WASHINGTON (CN) - The Department of Justice made its final push Monday to block the $85 billion AT&T-Time Warner merger, asking a federal judge to either enjoin the merger or allow AT&T to buy only a portion of the content giant.
Arguing on behalf of the Justice Department, Craig Conrath called the merger "a big deal," and said during closing arguments in the case that it would change all of AT&T's relationships with its competitors across the pay-TV industry. He also said it would have a "massive effect" on the pay-TV industry itself.
The Justice Department sued on Nov. 20 to block the deal, citing violations of antitrust law.
"We have a Clayton Act precisely for deals like this," Conrath argued to a packed courtroom late Monday morning, which spilled over into and nearly filled an overflow room with audio of the proceedings.
AT&T and Time Warner executives, including chief executives Randall Stephenson and Jeff Bewkes attended the closing arguments.
Over seven weeks of trial, the government has argued that the deal will give AT&T, which owns DirecTV, increased leverage over rivals during carriage negotiations for popular Time Warner content, such as Turner Broadcasting System networks like CNN, TBS and TNT.
During the trial, executives from DirecTV's competitors like Dish Network, Charter Communications and Cable One testified that those Turner networks are "must-have" for their subscribers.
That's because, they said, customers value the live news and marquee sports events these networks carry, such as live election coverage, the NCAA college basketball championship tournament known as March Madness, and NBA games.
Highlighting the importance of the content, Turner chief executive John Martin, who was called by the government as an adversarial witness, revealed during the trial that Turner pays $1 billion each year for the rights to broadcast NBA regular season and playoff games.
But according to Conrath, the merger will give AT&T the incentive and the ability to threaten to black those must-have channels out, and to demand higher prices from distributors. The government has argued this increased leverage will lead to higher content prices, which will ultimately get passed on to consumers to the tune of $571 million by 2021.
On the high end, the government's key expert witness Carl Shapiro said that pay-TV consumers could see a 45-cent increase on their monthly bills. On the low end, the University of California, Berkeley economics professor estimated an increase of 25 cents.
"If AT&T can push up its prices, consumers will pay the price," Conrath said.
According to the government, the deal could also hurt competition because subscribers would be incentivized to switch to DirecTV if they lose access to Turner networks at competing pay-TV distributors.
The key fact in the case, Conrath argued, is that prior to the merger Time Warner had the incentive to distribute its content widely. Post merger, however, Conrath said it could also make money by siphoning off subscribers from AT&T's rivals.
During the trial, AT&T chief executive Stephenson called the antitrust concerns about the merger "absurd."
But Conrath noted during trial, and reiterated during closing arguments, that Stephenson had expressed similar concerns to Time Warner chief executive Jeff Bewkes after he informed Stephenson the content giant had purchased a 10 percent stake in online video service Hulu.
"So maybe that concern isn't so absurd after all," Conrath said.