Earlier this week, the D.C. Circuit’s decision to allow AT&T’s acquisition of Time Warner cited an amicus brief filed by the Open Markets Institute. The Open Markets brief focused closely on the dangers to open competition and free expression posed by vertical consolidation between providers of essential communications services and the production of news and entertainment.

“We are disappointed by the D.C. Circuit's decision to affirm the District Court's ruling permitting AT&T to acquire Time Warner,” said Open Markets Legal Director Sandeep Vaheesan. “This case was a major loss for the Department of Justice, which had not litigated a vertical merger since the 1970s. While the District Court wrote its decision in a relatively ‘appeal-proof’ way, the D.C. Circuit’s citation of the Open Markets brief indicated the DOJ had better chances of victory on appeal had it pursued a different legal strategy.”

Open Markets was cited three times in the court's opinion. Open Markets, the court wrote, was one of “[s]everal amici [who] urge this court to speak definitively on the proper legal standard for evaluating vertical mergers."

In its appeal, the Department of Justice’s Antitrust Division excessively emphasized short-term price effects and did not fully present the medium and long-term competitive harms from AT&T potentially using essential Time Warner content, such as HBO, as a weapon against present and future distribution rivals.

The court highlighted: "There is a dearth of modern judicial precedent on vertical mergers and a multiplicity of contemporary viewpoints about how they might optimally be adjudicated and enforced." In noting this lack of analytical guidance, the court practically invited the federal antitrust agencies to publish new vertical merger guidelines. At the end of 2018, we submitted a comment to the Federal Trade Commission (FTC) – which also has not challenged a vertical merger since the 1970s – about the urgent need for strong vertical merger guidelines.

Importantly for future anti-merger enforcement, the Court opinion, citing Open Markets, stated: "Preliminarily, the court does not hold that quantitative evidence of price increase is required in order to prevail on a Section 7 challenge (sic). Vertical mergers can create harms beyond higher prices for consumers, including decreased product quality and reduced innovation." 

We are pleased the D.C. Circuit has cited our work and implied that the DOJ could have won the case under a different legal theory. “Instead of waiting another 40 years to challenge a vertical merger, the antitrust agencies should take up our call for new vertical merger guidelines and pursue legal theories that do not focus principally on the short-term price effects of vertical and horizontal mergers,” Vaheesan said. “Open Markets will continue to demand that the DOJ and FTC vigorously enforce anti-merger and anti-monopoly laws.”