NEW YORK >> The Justice Department is suing AT&T to stop its $85 billion purchase of Time Warner, setting the stage for an epic legal battle with the telecom giant.
The government claims that consumer cable bills will rise if the merger goes through, saying the deal would “substantially lessen competition, resulting in higher prices and less innovation for millions of Americans.” AT&T would be able charge rival distributors such as cable companies “hundreds of millions of dollars more per year” for Time Warner’s networks, the Department of Justice charged in a press release.
Those payments are ultimately passed down to consumers through their cable bills. The government also said the combined company would use its power to slow the TV industry’s shift to new ways of watching video online. Web TV services are cheaper than traditional cable.
The government’s objections to the deal have surprised many on Wall Street. AT&T and Time Warner are not direct competitors. Mergers between such companies have typically had an easier time winning government approval.
AT&T CEO Randall Stephenson said earlier this month that he would not sell “key franchises” of Time Warner to get the deal done. A person familiar with the matter, who could not go on record, had previously told the AP that DOJ wanted the company to sell either Turner, the parent of CNN, TBS and other networks, or DirecTV.
In an emailed statement Monday, AT&T general counsel David McAtee said the lawsuit is a “radical and inexplicable departure from decades of antitrust precedent” and that the company is confident that a court will reject the government’s claims.