Here’s something you don’t hear everyday: United States President Trump’s Department of Justice is asking AT&T to sell Turner, the broadcast TV portion of Time Warner that owns CNN, TBS, and other channels, if it wants to have a merger to have a chance of going through.
According to reports from Financial Times, New York Times, and Recode, the Trump’s Department of Justice is requesting AT&T to go through with this request in order for a possible merger to go through.
There is another option for AT&T that was put on the table. The company can either sell Turner or it can sell DirecTV, which is its satellite TV division arm. If AT&T fails to meet one of the conditions, it could take the Department of Justice to court in order to sue to get the deal through. That’s going to be one expensive route, so AT&T doesn’t have many options here.
The interesting things here is the inclusion of CNN by the Trump administration. It’s public knowledge that President Trump doesn’t like CNN and has personally gone out of his way to single out CNN by calling them “Fake News” CNN on multiple occasions. If CNN were to sell, it would reduce the potential reach it currently has, and would have to renegotiate terms to be included in cable packages.
“When the DOJ reviews any transaction, it is common and expected for both sides to prepare for all possible scenarios. For over 40 years, vertical mergers like this one have always been approved because they benefit consumers without removing any competitors from the market,” AT&T said in a statement. “While we won’t comment on our discussions with DOJ, we see no reason in the law or the facts why this transaction should be an exception.”
We can’t really argue that vertical integrations — two companies in the same market merging together but don’t directly compete — is bad, AT&T stating that it will benefit consumers is a long shot. AT&T is likely to say that a merger like this would reduce overall costs of operation and the savings would then be passed on to consumers, but this again is a long shot. The thing that’s disturbing is that a company owning entertainment from content creation all the way to distribution gives them immense power and control in the market, making things very difficult for competitors. An example here is that AT&T is already offering free HBO to wireless subscribers.