Modeling complexity in the AT&T–Time Warner merger appeal

[Commentary] To be sure, the Department of Justice has a right to appeal [the Sinclair/Tribune decision], and it has done so well within the 60 days allowed from the handing down of the Judge Leon decision on June 12. But one wonders what grounds support the DOJ’s claims that “in approving the merger, the district court rejected fundamental principles of economics, creating uncertainty that will have an outsized effect on vertical merger analysis.” The DOJ appears to be facing an uphill battle in the appeal as the economic models it relied on are useful only in that they are demonstrably a good approximation of the realities in the world in which the merger is grounded. 

If the DOJ’s appeal is to be successful, then (given its articulated grounds) it must demonstrate that the judge has erred in his assessments of the facts and the applicability of the models used in the original arguments. The economics of the models may be beautiful, and correct in certain circumstances, but if those circumstances do not prevail, the models will not help. The current reality is complex and it is posing new challenges to economists to develop new models that account for these factors. And as in the past, these new cases are providing the impetus to develop them.

[Bronwyn Howell is an adjunct scholar at the American Enterprise Institute]