AT&T Begins PR Battle Against Justice Department Over Time Warner Deal

This is bigger than AT&T and Time Warner. That was a key part of the message sent by AT&T chief Randall Stephenson at the hastily scheduled -- though long planned -- news conference held Monday evening to make the case for why AT&T is fighting the Justice Department's lawsuit to block its $85.4 billion merger with Time Warner.

Stephenson said he was personally "troubled" by what he sees as a departure from decades of legal precedent in the Justice Department's evaluation of anti-trust concerns raised by mergers. He warned of the chilling effect that the government's decision would have on business activity. And he made an unequivocal statement that AT&T would not compromise CNN's ability to operate as a news organization by agreeing to give up control of the news cabler to get the deal approved.

Stephenson did most of the talking in the 30-minute news conference, held in a small studio just off of CNN's fifth floor news room at Time Warner Center. He was joined by AT&T general counsel David McAtee and Daniel Petrocelli, the O'Melveny & Myers partner who is repping AT&T and Time Warner in the case. The three were mostly grim-faced as they hammered the point that the government has no leg to stand on in blocking the deal reached in October 2016.

"The rule of law is at issue here," Stephenson said. "Consistency in the application of the law is crucial in a free market economy," he said. The dire warnings about legal and First Amendment threats are undoubtedly a first salvo in enlisting support for AT&T's position in the court of public opinion.

The case laid out in the lawsuit filed by the DOJ Monday afternoon "stretches the very reach of anti-trust law beyond the breaking point," Stephenson said. "To suddenly, without any notice, upturn 50 years of precedent can have nothing but a freezing effect on commerce in general."

The trio repeatedly cited the 40 years of precedent of the Justice Department approving vertical mergers of companies that have no fundamental overlapping operations that would result in a competitor being taken out of the market.

The DOJ argues the combined AT&T-Time Warner would have a dangerous level of market power in entertainment and media through its control of wireless services, DirecTV and Time Warner's HBO, Turner and Warner Bros. content operations. The DOJ has said AT&T would need to sell off either DirecTV or Turner to secure approval of the merger.

"This defies logic, and it is unprecedented," Stephenson said. "I've done a lot of deals in my career, but I've never done one where we have disagreed with the Department of Justice so much on even the most basic of facts."

The focus on Turner spurred immediate speculation that President Donald Trump's distaste for CNN played a role in the decision.

Stephenson addressed "the elephant in the room" in declaring his opposition to any condition that would force them to give up control of CNN. None of the three executives invoked Trump by name until the question was raised by reporters. And even then, the three were restrained in tying Trump's influence to the DOJ's decision to sue.

"Frankly, I don't know," Stephenson said. "Nobody should be surprised the question keeps coming up because we've witnessed such an abrupt change in the application of anti-trust law. The bottom line is that we cannot and we will not be party to any agreement that would even give the perception of compromising the First Amendment protections of the press. So any agreement that results in us forfeiting control of CNN, whether directly or indirectly, is a nonstarter."

In Stephenson's view, the DOJ's position is a threat to the business community's "confidence in our government's ability to fairly adjudicate matters brought before them." When past precedent is disregarded to such a degree, "businesses large and small are left with no guideposts." Stephenson's points were buttressed by his clear exasperation at the situation and his down-to-earth mien, enhanced by the lilt of his Oklahoma accent.

When asked by Variety if his concerns about the potential chilling effect for business and the First Amendment were a driving factor in his promise to fight hard for the deal, Stephenson said his primary motivation was the certainty that the federal courts will see things his way.

"We're raising a vigorous defense because we have a darn good case," he said. "We think we will win."