Economist tells U.S. judge AT&T-Time Warner deal would harm consumers


WASHINGTON (Reuters) – The U.S. Justice Department called an economist on Wednesday to testify that allowing ATT (T.N) to purchase movie and TV production company Time Warner (TWX.N) would cost consumers hundreds of millions of dollars, as the government wrapped up its efforts to convince a judge to stop the proposed deal.

FILE PHOTO: An ATT logo is pictured in Pasadena, California, U.S., January 24, 2018. REUTERS/Mario Anzuoni/File Photo

Carl Shapiro, an economics professor at the University of California at Berkeley, said the planned $85.4 billion merger would give ATT, which owns DirecTV, leverage to charge more for Time Warner’s Turner family of channels, which includes sports and CNN.

It would also give ATT the opportunity to coordinate with Comcast Corp (CMCSA.O), which owns NBCU, to starve cheaper online video companies of content, he said.

FILE PHOTO: A screen shows the current price of Time Warner shares, above the floor of the New York Stock Exchange, shortly after the opening bell in New York, U.S. on November 15, 2017. REUTERS/Lucas Jackson/File Photo

Shapiro is expected to be the government’s last witness as it seeks to show that the proposed merger is illegal under antitrust law because it would harm consumers. The government filed a lawsuit in November and is asking Judge Richard Leon to block the deal.

Following Shapiro, who will likely face cross examination Wednesday afternoon, ATT’s lawyers are expected to bring their own economist, Dennis Carlton of the University of Chicago.

Shapiro testified that ATT’s ownership of DirecTV means that it will likely raise rates for content when it negotiates contracts with other cable and satellite companies, and will be more willing to let contracts lapse so DirecTV could win over irritated subscribers when the rival “goes dark.”

Blackouts mattered, he said. “Even though they don’t happen very much, that’s the key to leverage,” he said.

Shapiro noted that companies tend to function as one entity, rather than parts. “That (NBCU’s strategy) would not be in the combined interest of the company. They would be leaving money on the table,” he said.

The trial, which began in mid-March in the U.S. District Court in Washington, is expected to wrap up this month.

ATT has denied that the merger will hike costs and questioned the government expert’s model. The company has said it believes the deal would actually lead to a price decrease in prices for pay TV subscribers.

Reporting by Diane Bartz; Editing by David Gregorio

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