AT&T got its big day in court Tuesday.
A federal judge in Washington ruled the giant telecommunications company can proceed with an $85 billion merger with media conglomerate Time Warner.
AT&T has reportedly said the merger is necessary to fend off the growing competitive threat from tech companies such as Google and Netflix.
Why does this matter?
The merger is one of the largest deals in decades, and it’s likely to reshape the media and telecommunications industry, according to experts. The combined company will control assets as diverse as HBO, CNN, and DirecTV.
President Trump’s Department of Justice (DOJ) had voiced opposition to the merger since its announcement in 2016, saying it would restrict competition and increase consumer costs for a range of services from phone and internet to cable and television programming.
More mergers to come
The ruling in favor of AT&T is likely to give a green light to a wide range of mergers that are slated to take place, which must also get approval from the DOJ.
- CVS announced at the end of December that it plans to purchase health insurance company Aetna for approximately $69 billion in cash.
- Amazon has made a bid to purchase Whole Foods for $14 billion.
- Walmart wants to acquire healthcare provider Humana, for an estimated $37 billion.
- Comcast has made a bid for 21st Century Fox, which Disney already agreed to purchase.
Different types of mergers
These are known as vertical mergers, because the companies operate in distinct, although sometimes overlapping, industries. Such mergers typically have fewer monopoly concerns. In AT&T’s case, it runs a network that could distribute the content made by Time Warner.
By contrast, horizontal mergers, which is when companies in the same or very similar businesses agree to merge, can potentially create a monopoly. (The proposed merger between Disney and 21st Century Fox for $52 billion could be a horizontal merger, as would Sprint’s plan to combine with T-Mobile.)
DOJ’s resistance to the merger set off the court case. Its opposition has been linked to the president’s antipathy toward CNN, which Time Warner owns, according to some analysts. The Trump administration’s opposition to the merger stands in contrast to its pro-business and anti-regulation stance.