DOJ could sue to block merger, but AT&T says everything is on track.

AT&T's purchase of Time Warner Inc. is reportedly hitting a speed bump as the Trump administration's Department of Justice considers filing a lawsuit to block the merger.

This wouldn't be a death knell for the merger because the DOJ often files lawsuits against deals that it ultimately approves, and AT&T today said it still expects to get approval. The DOJ's antitrust division could file a lawsuit to block the proposed merger while at the same time filing a proposed settlement that would allow the deal to be approved, as it did last month with CenturyLink's purchase of Level 3.

But a settlement could only happen if AT&T and the government agree on conditions that would offset the merger's harms to competition. So far, negotiations are stalling, according to a report today in The Wall Street Journal.

The DOJ "is laying the groundwork for a potential lawsuit challenging" the proposed merger "if the government and companies can’t agree on a settlement, according to people familiar with the matter," the article said.

The Journal's sources say that DOJ antitrust officials are "preparing for litigation" in case that happens:

Simultaneously, the department and the companies are discussing possible settlement terms that would lead to the deal winning government approval with conditions attached. The two sides, however, aren’t yet close to an agreement, the people said.
The outcome could go either way and the timing of any decision remains uncertain, the people said.

This is a bit of a change from August, when negotiations over merger conditions seemed to be moving forward quickly.

AT&T: This is routine

AT&T has previously said it expects to close the acquisition of Time Warner by the end of this year, and the company continued to express confidence today. AT&T provided this statement:

When the DOJ reviews any transaction, it is common and expected for both sides to prepare for all possible scenarios. For over 40 years, vertical mergers like this one have always been approved because they benefit consumers without removing any competitors from the market. While we won't comment on our discussions with DOJ, we see no reason in the law or the facts why this transaction should be an exception.

AT&T has claimed the merger will benefit customers by providing “more relevant advertising in ad-supported video services,” "greater choice, convenience, and value in programming bundles," and other things. Democratic lawmakers and consumer advocates have urged the government to block the acquisition, saying that it will raise prices for consumers and restrict choices.

AT&T was able to avoid Federal Communications Commission review of the merger by having Time Warner shed FCC licenses that would otherwise have been transferred to AT&T.

Merger conditions prevent bad behavior

AT&T is one of the country's two biggest wireless carriers along with Verizon Wireless. AT&T is also the largest pay-TV provider because of its ownership of DirecTV, and it's one of the largest home Internet providers.

Buying Time Warner would give AT&T ownership of HBO, CNN, Warner Bros., and other programming, letting the company control some of the most valuable video content that is distributed over its broadband and pay-TV networks.

Possible merger conditions could prevent AT&T from discriminating against Time Warner rivals who need distribution of their video over AT&T's broadband and TV services. Additional conditions could also prevent AT&T from restricting access to Time Warner content on rival broadband networks and TV services or prevent AT&T from overcharging rivals like Comcast and other cable companies that want to make HBO and other content available to their customers.

When he was campaigning for president, Trump said that AT&T/Time Warner is "a deal we will not approve in my administration because it's too much concentration of power in the hands of too few."

Trump has continued railing against CNN as president, but he hasn't shown any further inclination to block the merger. Trump appointed lawyer Makan Delrahim to lead the DOJ's antitrust division; Delrahim has said the AT&T/Time Warner deal does not pose a "major antitrust problem."

DOJ staffers investigating the AT&T/Time Warner merger did much of their work while Delrahim was awaiting Senate confirmation, which he received in late September.

"Mr. Delrahim is now involved in the deliberations," the Journal wrote. Even if DOJ staff recommends blocking the merger, Delrahim could overrule them.