WASHINGTON _ The government on Monday made its final plea to a federal judge to block AT&T Inc.'s $85.4-billion purchase of Time Warner Inc. or order it significantly scaled back, arguing that the combined company would be so powerful it would hinder competition and raise pay TV prices for consumers.
"This merger is a big deal.... It would have a massive impact on the structure of the pay TV industry," Justice Department lawyer Craig Conrath said in his closing arguments in the six-week antitrust trial.
"This is not just a big deal for the companies involved. It is a big deal to consumers ... and a big deal to antitrust," he said.
U.S. District Judge Richard Leon, who listened intently to Conrath's closing arguments, will determine if the companies will be able to combine AT&T's telecommunications empire with Time Warner's stable of must-have content to form a media colossus.
Watching from the second row in the packed Washington, D.C., courtroom were AT&T Chief Executive Randall Stephenson and Time Warner Chief Executive Jeffrey Bewkes. Their attorney, Daniel Petrocelli, will give his closing arguments later Monday.
A major focus of the trial was whether consumer prices would be driven up because of the clout of a bulked-up AT&T to demand distributors pay more for Time Warner's high-demand content, including HBO, CNN, TNT, and Hollywood's largest movie and TV studio, Warner Bros.
"They'd be a gatekeeper for the content their rivals need," Conrath said. "AT&T will be able to push up its prices and consumers will pay the bill."
AT&T would have incentive to threaten to withhold Time Warner content from rivals because its DirecTV unit could gain customers who cancel subscriptions with those rivals because they lack that content, Conrath said.
A government expert argued prices would rise by hundreds of millions of dollars a year. An expert for AT&T and Time Warner said those calculations were faulty.
Conrath urged Leon to nix the deal or provide significant structural remedies to preserve competition. He said Leon could force AT&T to sell Time Warner's Turner networks, which include CNN, TNT, TBS and Cartoon Network, or divest its DirecTV unit.
Those divestitures were similar to ones proposed by the Justice Department and rejected by AT&T before the government filed its lawsuit.
Leon is expected to rule by the June 21 deadline the companies have set to complete the deal. In the interim, the two sides could decide to settle the suit if they can agree to conditions to allow the merger to be completed.
Makan Delrahim, the Justice Department's antitrust chief, told reporters last week that his "line is always open," suggesting a settlement was possible.
The Justice Department has been stymied several times by Leon in its attempts to introduce evidence to bolster its case. But some confidential evidence has been submitted, making it difficult to determine which side has the upper hand.
AT&T, which purchased DirecTV three years ago, already is the nation's largest pay-TV provider with more than 25 million customer homes. The company also has more than 100 million customers for mobile service, which is the preferred way many younger Americans watch programming.
The deal, announced in October 2016, would give AT&T control of Time Warner's media empire.
The companies argued they need to merge to compete in a rapidly changing media landscape. Stephenson testified this month that his company needed "premium content" to compete with Netflix, Amazon.com, Facebook and Google in the battle to engage consumers and target advertising tailored to their habits.
But the Justice Department sued, alleging that AT&T would use its expanded size to demand higher distribution fees and freeze out new TV entrants.
Government lawyers sought to prove to Leon that AT&T could try to "weaponize" Time Warner content _ threatening to withhold it from competitors, particularly online rivals.
Such a move, the Justice Department has said, would be done in coordination with Comcast Corp. withholding its own NBCUniversal content, to try to hobble the efforts of Sling TV and other Internet-bases services to lure away traditional pay-TV customers.
AT&T's lawyers have argued that if it acquired Time Warner, it would want to sell the programming to as many services as possible.
AT&T argued that prices would go down if the deal is approved. AT&T also noted that the purchase of Time Warner is a vertical merger, meaning the two companies do not directly compete in their primary business.
The Justice Department hasn't successfully blocked a vertical merger in nearly 50 years.
Such deals are different from horizontal mergers, which involve companies that primarily compete directly. Those deals remove competitors from the marketplace and are more frequently blocked.
AT&T said that in 2011, the Justice Department allowed a major media vertical merger when it approved Philadelphia cable-TV giant Comcast Corp.'s acquisition of NBCUniversal.
