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A panel of three judges hearing the governments appeal of its lawsuit aiming to block the AT&T–Time Warner merger peppered a Department of Justice lawyer with critical questions while going notably easier on the attorney for AT&T.
This mornings nearly two-hour session at the District of Columbia Circuit of the U.S. Court of Appeals, which was live-streamed on the courts website, included solo appearances by lawyers for both sides as well as two “amici” representatives of antitrust experts.
Representing the DOJ, Michael Murray faced a steady stream of feedback from the bench as he attempted to show that U.S. District Court Judge Richard J. Leon had made clear errors in his June ruling allowing the merger to proceed.
The arguments are a key stage of the appeal in the lawsuit filed in the fall of 2017 aiming to block the $81 billion merger, a deal that was first proposed in October 2016. The judges did not rule at the close of the arguments, but are now expected to take a period of weeks to render their decision. They have several options, including outright affirming Leons ruling (meaning the merger would stand) or to remanding the case back to Leon (meaning the deal could face more hurdles or even possibly be unwound).
Undoing the deal seems to be a far less likely outcome after the arguments. “The problem is, where was the evidence to show that the district court clearly erred?” asked Judith W. Rogers at one point, before advising Murray, “Its not enough to cite the principle. You have to show it fits within the context.”
The notion of theory versus empirical evidence cropped up repeatedly in the judges questions for Murray. During his initial 20-minute allotment of time, he rarely was able to speak for more than a few seconds at a time before being interrupted. The judges seemed particularly vocal on the matter of whether the DOJ could prevail in its complaint merely by demonstrating that the economic harm is not zero.
“The government had to show that the proposed merger was likely to substantially lessen competition by increasing Turners bargaining leverage in affiliate negotiations,” Rogers said. “Some of those adverbs appear to be flying in the face of your statement that if all the numbers arent zero, you win.”
Judge David B. Sentelle also scolded Murray for contending that “if the number is anything greater than zero, youve carried your burden. That doesnt follow.” He added, “Remember where the burdens are.” At issue, Sentelle said, was the governments reliance on the Nash model, which is named after mathematician John Nash, the subject of the book and film A Beautiful Mind, to show how AT&T would use Turner to gouge rivals and therefore consumers. “The bare theorem of John Nash doesnt prove anything in a particular case,” Sentelle said. “You have to have numbers to make a model work.”
Speaking on behalf of AT&T, Peter Keisler leaned on a key pillar of the defense argument during the trial last spring, emphasizing the seven-year offer of baseball-style arbitration that Turner has offered programmers as a hedge against any potential merger effects. The goal of that offer is to ensure that DirecTV wouldnt be able to use Turner as a weapon to punish rivals.
“We will honor it. The other side will invoke it. And it will have real world effects,” Keisler said. And Turner will have “less leverage as a result of a merger.” He added, “That is one thing by itself that should be enough to resolve the case.”
The third judge, Barack Obama appointee Robert L. Wilkins, appeared to be the least openly critical of the governments case and even suggested to Keisler that the governments overreach with Nash should not condemn the lawsuit. He was also the only one of the judges to favorably cite the amici curiae brief filed by 27 scholars supporting the DOJ. “Sometimes, lawyers over-try their cases,” Wilkins said. “They go for the belt and suspenders and then the suspenders break and they say, Judge, dont worry about my broken suspenders. Ive still got the belt.'”
Keisler replied, “This was not a case where the government over-tried its case, your honor. If you take the model out, there is really nothing here that demonstrates anything other than a concern and a theory that there might be increased leverage. There has to be a demonstration of two things: one, a substantial lessening of competition and two, once the government has conceded significant consumer benefits … then it has to balance the harms against the benefits.”
In his five-minute rebuttal at the end of the proceeding, Murray said, “AT&T is asking the court to make findings that are not there. … Theres no finding about what the real-world effect of the arbitration will be.” Rival distributors testified at trial that the arbitration offer “imposes on the arbitrator a standard of fair-market value” that is difficult to calculate because some pay-TV distributors are national (DirecTV and Dish) and others are regional (cable companies like Charter).
AT&T agreed with the DOJ as a condition of Leons ruling to put Turner in a corporate silo separate from DirecTV to avoid any overlaps as the appeal unfolds. The terms of that agreement expire February 28, by which time most parties expect to have gotten the judges decision.
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