A federal court judge ruled that AT&T can move forward with its purchase of Time Warner and the D.C. Circuit affirmed that decision.
Retained by Crowell & Moring and by Cravath, Swaine & Moore
Judge Richard Leon denied the government’s request to enjoin the proposed $85 billion merger of AT&T and Time Warner, saying, “The court has now spoken and the defendants have won.” Defense counsel retained Cornerstone Research and a marketing expert to testify about survey methods and to rebut opposing experts.
The U.S. Department of Justice had sued to block the merger, alleging that the deal would substantially lessen competition in video distribution markets.
Among other allegations, the DOJ claimed that AT&T would be able to charge higher prices to other pay-TV providers, which compete with AT&T and its subsidiary DirecTV, for content licensed from Turner Broadcasting, a Time Warner subsidiary. As a result, the DOJ alleged, consumers would pay significantly higher subscription fees.
The Cornerstone Research marketing expert testified at trial about two market research studies, which the government’s economic expert relied on to predict competing distributors’ potential subscriber loss and to form a measure of harm. The first study was comprised of three different components: a conjoint survey, a set top box data analysis, and a “hybrid” methodology, which purported to combine the first two components.
A marketing expert demonstrated a number of flaws in the design, implementation, and methodology of each component of the study. The judge, extensively citing the expert’s testimony, accepted all of his conclusions: “[I]n testimony that went largely unrebutted, [the marketing expert] explained his conclusion that ‘[a]ll three are invalid.’”
A marketing expert’s analyses of the second study, an internet survey, demonstrated built-in biases in the design, as well as other flaws. He also found that the methodology used to elicit respondents’ answers was confusing and likely to overstate the likelihood of customers switching distributors. On the issue of this study, the judge ruled, “I agree with [the marketing expert’s] conclusions.”
In addition, defense counsel retained Professor Gregory Rosston of Stanford University and Dr. Michael Topper of Cornerstone Research, who consulted to AT&T and Time Warner during the regulatory process and litigation about the proposed merger’s likely competitive effects.