Justice Department sues to block AT&T, Time Warner merger

Last Updated Nov 20, 2017 6:31 PM EST

The Department of Justice has sued to stop AT&T's (T) proposed $85.4 billion acquisition of Time Warner (TWX), saying the merger would harm competition, lessen innovation and result in higher costs for consumers. According to the complaint, which was filed in district court Monday, the combined company  would "harm consumers by substantially lessening competition among traditional video distributors and slowing emerging online competition."

With Time Warner, AT&T "would have the power to make its video distributor rivals less competitive by raising their costs, resulting in even higher monthly bills for American families," according to the complaint. "The merger also would enable the merged firm to hinder the growth of online distributors that it views as a threat to the traditional pay-TV model."

As a condition for approving the merger, the Justice Department has been pressing the telecommunications and media giants to sell Turner Broadcasting, the Time Warner unit that includes CNN. Randall Stephenson, AT&T's CEO, said in a press conference that he didn't know if the suit was about CNN, but said he was confident it would fail.

He said there was very little legal precedent to support the government's assertion. 

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.

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 brands 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.

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.

"The issue isn't so much that these two compete right now," a Justice official said, but the "potential actions they could take." 

David McAtee II, senior vice president at AT&T, disputed the DOJ's assertion that the merger would eliminate competitors and raise costs for consumers, calling the suggestion "pure fiction."

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.