Justice Department expected to block AT&T-Time Warner merger

Federal antitrust regulators are suing to stop AT&T’s (T) proposed $85.4 billion acquisition of Time Warner (TWX).

Department of Justice Officials on Monday said the merger “will harm competition, result in higher bills for consumers and less innovation.”

According to the complaint, the combined company would use its control over Time Warner’s valuable and highly popular networks to hinder its rivals by forcing them to pay hundreds of millions of dollars more per year for the right to distribute those networks. The combined company would also use its increased power to slow the industry’s transition to new and exciting video distribution models that provide greater choice for consumers, resulting in fewer innovative offerings and higher bills for American families.

As a condition for approving the merger, the US Justice Department has been pressing the telecommunications and media giants to sell Turner Broadcasting, the Time Warner unit that includes CNN.

The combination of AT&T/DirecTV’s vast video distribution infrastructure and Time Warner’s popular television programming would be one of the largest mergers in American history. In addition to CNN, Time Warner’s network offerings include TBS, TNT, Cartoon Network, HBO and Cinemax, and its programming includes Game of Thrones, NCAA’s March Madness and substantial numbers of MLB and NBA regular season and playoff games.

AT&T CEO Randall Stephenson said earlier this month the company does not plan to divest CNN as part of any antitrust settlement. He didn’t rule out selling other Turner Broadcasting brands, like TBS or TNT.

Before last week, AT&T had said in regulatory filings that it expected to finalize its acquisition of Time Warner by the end of the year. The deal was announced in October 2016.

David R. McAtee II, AT&T’s senior executive vice president and general counsel, called the DOJ lawsuit “a radical and inexplicable departure from decades of antitrust precedent.”

“Vertical mergers like this one are routinely approved because they benefit consumers without removing any competitor from the market. We see no legitimate reason for our merger to be treated differently,” he said in a statement.

Beyond the deal’s size, it has drawn attention because of President Donald Trump’s outspoken criticism of CNN. On the campaign trail last year, he had vowed to stop the deal if he were elected president.

Trump adviser Kellyanne Conway recently told CBS News the White House isn’t involved in the Justice Department’s antitrust review of the merger. An official in the agency’s antitrust division also said the White House has not directed it on how to proceed on the transaction.

Yet in a move that could fuel speculation about the Trump administration’s possible involvement, Attorney General Jeff Sessions invoked executive privilege when asked about possible White House interference in the deal in an unrelated congressional hearing on Thursday.

Competitors and consumer groups have raised questions about the deal, arguing that it would give the wireless carrier too much control over the content carried on its network.   

Because the two are not direct competitors, however, some antitrust experts thought the Justice Department was unlikely to block the deal. 

CBS News’ Paula Reid contributed reporting.