A Dose Of Reality On The AT&T-Time Warner Merger

[Commentary] The AT&T-Time Warner merger is not a horizontal merger. AT&T and Time Warner are not competitors. AT&T provides wireless and broadband Internet service, while Time Warner creates movies, TV shows and other content that AT&T and other distributors transmit to consumers. AT&T and Time Warner operate at different levels of the distribution chain. Theirs would be a “vertical merger.” The central question in any merger review is how the transaction will impact consumer welfare. Because AT&T and Time Warner are not competitors, concerns about increased market power or loss of competition do not apply. Rather, the pertinent inquiry is whether AT&T ownership of Time Warner content will lead to exclusive dealing, improper favoritism, or other acts that narrow consumer choice and reduce service quality.

At the same time, we should carefully evaluate the parties’ claims that the merger will benefit subscribers by, for example, expanding the amount of available content that doesn’t count against monthly data caps. Rather than fall prey to hyperbole or to simplistic, knee-jerk claims that bigger is always worse, reviewing authorities owe it to consumers to analyze the AT&T-Time Warner merger according to the law and economic reality. That the proposed transaction is a vertical, rather than a horizontal, merger should give some comfort to concerned parties. But due diligence is still needed to ensure that the merger will benefit consumers.