The American Cable Association has told a federal appeals court that it should throw out the district court's decision to allow the AT&T-Time Warner merger and kick the case back to that court for a new trial.
That came in an amicus brief to the U.S. Court of Appeals for the D.C. Circuit. ACA says the lower court's "incorrect and inconsistent" economic analysis demands that the ruling be reversed and the case re-tried.
"A decision that applies a basic economic principle at one point but then rejects precisely that same principle at another—without reconciling the divergence—is not merely inconsistent with principles of judicial reasoning; it is also inconsistent with basic economics," ACA told the court, with an assist from antitrust expert and Northwestern University professor William Rogerson. "The laws of supply and demand, bargaining principles, and theories about firm behavior should not be banished from one part of the analysis of a merger but reappear without explanation, apparition-like, in another."
Rogerson was the FCC senior economist who oversaw the FCC's review of the proposed Comcast-Time Warner Cable, AT&T-DirecTV, and Charter-Time Warner Cable mergers.
U.S. District Court Judge Richard Leon ruled June 12 that the government had failed to prove its case that the merger would not be in the public interest. The merger combined the distribution muscle of DirecTV and AT&T's broadband service with Time Warner and Turner programming networks including HBO, CNN and high-value regional sports nets.
ACA has long argued that such power is used to force its smaller distribution members into bad or more expensive deals to get access to must-have programming.
The judge concluded in a 172-page decision that DOJ "failed to meet its burden to establish that the proposed transaction is likely to lessen competition substantially," and thus declined to enjoin the merger.
Judge Leon concluded that government had failed to clear the first hurdle of showing that the proposed merger is likely to increase Turner's bargaining leverage in affiliate negotiations, so did not have to consider whether such increased leverage would lessen competition and violate antitrust law.
While Leon is just one judge in a circuit court, his ruling had wider implications because it sent a signal that distributors aren't foreclosed from trying to beef up their programming to compete with over-the-top players, as long as they do not use that asset anti-competitively.