At&T and Time Warner argue they need more scale to compete with online rivals like Netflix and Amazon and with Silicon Valley giants like Google, Facebook and Apple which are expanding in the sector. In conclusion, he said, "the government has failed to meet its burden of proof".
The Justice Department must now decide whether to allow the merger to proceed or appeal the decision to a higher court. The judge backed AT&T's and Time Warner's view that the deal was justified by "tectonic changes" and a "veritable explosion" of innovation among vertically integrated competitors. Other acquisitions on the table include Disney's offer to buy 21st Century Fox, drug store CVS's bid for Aetna and T-Mobile's potential merger with Sprint. The approval of AT&T and Time Warner's merger works in Comcast's favor, spurring it to finalize its all-cash offer, which is said to be in the "advanced stages". The Trump administration opposed the merger while the justice department has sued to block it. The ruling comes one day after the repeal of net neutrality, meaning that AT&T now has more freedom to prioritize the delivery of select content on its network.
"We continue to believe that the pay-TV market will be less competitive and less innovative as a result of the proposed merger between AT&T and Time Warner", he said in the statement.
Assistant Attorney General Makan Delrahim said the Justice Department was "disappointed" by the decision, but did not say if it planned to appeal. And Leon's decision is likely to trigger a wave of new mergers, as many executives were waiting to for the outcome of AT&T's bid before pushing forward with their desired deals.
As the owner of Time Warner, AT&T would be able to set the price that other cable or satellite companies must pay for a large quantity of TV programming.
"This decision will have an outsized effect because there are so few antitrust trials that challenge vertical mergers", said Michael Carrier, a Rutgers University law professor specializing in antitrust.
Former Federal Communications Commission staff attorney Blair Levin said a loose interpretation of antitrust law would allow the government to block nearly any deal, and open up the process to political interference.
In a scathing opinion, Leon concluded that the government had failed to show competitive harm and urged the USA government not to seek a stay of his ruling pending a potential appeal, saying it would be "manifestly unjust" to do so and not likely to succeed.
The Justice Department had repeatedly suggested the judge consider forcing AT&T to divest some of Time Warner's cable channels.
The Justice Department charged that AT&T was buying Time Warner so the carrier could charge its competitors more to carry CNN, HBO and National Basketball Association games on TNT, or maybe even cut them off altogether to make its own distribution services more popular.
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