The case of AT&T and Time Warner is one of the highly controversial merger instances, where one of the largest communications companies seeks to merge with one of the largest media content producers. It can be considered as an example of vertical merger cases, where a distributor acquired a producer or manufacturer. It is important to note that AT&T provides services, such as high-speed internet, next-generation television, and advanced mobile services. Time Warner possesses a large library of high-quality premium content for a global audience, and thus, combining these two giants evidently creates a serious concern in regards to anti-trust laws (Kumar, 2018). Such laws are designed to ensure fair and equal competition, where consumers will be protected from business practices, which can be considered as predatory. The agreement for acquisition between AT&T and Time Warner was invoked on October 22, 2016, which is estimated to have a value of $85.4 billion, where AT&T pays $107.5 for a share comprised of stock and cash (Kumar, 2018). In other words, the deal was confronted by the United States Department of Justice because it will clearly allocate a high concentration of power in the hands of a small group of people.
The merger between AT&T and Time Warner will severely damage the fairness factor of competition since AT&T’s main competitors will be at a disadvantage due to the lack of access to the premium content of Time Warner. In addition, it is important to point out that such poor competition in the market will hurt consumers because power concentration will eliminate incentives for improvement of services and products, which will lead to low quality. In addition, AT&T can achieve a monopolistic position through predatory pricing strategies, where competition is eliminated and customers are charged higher prices later on.
Reference
Kumar, R. (2018). Wealth creation in the world’s largest mergers and acquisitions. Springer.