United States v. AT&T, Inc.

In 2016 AT&T, Inc. (defendant) announced its plan to acquire Time Warner, Inc. (defendant) in a vertical merger. AT&T was a video distributor and Time Warner, which owned Warner Brothers, Turner Broadcasting, and Home Box Office Programming, was a content producer and video programmer. The United States government (plaintiff) filed a lawsuit in federal district court to enjoin the merger, arguing that the merger between the distributor and programmer would harm competition in the video-programming and video-distribution industry. At trial, the government presented evidence that it claimed showed the merger would harm competition by increasing consumer prices. Part of the government’s evidence was the expert opinion of Professor Carl Shapiro, who applied an economic theory of bargaining to the merger. Shapiro believed that the merger would allow Time Warner to increase its bargaining leverage with other distributors, charging competitors higher prices to distribute its content. Further, because AT&T would own Time Warner’s content, consumers seeking that content were likely to switch to AT&T from other distributors. AT&T and Time Warner presented evidence that they claimed showed the merger would lead to lower consumer prices. The district court found in favor of AT&T and Time Warner, holding that the government had failed to show that the merger was likely to substantially lessen competition in the video-programming and video-distribution industry. The district court cited evidence presented by AT&T and Time Warner in its decision and found that Shapiro’s theory about bargaining leverage was unsupported by evidence. The government appealed.