“I have no evidence that there’s been inappropriate behavior. What I have is a really peculiar timeline.”
I’m on the line with Randall Stephenson, AT&T’s chief executive. I’ve heard other CEOs offer up brutal judgments of this and previous administrations — invariably in off-the-record interviews. This one’s on the record.
Stephenson is battling the Justice Department, which recently sued to block AT&T’s $85.4 billion bid for Time Warner. The suit marks the first time in nearly 40 years that Justice has tried to quash such a deal, known as a vertical merger. The Obama administration approved a similar merger — one that brings together companies that don’t compete and that offer different products and services — between Comcast and NBC-
Universal in 2011.
What’s different this time? Vertical mergers have long had liberal critics, and Senate liberals Elizabeth Warren, Bernie Sanders and others have expressed public misgivings about AT&T’s bid.
But this is supposed to be a pro-business, anti-regulation, conservative administration. And Makan Delrahim, a political appointee who served as Donald Trump’s deputy White House counsel before taking over Justice’s Antitrust Division, previously said of the deal, “I don’t see this as a major antitrust problem.”
That was before he got his current job. Once he did, Stephenson says, “Temperatures change rather quickly, and Delrahim’s own attitude changes rather quickly.”
Consider the timeline: Delrahim is confirmed on Sept. 27 as his department seems to be moving toward a consent decree for the merger. On Oct. 27, CNN breaks the story that special counsel Robert Mueller filed charges in the Russia probe. On Oct. 30, the president and the vice president are to have a private lunch with Attorney General Jeff Sessions, who is nothing if not eager to get back into his boss’ good graces.
On Nov. 2, The Wall Street Journal gets the bombshell scoop that the Justice Department is inclined to block AT&T’s bid. The same day, the president answers a radio host’s question about Hillary Clinton’s emails by saying he is “very frustrated” that he is “not supposed to be involved with the Justice Department.”
In other words, either Delrahim has miraculously seen the liberal light when it comes to vertical mergers, or he’s channeling the wishes, implied or explicit, of the “very frustrated” man who has made his feelings about the merger well known and could yet make him Sessions’ successor.
The government claims that the merged company could jack up prices on other distributors for must-watch content like HBO’s “Game of Thrones,” and that it would also “slow the industry’s transition to new and exciting video distribution models.” But the arguments, Stephenson notes, are “bizarre at best.”
“One has to assume two things,” he says of the idea that the merger will lead to higher prices for consumers. “That (Time Warner subsidiary) Turner has market power, and that (AT&T subsidiary) DirecTV has market power.” But with roughly 10 percent and 20 percent of their respective markets, they don’t. As for the industry’s “transition,” has the government not heard of Amazon Prime?
Meantime, companies like Google and Facebook are gobbling up digital advertising dollars. “How do we compete with these guys?” Stephenson wonders. “If we can’t take someone with less than 10 percent of viewership and pair it with distribution, what can we do?”
That’s the economic question. Then there’s the political one. Donald Trump makes no secret of his feelings about CNN, a Turner subsidiary. Last Tuesday, he reiterated his view that the merger was “not a good deal for the country.”
I ask Stephenson whether the government proposed the divestiture of CNN as a condition for its consent. He won’t say, citing the confidentiality of negotiations with the government. It has been widely reported that the government had suggested the sale of Turner as one possible way out of the impasse.
But the circumstantial case that the Justice Department’s decision is politically motivated is compelling. For conservatives, it’s a fresh reminder that the administration’s pro-business convictions go only as far as the president’s convenience. A Sanders presidency would also have opposed the merger, though at least it would have done so honestly. What we have instead is economic policy conducted as an extension of presidential pique.
As for liberals, those inclined to agree with Justice’s decision should note how similar it is to the administration’s curious outreach to Russia. The curiosity isn’t that there is no rational argument for improving relations with Moscow or opposing the merger. It’s that the argument is being made by an administration whose ideological instincts otherwise lean in the opposite direction.
I ask Stephenson if the government’s suit smacks of the kind of political risk multinational companies often face in autocratic countries such as Russia or Turkey, where the whims of the ruler have a way of translating into the judgment of regulators and courts.
“I don’t know if there has been political interference, but it’s logical to ask questions,” he says. “You’d have to be naive not to.”
Bret Stephens is a columnist for The New York Times.