Judge Ruling In AT&T Merger Again Highlights Broken Antitrust Enforcement, Court Myopia

from the ill-communication dept

Last year AT&T defeated the DOJ's challenge to the company's $86 billion merger with Time Warner thanks to a comically narrow reading of the markets by U.S. District Court Judge Richard Leon. At no point in his original 172-page ruling (which approved the deal without a single condition) did Leon show the faintest understanding that AT&T intends to use vertical integration synergistically with the death of net neutrality and neutered FCC oversight to dominate smaller competitors and tilt the entire internet ecosystem in its favor.

While the DOJ lost its original case, it was quick to appeal late last year, highlighting how within weeks of the deal AT&T had jacked up prices on consumers and competitors like Dish Networks, which says it was forced to pull HBO from its lineup because it could no longer afford the higher rates. Those rate hikes were directly courtesy of the huge debt AT&T incurred from both its 2015 merger with DirecTV (which eliminated a direct pay TV competitor from the market), and last year's Time Warner merger.

None of this apparently mattered to a three-judge panel from the US Court of Appeals for the DC Circuit, which ruled this morning (pdf) that AT&T's latest merger would be allowed to stand. According to the Judges, the DOJ's claims that Leon failed to understand basic economic realities in the broadband and video markets were "unpersuasive." Much like the initial Leon ruling, the cornerstone of the Judges ruling centers around the idea that because there's more and more streaming competition, any anti-competitive problems from the deal would be mystically mitigated:

"Evidence also indicated that the industry had become dynamic in recent years with the emergence, for example, of Netflix and Hulu. In this evidentiary context, the government’s objections that the district court misunderstood and misapplied economic principles and clearly erred in rejecting the quantitative model are unpersuasive. Accordingly, we affirm."

But, like the Leon ruling, the Judges failed to understand the bigger picture, almost to an embarrassing degree. In part with the DOJ's help, since throughout the entire case, the phrase net neutrality wasn't uttered even once in context.

While AT&T does face more competition via streaming competitors, its control over wireless and wired broadband networks those services run over gives AT&T a distinct advantage. So in addition to making "must have" content more expensive for competitors (something the court just ignores), AT&T can also use its broadband networks to hamstring these emerging competitors. We've already seen that demonstrated clearly as AT&T imposes arbitrary and unnecessary usage caps on overage fees on its broadband users if they use a competitor like Netflix, but not if they use AT&T's own streaming service.

It's not rocket science to see how AT&T's domination of broadband, control of essential content, and successful obliteration of FCC oversight all work synergistically to distort the market AT&T operates in. This is a company that effectively told the Ajit Pai FCC to go neuter itself, and the agency was more than happy to oblige. It's the same company that had so much political power, it was able to convince the government to retroactively change the law when it was found to be spying on Americans without a warrant. The problems with this type of power couldn't be more obvious.

Meanwhile, the case continues to show how the steady lobbying erosion of U.S. antitrust authority is having a decidedly negative impact US market health. For decades we were told that the telecom industry should be deregulated to unleash brave new synergies and amazing innovation. This wouldn't be a problem, telecom giants and their allies insisted, because antitrust authority would help keep these natural monopolies in line.

Yet here we are, with antitrust authority so comically eroded that lawyers are trapped within very narrow confines of economic theory, utterly incapable of proving even the most obvious of harms.

The broadband industry is a broken, natural monopoly plagued by federal and state regulatory capture. When you obliterate what few consumer protections exist, giants like AT&T and Comcast don't just mystically start behaving thanks to a free market, they just double down on existing, bad behavior. That's because telecom isn't a free market, it's a broken mess. And free of both competition and meaningful regulatory oversight, it only gets worse. History has made this point time and time again, and the public's utter disdain of Comcast and AT&T is example A.

In the wake of the telecom industry's successful attack on FCC authority, there are only a few things that can keep these natural monopolies in line absent meaningful competition. One, an FTC that lacks the authority, resources, or rule-making ability to actually police bad ISP behavior. Two, state regulators and AGs that ISPs and the FCC have working overtime. And antitrust enforcement that's been so neutered by lobbying that the government can't police even the most obvious instances of competitive issues caused by mindless merger mania.

Anybody, Judges included, that can't see the obvious problem here isn't paying close enough attention.

Filed Under: competition, doj, merger, streaming, telco, telecom, tv
Companies: at&t, time warner


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  • identicon
    Anonymous Coward, 26 Feb 2019 @ 4:09pm

    This is all very depressing but not really news. Can you shed any light on what you would do to fix this situation? We're inundated with bad news effectively non-stop but rarely do we hear how to fix these problems from anyone with a good understanding of them. Most of us aren't in a position to offer such advice and we don't know where to begin.

    reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 26 Feb 2019 @ 4:31pm

      Re: what you would do

      Yes. What would you do?

      If our senior Federal judges are inattentive or incompetent or corrupt -- we face MUCH bigger problems than this AT&T antitrust issue.

      Take 3 steps back and ponder the bigger problem in play here.

      reply to this | link to this | view in chronology ]

      • identicon
        Anonymous Coward, 27 Feb 2019 @ 8:10am

        Re: Re: what you would do

        I don't agree that this highlights broken antitrust enforcement. Antitrust enforcement should be based on bad things companies actually do—which there are plenty of—and not what a merged company might do. In other words, stopping the merger won't truly fix anything. It's a big company getting bigger, but not really going into markets they're not already in.

        True competition, including community broadband, will help fix the real problem. Proper ISP regulation (net neutrality, truth in advertising, maybe functional separation) is needed. Looking through Karl's history shows that those topics have been raised.

        reply to this | link to this | view in chronology ]

        • identicon
          Anonymous Coward, 27 Feb 2019 @ 10:44am

          Re: Re: Re: what you would do

          Uh... they are shrinking the number of market players in a market already lacking in competition.

          "Too big" is a different problem, but with some overlap in amtitrust.

          "What they might do" is what they have done every single time in the past. I don't see that as a valid point. You're playing the technical game of good-faith exception here.

          reply to this | link to this | view in chronology ]

          • identicon
            Anonymous Coward, 28 Feb 2019 @ 9:59am

            Re: Re: Re: Re: what you would do

            "What they might do" is what they have done every single time in the past. I don't see that as a valid point. You're playing the technical game of good-faith exception here.

            Quite the opposite. We can wait for them to do what they've always done, and when they do, hit them harder than we otherwise could. Instead of blocking an incremental merger, we'd get to split up the company in a way that makes sense for public policy. The bonus is that it would be more punishing for them too, after they think they got away with it.

            reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 26 Feb 2019 @ 5:16pm

    On one hand there is the monopolistic tendencies of AT7T which extend back to the beginning of telephone causing the AT&T break up of the 1950s.

    On the other hand there is the attempt to establish world dominance and world control of all internet traffic which implies a world totalitarian regime based on the big Silicon Valley internet firms Amazon, Face Book, Google, Netflex et.

    On one foot there is the attempt at world thought domination by main stream media by the likes of MSNBC, CNN, et.

    On the other foot there is the total racial dominance of all sports by a group of raciest clicks.

    Given this it is hard to bend over for the required LGBT salute.

    reply to this | link to this | view in chronology ]

  • icon
    morganwick (profile), 26 Feb 2019 @ 5:21pm

    That Justice didn’t do a good job of making the case against the merger is because they only went after it in the first place because Trump hates CNN. Any merger not involving TimeWarner or Comcast/NBCUniversal, especially Disney/Fox, Justice wouldn’t go after at all.

    reply to this | link to this | view in chronology ]

  • identicon
    Pixelation, 26 Feb 2019 @ 7:39pm

    It's time

    I think I'm going to get a library card and fuck paying for anything other than internet access.

    Thanks AT&T for helping me streamline my expenses.

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 27 Feb 2019 @ 2:28am

    those not paying close enough attention are obviously being paid to not do so! what makes me laugh is that a few decades ago, the US security forces made all out war on the Mafia etc because of how they had markets tied up and the money they were making, partly because of the politicians they had 'in their pockets'. what is happening now is so much worse but totally ignored. i have to question 'why'??

    reply to this | link to this | view in chronology ]

  • identicon
    Philly Bob, 27 Feb 2019 @ 6:59am

    Anybody, Judges included, that can't see the obvious problem here isn't paying close enough attention.

    It's ATTention that's paying the judges...

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 27 Feb 2019 @ 11:43am

    TBTF...

    They are trying (and succeeding) to become "To Big To Fail" (TBTF), as they have seen what 'government regulation' looks like for entities that are too big to fail...

    Ok, you broke the entire economy, here have 100 billion dollars to go fix it...

    They do want to grow to control everything within their reach (the natural tendency of corporations), and they are doing great at it, they have purchased and broken down all the regulatory agencies (is lobbying a "purchase" or a "lease"???) that could have any negative impact on them, the ones that are left can only hand them MORE money or lightly slap their wrist and tell them to, "Think about what you are doing, before you do it the next time" which we all know works so well.

    If the world is going to hell in a handbasket, it must be time to start selling handbaskets...

    reply to this | link to this | view in chronology ]


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