The deal may “feel wrong” to a lot of people, but for the regulators it ought not to be a big deal:
AT&T’s proposed acquisition of Time Warner…is considered “vertical” because the two companies largely do not compete against each other but operate on the same supply chain.
This is the bottom line:
“By standard antitrust metrics, this deal should be O.K. in Washington,” said Paul Gallant, a technology, media and telecommunications policy analyst with Cowen & Company. “But the Democratic Party is moving left, and if Clinton wins, this could become an early test for her ‘tougher on business’ rhetoric.”
The negative arguments are speculative or quite a stretch:
AT&T could make it more expensive for its competitors to gain access to Time Warner’s content or give preferential treatment to its own programming, said John Bergmayer, senior counsel at Public Knowledge, a digital rights advocacy group.
That is all from Leslie Picker and Cecilia Kang at the NYT. I would stress that “entertainment” and “content” are sectors where choices have exploded more or less without precedent. If the goal is to stop Time-Warner content from spreading to multiple sectors of the consumer media universe, I don’t see this one as a winner.
More generally, it is hard to see where the efficiencies from the deal are supposed to come from. About the recent Bayer and Monsanto proposed merger I wrote:
There is a well-known academic literature, dating to the early 1990s, showing that acquiring firms usually decline in value after tender offers, especially after the biggest deals. Mergers do not seem to make companies more valuable or efficient.
Why then do so many mergers and acquisitions happen? Well, some of them do pay off (Google buying YouTube), but also many managers engage in empire-building by increasing the size of their companies, even at the expense of the shareholders. Another possibility is what economists call “winner’s curse,” namely that the winner of an auction or contest or bidding war tends to be the person or institution most optimistic, and in fact overly optimistic, about the value at stake.
So from a social point of view, I doubt if there is so much at stake here.