Justice Department Antitrust Chief Indirectly Pushes Back on AT&T Criticisms

Justice Department antitrust chief Makan Delrahim Friday indirectly pushed back against some of AT&T Inc.'s arguments in support of its proposed acquisition of Time Warner Inc.

Mr. Delrahim, who is considering whether to challenge the AT&T-Time Warner deal, rarely mentioned the telecom giant by name during his comments at the University of Southern California, where he gave a speech about competition and intellectual property. But during a question-and-answer session that followed, he addressed two points that AT&T CEO Randall Stephenson has made publicly in recent days.

Mr. Stephenson has said the Justice Department in the modern era always approves so-called vertical mergers that combine complementary companies that aren't head-to-head competitors. AT&T says its Time Warner acquisition is this type of transaction.

Mr. Delrahim, responding to a question at USC about vertical mergers, said it wasn't accurate to say the Justice Department doesn't challenge such deals. He said the department has forced changes to past vertical mergers and objected to one such deal in the semiconductor industry last year -- a merger of Lam Research Corp. and KLA-Tencor Corp. -- which the companies abandoned in light of the government's objections.

Also without mentioning AT&T by name, Mr. Delrahim spoke to the company's argument that the Time Warner deal would be beneficial because it would let AT&T compete with powerful companies like Alphabet Inc.'s Google and Facebook Inc. by giving it a strong platform to attract customers and advertisers.

Mr. Delrahim began by citing former President Ronald Reagan's quote that the most terrifying words in the English language are "I'm from the government and I'm here to help." He added that people "should be equally terrified when an incumbent company, in whatever industry, says, 'I'm here to help you against the evils of dynamic competition from Netflix, Amazon, Google, Facebook.' "

An AT&T spokesman declined to comment.

Mr. Delrahim's comments are the latest chapter in an unusually public tussle between the Justice Department and the companies. They follow a public appearance Thursday by Mr. Stephenson at the New York Times DealBook conference, where he said the idea "borders on comical" that AT&T would be too powerful if it acquires Time Warner.

That is not an assessment shared by the Justice Department, which has concerns that AT&T after the acquisition would have enough control over video content and its distribution that it could disadvantage competitors and consumers, according to people familiar with the matter.

The Wall Street Journal reported last week that the Justice Department was considering filing a lawsuit to challenge the deal, but also was talking with the companies about a settlement that could address the government's antitrust concerns. No final decision has been made, and the timetable for doing so remains unclear.

At a meeting Monday between AT&T and the Justice Department, the agency raised the prospect that the telecom giant would have to sell off either Time Warner's Turner unit, which includes CNN, TBS and other cable networks, or the DirecTV satellite business that AT&T bought two years ago, according to people familiar with the matter.

The department has since sent signals that the companies may be able to offer other solutions to address the government's antitrust concerns.

Mr. Stephenson said Thursday that his meeting on Monday with Mr. Delrahim was productive and that the company would continue to work toward a negotiated settlement. He added that he wasn't willing to sell off any large asset to win government approval and was prepared to litigate against the Justice Department in court if necessary.

The public debate between the Justice Department and AT&T isn't the only unusual aspect of the deliberations. Hanging over the Justice Department's review of the deal are comments by President Donald Trump during last year's campaign.

Mr. Trump pledged as a candidate that his administration would block the deal, saying it would give one company too much power. He also has repeatedly criticized the way Time Warner's CNN has covered his campaign and presidency.

Presidents and candidates don't normally take public positions on whether specific mergers should be approved. That decision rests with antitrust enforcers at the Justice Department, or in some cases the Federal Trade Commission.

Mr. Stephenson said Thursday he had no reason to believe that antitrust officials' examination of the deal was influenced by Mr. Trump.

Mr. Delrahim, speaking to a reporter after the USC event, said he was pleased that Mr. Stephenson had made that comment.

During the event, he reiterated his previous statements that he hasn't had any communication with the White House about the AT&T deal.

"I can't get any more clear than that," Mr. Delrahim said. Some people may try to inject politics into an antitrust review, he said, but "I've got to keep my nose down, be a law enforcer, do what's good [for] the American people."

Drew FitzGerald contributed to this article.

Write to Sara Randazzo at sara.randazzo@wsj.com and Brent Kendall at brent.kendall@wsj.com

(END) Dow Jones Newswires

November 10, 2017 20:38 ET (01:38 GMT)