United States v. AT&T/Time Warner: A Triumph of Economic Analysis

Abstract

The DOJ’s lawsuit to block the AT&T/Time Warner transaction marks the first time in 40 years that a court has heard a fully-litigated challenge to a vertical merger. Following a six-week trial, Judge Leon issued a comprehensive 172-page decision holding that the DOJ failed to show that the transaction would be anticompetitive. Although the decision does not break new legal ground, it does represent a welcome reminder of the primacy of economic analysis over hot documents, testimony of rivals, and politics. As populist cries for increased government intervention to combat perceived widespread industry consolidation continue to mount – calls that often are proudly indifferent to the economic impact of the transaction – Judge Leon’s decision is a victory for evidence-based antitrust law. As the government now appeals the decision, we believe the D.C. Circuit should affirm the holding in the case and more broadly Judge Leon’s economic evidence-based approach.

Keywords: vertical mergers, foreclosure, antitrust, DOJ, double marginalization

JEL Classification: K21, L41, L42