Array of post-AT&T mega-mergers may define Trump-era antitrust policy

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The Justice Department’s unsuccessful attempt to block AT&T’s takeover of Time Warner was the beginning, not the end, of antitrust enforcement in the Trump era.

The agency’s regulators are still considering transformative deals in both the pharmacy and telecommunications sectors as well as additional content-related mergers that have the potential to define the administration’s position on anticompetitive issues as well as upend their respective industries.

“They are just overwhelmed with huge mega-deals,” said Andre Barlow, a former trial attorney at the Justice Department who’s now a partner at Doyle, Barlow & Mazard. “If they have the facts to bring a case, they will challenge a deal in court.”

Among the deals on the table are proposed mergers between CVS Health and insurer Aetna as well as Cigna insurance and Express Scripts. The transactions — each of which seeks to combine an insurer with a pharmacy benefit manager — have the potential to shift the healthcare landscape at a time when the Trump administration is trying to rein in high prescription-drug costs.

One of the largest acquisitions under review is the purchase of most of 21st Century Fox’s assets. Walt Disney Co. and Comcast are in a bidding war that insiders say could last for weeks, with Disney recently raising its offer to $71.3 billion after an all-cash proposal of $65 billion from the cable provider.

Regulators told Disney in June that it must divest its regional sports assets in order to acquire Fox, a sign the government will continue to closely scrutinize how a transaction could raise costs for competitors, despite failing to sway a federal judge with similar logic in the AT&T case.

“They haven’t backed off on that type of analysis,” Barlow said. “Divesting 22 regional sports networks that are worth about $20 billion is a fairly large divestiture.”

Comcast, which controls television and movie assets through NBC Universal, would likely have to make a similar divestiture, and either transaction is likely to raise questions about how aggressively the Justice Department should police such deals.

Disney films represent the bulk of the highest-grossing movies of all time, and the company has some of the most lucrative intellectual property in the content industry. Spurred by record earnings from blockbuster movies like “Black Panther” and the latest installment of “The Avengers” franchise, Disney’s film revenue grew 21 percent to $2.5 billion for the quarter that ended March 31.

Adding Fox-owned franchises like “X-Men” to its stable and using other acquired assets, Disney might be able to extend “Avengers” well beyond the next decade as well as gain considerable negotiating power.

“There aren’t that many producers of content and owners of content,” said John Lopatka, a former official in the Federal Trade Commission’s competition bureau and a professor at Penn State Law. “Those are really difficult issues. When mergers like this take place, there is an increasing concentration in the ownership of content. Is that problematic, and how much farther can it go?”

A Disney spokesperson did not respond to request for comment.

Comcast, for its part, controls DreamWorks Animation in addition to Universal, but a bigger challenge in winning merger approval is its extensive broadband network, experts say. Comcast currently has 26.2 million high-speed internet customers, the most of any U.S. provider, and many of its clients have no alternative provider.

“The question is whether Comcast will use its dominance in broadband to disadvantage the direct-to-consumer folks,” one former Justice Department official said.

While the federal government’s failure to block the AT&T-Time Warner deal is expected to fuel a wave of acquisitions, the ruling in that case was narrow, and legal experts say little precedent was set for future cases. It also involved two companies at different points in the supply chain, a transaction commonly referred to as a vertical merger.

So-called horizontal mergers like the proposed $26 billion transaction between Sprint and T-Mobile typically face even more scrutiny, since the potential anticompetitive effects from a combination of two rivals are easier to illustrate in court.

The firms have flirted with a deal for years only to be stymied by antitrust concerns, calling off a prior transaction in 2014 after Obama-era regulators signaled they would block it.

Both Sprint and T-Mobile faced pointed questions in June over whether their consolidation, which would shrink the wireless phone industry from four major firms to three, would mean higher costs for consumers.

“Four competitors is not very many, given all of the public use of cell phones, but over the last few years, we’ve still seen vigorous competition,” Sen. Amy Klobuchar, D-Minn., said at a hearing held by the Senate Judiciary Committee’s antitrust panel. “Most of this competition has been driven by the maverick behavior of T-Mobile and Sprint. Will that competitive energy remain when the lowest-cost provider is gone?”

Company executives argued that the pending launch of the fifth-generation wireless network and the dominance of Verizon and AT&T differentiate this proposed merger from those in the past.

“AT&T and Verizon have maintained the status quo, and we’ve been able to take some competition to them, but not the way that we can compete if we’re able to get this significant increase in supply and unit-cost decrease,” T-Mobile Chief Executive Officer John Legere said.

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