United States: AT&T Rings Justice's Bell: What The AT&T-Time Warner Merger Decision Means For Healthcare

In a lengthy June 12, 2018 opinion, United States District Judge Richard J. Leon handed the U.S. Department of Justice a major defeat in clearing the way for the merger of media and telecommunications giants AT&T and Time Warner. Despite the potential for appeal, the decision demonstrates how vertical mergers may be better able to withstand antitrust scrutiny compared to horizontal mergers, and it is likely to influence merger and acquisition activity in the health care industry.

In a deal announced in October 2016, AT&T proposed to acquire Time Warner for $108 billion, including debt. The two companies are not direct competitors, although their markets are related. Whereas AT&T is a communications provider and supplies customers with the means of access to media, primarily through cable service, telephone networks, and the internet, Time Warner is primarily a content provider, with an entertainment and information network portfolio that includes CNN, HBO, and Warner Bros. Following a lengthy investigation, the Justice Department filed suit to stop the merger under Section 7 of the Clayton Act, which prohibits any business acquisition that may substantially "lessen competition." Specifically, the government claimed that this merger would result in a substantial decrease in "competition in the video programming and distribution market nationwide by enabling AT&T to use Time Warner's 'must have' television content to either raise its rivals' video programming costs or, by way of a 'blackout,' drive those same rivals' customers to its subsidiary, DirecTV." In short, the government argued AT&T could leverage consumer desire for programs like HBO's Game of Thrones and Warner Bros.' movie catalog to raise prices for its DirecTV or U-verse subscription services, or otherwise squeeze out cable and satellite competitors by denying them the use of such popular content.

The Justice Department's position was a difficult one, and the court ultimately did not agree with it. Because AT&T and Time Warner are not horizontally positioned in the marketplace, they are not direct commercial rivals selling similar products or services at the same point on the supply chain. Rather, their proposed merger is a vertical one, between market players situated at different places in the supply chain. The government's burden in opposing horizontal mergers on antitrust grounds is typically lighter because such mergers involve the elimination of a competitor and a reduction of players in a given product market; as such, the adverse impact on competition can be easy to prove. Stopping a vertical merger is possible but difficult, because the combination of vertical market players usually does not result in the elimination of a rival, and vertical mergers often create cost-saving efficiencies that can be used to defend the deal.

District Judge Leon was not persuaded that Time Warner's content library is a "must have" that will provide AT&T with insurmountable power in the marketplace. To the contrary, AT&T arguedand the court agreedthat the merger will allow the parties to more effectively and efficiently compete in an industry in which vertical consolidation are increasingly common. AT&T successfully argued the merger will allow it to compete with such vertically integrated firms as Google, Facebook, Netflix, Hulu, and Amazon, all of whom are already combining technological access with media content. AT&T also convinced the court the proposed merger would bring efficient benefits rather than adding costs to the market.

Health care industry watchers are speculating about the impact of the AT&T precedent for major vertical mergers now pending, especially given the continued appetite for consolidating transactions and increased alignment between payers and providers. For example, in late 2017, pharmaceutical giant CVS Health announced a $69 billion acquisition of health insurer Aetna. In March, 2018, health insurer Cigna announced a nearly $70 billion acquisition of pharmacy benefit manager Express Scripts. These proposed deals present combinations of health care payers and providers; so, both mergers are analogous to the AT&T/Time Warner deal in that they involve potential combinations of vertical players rather than horizontal rivals. The federal government is reviewing both transactions for antitrust concerns, and other vertical mergers are pending in the health care sector. Recently, the Justice Department successfully blocked proposed mergers between health insurers Anthem and Cigna, as well as Humana and Aetna; however, unlike the AT&T/Time Warner combination, those attempted deals involved horizontal combinations which, if consummated, would have reduced the number of competitors and consolidated market shares overnight.

The AT&T decision indicates the Justice Department might not resurrect its merger-blocking winning streak, at least with regard to vertical mergers. The court's reasoning in AT&T may chill the Justice Department's enthusiasm to oppose vertical combinations, thus opening the path for CVS/Aetna and Cigna/Express Scripts, as well as other future transactions. However, considering the competition the combined AT&T/Time Warner faces in the video entertainment market, decisions on future vertical mergers, including health care transactions, will remain rooted in the facts specific to each proposed transaction.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions