Is Donald Trump Using the Justice Department to Crush CNN?
Or is the Department of Justice finally cracking down on corporate mergers?
The Department of Justice may finally be getting tough on corporate mergers. But it picked a politically explosive case to bring back the forgotten art of trust-busting.
On Wednesday afternoon, The New York Times reported that AT&T and Time Warner, in order to win government approval of their $85 billion merger, are under pressure from the Justice Department to sell off either DirecTV or Turner Broadcasting, the group of cable networks that includes CNN. A different report in the Financial Times, however, claimed that the Trump administration is focused on the sale of CNN specifically.
The latter news sparked concerns that President Trump, who has long berated CNN as “fake news,” was punishing the company for its critical coverage of his administration. Indeed, for any president to use the Department of Justice to punish enemies—either individuals or companies—would be the stuff of authoritarians.
There are two fishy details about the DOJ’s objections. First, Makan Delrahim, Trump’s handpicked head of antitrust at the Justice Department, had previously announced that this merger would be acceptable. The fact that he has changed his mind while working for this White House suggests to some that the administration may have inspired the policy change. Peter Kafka, a media reporter at Recode, called the possibility “chilling.” Second, it’s doubly startling for a Republican administration to suddenly reverse several decades of party leniency on just these sort of mergers, particularly with the president’s favorite target, CNN, hanging in the balance.
But if the White House is truly behind the news, it’s a bizarre play, since it’s not clear what Trump would get out of it. Forcing the sale of CNN wouldn’t destroy the company. At a moment of record ratings, it could fetch a healthy price on the open market. If Trump merely wanted to bend CNN to his will, he might even want to encourage the merger: The CEO of AT&T is Randall Stephenson, a Republican from Texas, who is comfortable with the administration and has praised Trump publicly. Potential buyers of CNN, meanwhile, would include CBS, led by Les Moonves, a Democrat, who might have far more tolerance for the news network’s anti-Trump reporting.
Several antitrust experts that I spoke with said CNN’s role in this story probably has more to do with the merger itself than with the president—which is encouraging. Indeed, there are several meritorious reasons for the Department of Justice to push back against AT&T’s acquisition of Time Warner. What’s more, there are reasons that AT&T would benefit from getting out the narrative to news organizations that the Justice Department might be mistreating it.
Politicians have voiced concerns about the AT&T–Time Warner union for months. In June, 11 Democratic senators signed a letter urging the Justice Department to reject the deal if it could prove that a merger would hurt competition and consumers. “In my view, the merger is potentially anticompetitive,” said Steven Salop, a professor of economics and law at Georgetown Law. Since the 1970s, the federal government has typically allowed “vertical mergers” between companies that do not have competing divisions. AT&T is a telecom company that specializes in distribution, and Time Warner is a media company that specializes in content. So, this looks a vertical merger.
But it doesn’t take much creativity to see how their combination could lead to anticompetitive practices. AT&T or DirecTV could make it cheaper for consumers to watch Time Warner content, like HBO, which would hurt competitors, like Disney. More subtly, AT&T could collect data about Time Warner and share it with its own advertisers, but not with its competitors, which would put other entertainment companies at a disadvantage. “I don’t see how anyone can know right now whether this is Trump trying to punish CNN,” Salop says. “But it does not matter. Retaliation or not, this is just good vertical-merger enforcement.“
For AT&T, whose big deal is now potentially in jeopardy, it would be strategic to push the narrative that the Justice Department’s objections are all about the president’s beef with CNN. “If I’m AT&T, I’m calling everybody and saying they want us to sell CNN,” said Andrew Jay Schwartzman, who also teaches at Georgetown Law. “That story helps AT&T.” Whether the company did that, though, is unclear.
For Trump to use the Justice Department to throttle his enemies would be a horrifying prospect, and it’s one that he has publicly mused about. But there is another disconcerting possibility here, which is that AT&T recognized it could co-opt the news media’s disgust toward the president to distribute a pro-merger narrative that would drown out the Justice Department’s reasonable objections to its acquisition. It’s important for the news media to remain on authoritarian watch. But a convenient union between anti-Trump journalists and big business would be another dangerous merger.
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