Canada: AT&T/Time Warner: Lessons Learned For Companies Considering A Merger

Last Updated: March 21 2019
Article by Blake, Cassels & Graydon LLP

On February 26, 2019, the U.S. Court of Appeals for the District of Columbia (Court of Appeals) issued an important antitrust decision, which will influence how vertical mergers are reviewed in the U.S., and perhaps in other countries, including Canada. The Court of Appeals refused to overturn the U.S. District Court (District Court) ruling that allowed AT&T (one of the largest pay-TV providers in the U.S.) and Time Warner (one of the largest content producers in the U.S.) to complete their US$108-billion merger. The trial was one of the most followed competition law cases of all time.

The appellate decision brings finality to the case, as the U.S. Department of Justice (DoJ) indicated it will not be seeking leave of the Supreme Court to pursue a further appeal.

Below we provide background on the decision and discuss the key takeaways for merger preparation, reviews and challenges in Canada.


On October 22, 2016, AT&T announced its proposed acquisition of Time Warner. The merger would combine Time Warner's programming content, which includes television stations HBO, CNN, TBS and TNT, with AT&T's mobile, TV and broadband distribution services, notably DirecTV. Faced with new competition from Netflix and Amazon, which offer competing services, leaders from both companies positioned the merger as a way to enhance content offerings, tailor advertising, and improve accessibility and availability of content across platforms. Despite the many pro-competitive benefits from the merger, including an estimated US$1.5-billion in cost savings, the DoJ filed suit on November 20, 2017, seeking to block the merger.

At trial, the DoJ alleged that the merger would give AT&T the ability to use Time Warner's popular programming to gain leverage in negotiating distribution deals with other distributors, resulting in higher prices being passed onto consumers, and that the merger would stifle the growth of innovative and next-generation distributors.

After a 23-day trial that involved 28 witnesses, the District Court denied the DoJ's request to block the merger. The District Court made several important findings, all of which the Court of Appeals upheld.


Competitor Testimony, Prior Statements and Internal Documents

Competitor testimony featured prominently in the DoJ's case. At trial, the DoJ called nine witnesses, from competitors to AT&T's DirecTV, to testify about the harm their companies were likely to experience once AT&T acquired control of Time Warner.

Despite the DoJ's reliance on competitor complaints to pursue the matter to trial in the first place, the District Court ultimately concluded that the complaints were speculative as the potential for harm could not be quantified. It was not enough for rivals of DirectTV to speculate on the likely negative impact of the transaction on their businesses. The Court of Appeals agreed.

The DoJ also argued that the District Court failed to properly weigh the statements AT&T and DirectTV had made in prior regulatory filings. At the time of the Comcast-NBCUniversal merger in 2009, both AT&T and Time Warner argued that the transaction could result in higher fees for consumers. The District Court was reluctant to assign significant weight to these filings since AT&T and Direct TV were direct competitors. The Court of Appeals agreed.

The DoJ also led into evidence a number of presentations, emails and memos drafted by employees of the merging parties. The District Court found that many of these documents had not been reviewed by senior management responsible for making important company decisions. Accordingly, the District Court was reluctant to give that evidence any weight.

The District Court also did not take issue with the fact that many of the documents had changed prior to being finalized by management. The Court of Appeals did not comment on this issue in the appellate decision.

The outcome of this appeal reinforces how early guidance to a merger planning team can help ensure that final versions of documents produced to the Competition Bureau accurately reflect the business objectives of the company engaged in the merger.


The DoJ's case relied on expert opinion about the likely effects on subscription fees paid by consumers if Time Warner threatened to withhold content and cause blackouts of its channels on distributors other than DirecTV. The District Court took issue with how the DoJ's economic theory was divorced from real world experiences in which blackouts were not only infrequent, but also did not result in material customer migration as the DoJ's expert had predicted. The District Court also criticized the DoJ's expert for relying on outdated or faulty data.

The Court of Appeals agreed and acknowledged further that it would be difficult to predict long-term price increases given the continuous changes and increasing competitiveness in the industry.

It is critical that economic models used align with the way a business actually works, which must be explained to the court in a way which is understandable. The best and most recent data must be used, and with caution, as the data may not reflect the future reality of the market, such as the decline of revenue for DirecTV from the expansion of Netflix and other OTT services. The DoJ failed here, as noted by the Court of Appeals.

Litigating the Fix

Both the District Court and the Court of Appeals concluded that the model used by the DoJ's expert was flawed by failing to account for the irrevocable offer of no-blackout arbitration agreements for Time Warner's Turner networks, something which, coincidentally, already exists in Canada.

In advance of the trial at District Court, the DoJ attempted to bar testimony related to AT&T's remedial arbitration commitment. The District Court denied this request, which allowed the merging parties to introduce evidence about the impact of the arbitration commitment on the negotiating leverage between Time Warner and distributors. The District Court concluded that the "real-world effects" of the arbitration agreements would likely prevent an increase in AT&T's bargaining leverage post-merger.

The Court of Appeals agreed with the District Court's finding. In doing so, the Court of Appeals recognized the importance of considering contractual obligations—and by extension, remedies—in the analysis of vertical mergers.


The decision recognizes the importance of supporting economic theories at trial with concrete real-world evidence. It also highlights the important role of documents in these matters and how adopting effective mitigation strategies can help get a transaction through the process.

For permission to reprint articles, please contact the Blakes Marketing Department.

© 2018 Blake, Cassels & Graydon LLP.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Events from this Firm
30 Oct 2019, Other, Toronto, Canada

The materials on the Blakes Business Class website are provided for informational purposes only. Accessing this information does not create a lawyer-client relationship.

In association with
Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions