration conditions that played a notable role in AT&T/TW passing muster with the District Court. “You can eliminate a lot of the [government] arguments about competitive effects,” she said.
The Circuit Court is likely to confirm Leon's decision, but the problem is the lower court was too narrow in its view and didn't pay enough attention to the risks posed by a company with notable network assets now owning significant programming, said Incompas General Counsel Angie Kronenberg. That's particularly problematic since the FCC isn't using its regulatory power to help foster competition the way it should, she said: “I'm a little concerned about how we're seeing the market shape up.”
Also at the event, FTC officials also discussed data collection concerns, with Commissioner Rohit Chopra arguing the agency should be able to levy “real” penalties, like forcing executive firings, to deter FTC order violations (see 1812130062).