Late last month, the US Department of Justice sued to stop AT&T's $85.4 billion acquisition of Time Warner, making the DOJ the only regulatory body in the world to do so since the deal was announced in late 2016.
In its complaint, the department cited the likelihood that vertically integrating the telecom giant's DirecTV subsidiary with the owner of CNN and HBO would hurt consumers. The DOJ also claims a deal between a content distributor and a content creator could harm competition and stifle innovation in video streaming.
If that all sounds familiar, it's because it should. Just eight short years and one day ago, Comcast announced the first stage in its acquisition of NBCUniversal, a 51% stake that it would pick up from GE for $6.5 billion in cash. The deal was hardly met with universal approval from regulators, however, prompting the Federal Communications Commission and the DOJ to secure guarantees from Comcast and NBCUniversal that they would preserve competition and encourage innovation.
The companies made a number of public interest commitments to secure regulatory approval, ultimately arguing that the combination would, among other things, accelerate innovation in "the 'new media' future of in-home and mobile entertainment."
It was the first transaction in the US to merge a content distributor with a creator. The joint venture brought together Comcast's cable programming networks, Fandango and Daily Candy, with NBCUniversal's broadcasting, cable programming, movie studio, theme park and online content.
Comcast became NBCUniversal's majority owner in January 2011. The deal, which Comcast and GE planned to put together piece by piece over seven years, would total $16.7 billion and value NBCUniversal at about $30 billion. Ultimately, Comcast broke with the planned timeline in 2013 and bought GE's remaining share of NBCUniversal outright that March.
Comcast's deal for NBCUniversal remains the cable company's largest acquisition to date. Moreover, pegged at its $16.7 billion total, it ranks right behind Thomson's 2008 acquisition of news agency Reuters as one of the media's biggest transactions to close in the last decade, per the PitchBook Platform.
Appealing to precedentCompetition among online video providers still looms large in the minds of regulators, with the public also peppering them with comments about the deal between AT&T and Time Warner over the past year.
However, regulators ultimately did not ask either Comcast or NBCUniversal to divest anything to remedy the transaction. That included NBCUniversal's stake in streaming video platform Hulu. Rather, Hulu's parent company agreed to a handful of "behavioral remedies" that included giving up its management role on the platform.
In addition, it had to guarantee that NBCUniversal content could still ship to competitors—a guarantee that AT&T has also offered, along with arbitration provisions for other distributors, which it has likened to those deployed in professional baseball.
Above all, though, like Comcast, AT&T sees itself doing this deal to stay competitive in an increasingly crowded space:
"Simply put, no competitor will be eliminated by this merger. This transaction is therefore a classic vertical deal, combining Time Warner's video content with AT&T's video distribution platforms so that the merged company can compete more effectively against market-leading cable incumbents and insurgent tech giants," AT&T has asserted in its defense against the DOJ's suit.
In other words, acquiring Time Warner represents for AT&T its best chance at playing catch-up with the likes of Amazon, Google and Netflix.
AT&T and Time Warner have extended the deadline on their deal to April 22, 2018. The new timeframe gives them five months to let the DOJ's lawsuit play out. The pair initially announced that they expected the deal to close by the end of this year.
Judge Richard J. Leon of the Washington DC US District Court has set the first hearing in the trial for December 7. His appointment may bode well for AT&T and Time Warner: Leon also handled the hearing over Comcast's deal for NBCUniversal in 2011.
Related read: Content, meet distribution: Telecom M&A in 2017
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