What We Learned From the First Day of the AT&T-Time Warner Antitrust Trial
Actually, the proceedings were really evidentiary hearings, in which the judge heard from both sides on what emails and documents they thought should be allowed to be admitted as evidence in the trial. Opening arguments won’t be until Wednesday, so this was really a prelude, to decide what gets to be talked about when things really get up and running.
That said, there were still moments that offered a glimpse of what is to come over the next few weeks:
AT&T and Time Warner rivals may testify on why they don’t like the merger. Part of Monday was devoted to the question of how to handle documents from third-party witnesses when they testify in the case. The companies are rivals to AT&T and Time Warner, and want the court to keep most of their information confidential. Judge Richard Leon is grappling with how to handle situations when they take the witness stand and are questioned about the documents — i.e. does he clear the courtroom and make their testimony private?
So far, he’s asked the lawyers to try to work it out among themselves. But it raises the very real possibility that the trial will show which companies have been expressing their concerns about the merger to the Justice Department, something that is usually kept in confidence in past transaction reviews. The DOJ sees their testimony as important to show how their bargaining will change for the worse if AT&T-Time Warner gains increased leverage and are able to demand higher prices for content. Among those expected: an executive from Google talking about YouTube TV and the importance of its “virtual” multichannel platform in obtaining the Turner networks.
Daniel Petrocelli, the lead counsel for AT&T-Time Warner, told the court that the rival companies have been “working very closely with the government and have met many, many times.” He suggested that they would offer testimony warning of the increased leverage of a combined AT&T-Time Warner, but argued that it would be “all speculation about what could happen.”
Leon acknowledged that such third-party competitors “are afraid … that if this goes through, they are in a worse position than they are in now.” But he also expressed concern that too much was being kept from public view. “There’s no way all this stuff should be confidential,” he said.
The Justice Department says emails contain “startling statements.” Eric Welsh, one of the Antitrust Division lawyers, argued for the admission of a trove emails from AT&T and Time Warner employees, and at one point said the court “will see some startling statements from these individuals.”
In many cases, AT&T-Time Warner is objecting to the admission of many of the emails unless they are connected to witness testimony. Petrocelli argued that in some instances, the emails are from lower-level employees who don’t have authority over merger decisions, and he pointed out that the government is seeking to enter 18 exhibits into evidence that come from one person just out of business school.
He also downplayed what evidence the government does have, calling their strategy the “incredible shrinking case.” He suggested that the government lacks a smoking gun document, like one where an executive comes out and says that the merger will allow them to raise prices. “You will see none of those,” he said.
AT&T CEO Randall Stephenson and Time Warner CEO Jeff Bewkes are expected to testify, and will attend opening arguments on Wednesday.
Welsh said the DOJ would be adding witnesses to address some of the documents.
The DOJ is determined to use AT&T’s own words against it. The Justice Department wants to admit past filings that AT&T has submitted to the FCC in some of its public proceedings, including Charter’s proposed acquisition of Time Warner Cable in 2016, AT&T’s merger with DirecTV in 2015, and a programming carriage proceeding in 2012.
Welsh said such past statements are important to show that the company recognized the value of so-called “must have” content for multichannel platforms — a key argument in its case — and how vertical integration could have an impact on leverage in the marketplace. “Now today they are coming into court saying, ‘Don’t worry because it’s not going to be an issue,’” he said.
Petrocelli, though, said that what the company said in past FCC proceedings shouldn’t have a bearing on the present case because so much has changed in the intervening years. “The government cannot prove its case … with respect to another issue in another matter.”
There looks to be a long trial ahead. Leon is concerned about the volume of exhibits the parties are trying to admit. He several times expressed hesitation about including as evidence slide decks, or the PowerPoint presentations that are ever more common in corporate America, unless the relevance can be established.
The proceedings are expected to last six weeks at a minimum, Leon said. As high as the stakes are, not every moment will be earth shattering. That was evident after the court was about to return from its first break on Monday morning. One of the U.S. marshals warned those watching, “Do not nod off,” or he’d give them a tap on the shoulder.