This gutsy tactic could make or break the AT&T-Time Warner court fight

Wednesday , February 14, 2018 - 2:50 PM

Brian Fung

(c) 2018, The Washington Post.

The landmark court battle between AT&T and the U.S. government took another unusual turn Wednesday when reports surfaced that the telecom giant may seek to call the Justice Department’s top competition regulator - the very same person working to block AT&T’s megadeal with Time Warner - as a potential witness in the case.

The tactic is unprecedented, according to legal experts, and suggests that AT&T is so confident in its case that it is willing to take the fight directly to its primary antagonist, antitrust chief Makan Delrahim, as part of an aggressive strategy to discredit the Trump administration’s lawsuit.

“No antitrust defendant has ever called in the [assistant attorney general] for antitrust to explain why he brought the case,” said Berin Szoka, president of the think tank TechFreedom. “It’s Litigation 101: You just don’t give a platform to your chief opponent unless you’re really sure it will turn out in your favor.”

The Justice Department declined to comment on the matter.

On Wednesday, Dan Petrocelli, lead trial counsel for Time Warner and AT&T, said: “This is a matter to be discussed in court, not the press ... we will reserve comment on it for the courtroom.”

That AT&T could call Delrahim himself to the stand, according to a New York Times report, implies that the company is prepared to go on the offensive to save its deal, legal experts say. Delrahim, the Trump appointee who claims the deal could harm competition, made the decision to sue AT&T in November in a bid to block the company’s proposed $85 billion merger with Time Warner. The government rarely challenges mergers involving two companies in different industries on the theory that those types of so-called vertical acquisitions tend to produce efficiencies that benefit consumers. The two sides are gearing up for a courtroom showdown scheduled for March 19.

In the case against AT&T, Delrahim argues that the combined company would have the power to weaken its rivals in the online streaming video business by using Time Warner’s enormous content library as both carrot and stick. (Time Warner owns CNN, HBO and Warner Bros., among other major media properties.) The result, the Justice Department said in its complaint, would be higher prices for consumers and less competition and innovation.

Although AT&T has insisted the acquisition will benefit the public, legal experts say the company’s court strategy appears to center not on touting the merits of the deal but on questioning the legitimacy of the government’s entire case. That strategy that could have major implications for the government’s ability to stop future anticompetitive mergers.

One key plank of AT&T’s strategy, analysts say, will be to raise questions about whether President Donald Trump pressured Delrahim and the Justice Department to block the deal - a serious allegation which, if true, would potentially be an illegal exercise of executive authority.

In 2016 Delrahim said he did not think the AT&T deal would pose a “major antitrust problem.” But Trump has opposed the acquisition, saying it would concentrate too much power in the hands of too few. Since then, Delrahim has taken a much tougher tone on the deal. Last fall, Trump defended his earlier criticism of the planned merger, telling reporters that the decision to sue AT&T was made by “a man who’s a very respected person, a very, very respected person.”

Ahead of his Senate confirmation, Delrahim received lavish praise from Republicans and even acknowledgement by many Democrats concerning his talent and experience as a lawyer. He, along with the Justice Department and the White House, have all issued denials of any improper communications pertaining to the AT&T-Time Warner deal.

“The president did not speak with the attorney general about this matter, and no White House official was authorized to speak with the Department of Justice on this matter,” the White House has said.

“I have never been instructed by the White House on this or any other transaction under review by the antitrust division,” Delrahim has also said.

Some legal experts say those carefully worded denials still leave open the possibility that there were unauthorized, indirect or nonverbal communications on the matter - and that AT&T is expected to use the court process to try to uncover evidence to prove it.

“I’ve always thought that if there were communications, they were from Trump to [Attorney General Jeff] Sessions and then from Sessions to Delrahim,” said one longtime telecom industry analyst, who spoke on the condition of anonymity to speak more freely.

There’s no guarantee AT&T will be able to call Delrahim to testify, however, due to regulations that shape how and whether federal agents may appear in court. The rules, for example, permit the deputy attorney general or associate attorney general to block the testimony of Justice Department officials under certain circumstances, such as if the testimony would lead to the disclosure of classified information or violation of other regulations.

But should AT&T gain permission to bring Delrahim as a witness, analysts say, it could either put more pressure on him to settle the suit out of court - rather than face questioning on the stand - or to reveal what would otherwise be protected communications related to the merger review.

Should AT&T manage to uncover evidence of political influence by Trump, the results are likely to draw scrutiny from the presiding judge, Richard Leon. The judge, who has been described as sharp, aggressive and highly engaged, will not shy from the political questions, according to those who have taken part in cases before him.

“Judge Leon is an active federal judge. He’s not somebody who looks at papers and says, ‘The government brought this case, so they must be right,‘” said David Balto, a former Justice Department antitrust lawyer.

But if AT&T uncovers no evidence of impropriety and Delrahim proves unfruitful as a witness - or his testimony helps strengthen the government’s own case against the merger - that could pose risks to AT&T, analysts say. In that respect, putting Delrahim on the witness list would be a gamble that the company could ultimately lose.

“The bottom line is: If there is political influence, it’s bad for consumers,” said Balto, “because it would lead to the abuse of the antitrust laws in a fashion the powerful would ultimately control. And that’s inconsistent with the purpose of the law.”

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