US sues to block AT&T purchase of Time Warner: source

WASHINGTON, Nov 20 (Reuters) - The U.S. Department of Justice will sue AT&T Inc later on Monday to block its $85.4 billion acquisition of Time Warner Inc, a source familiar with the matter told Reuters.

The legal challenge was expected after AT&T rejected a demand by the Justice Department earlier this month to divest its DirecTV unit or Time Warner's Turner Broadcasting - which contains news network CNN - in order to win antitrust approval.

AT&T's chief executive said then that he would defend the deal in court to win approval, and the company criticized the Justice Department's case on Monday.

The lawsuit is "a radical and inexplicable departure from decades of antitrust precedent,” said AT&T lawyer David McAtee, arguing that so-called vertical mergers, between companies that are not direct competitors, are routinely approved.

22 PHOTOS
AT&T CEO Randall Stephenson through the years
See Gallery
AT&T CEO Randall Stephenson through the years
Chief Executive Officer of AT&T Randall Stephenson testifies before the Senate Judiciary Committee Antitrust Subcommittee during a hearing on the proposed deal between AT&T and Time Warner in Washington, U.S., December 7, 2016. REUTERS/Joshua Roberts
Chief Executive Officer of AT&T Randall Stephenson (L) and Chairman and Chief Executive Officer of Time Warner Jeffrey Bewkes listen to testimony before the Senate Judiciary Committee Antitrust Subcommittee hearing on the proposed deal between AT&T and Time Warner in Washington, U.S., December 7, 2016. REUTERS/Joshua Roberts
Chief Executive Officer of AT&T Randall Stephenson (L) and Chairman and Chief Executive Officer of Time Warner Jeffrey Bewkes testify before the Senate Judiciary Committee Antitrust Subcommittee hearing on the proposed deal between AT&T and Time Warner in Washington, U.S., December 7, 2016. REUTERS/Joshua Roberts
Randall Stephenson, chairman and chief executive officer of AT&T Inc., from left, speaks while Jeffrey 'Jeff' Bewkes, chairman and chief executive officer of Time Warner Inc., listens during a Senate Judiciary Subcommittee hearing in Washington, D.C., U.S., on Wednesday, Dec. 7, 2016. Stephenson told Congress his company's planned $85.4 billion purchase of HBO and CNN owner Time Warner Inc. will help the telecommunications provider challenge cable companies for customers. Photographer: Andrew Harrer/Bloomberg via Getty Images
Chairman and Chief Executive Officer of AT&T Randall Stephenson (L), Chairman and Chief Executive Officer of Time Warner Jeffrey Bewkes (C) and Chairman of AXS TV and owner of the Dallas Mavericks Mark Cuban are sworn in before a Senate Judiciary Committee Antitrust Subcommittee hearing on the proposed deal between AT&T and Time Warner in Washington, U.S., December 7, 2016. REUTERS/Joshua Roberts TPX IMAGES OF THE DAY
Randall Stephenson, chairman and chief executive officer of AT&T Inc., swears into a Senate Judiciary Subcommittee hearing in Washington, D.C., U.S., on Wednesday, Dec. 7, 2016. AT&T Inc. Stephenson told Congress his company's planned $85.4 billion purchase of HBO and CNN owner Time Warner Inc. will help the telecommunications provider challenge cable companies for customers. Photographer: Andrew Harrer/Bloomberg via Getty Images
Chief Executive Officer of AT&T Randall Stephenson (L) speaks as Chairman and Chief Executive Officer of Time Warner Jeffrey Bewkes listens during testimony before the Senate Judiciary Committee Antitrust Subcommittee hearing on the proposed deal between AT&T and Time Warner in Washington, U.S., December 7, 2016. REUTERS/Joshua Roberts
Randall Stephenson, chairman and chief executive officer of AT&T Inc., speaks during a Senate Judiciary Subcommittee hearing in Washington, D.C., U.S., on Wednesday, Dec. 7, 2016. Stephenson told Congress his company's planned $85.4 billion purchase of HBO and CNN owner Time Warner Inc. will help the telecommunications provider challenge cable companies for customers. Photographer: Andrew Harrer/Bloomberg via Getty Images
U.S. President Donald Trump (C), flanked by AT&T CEO Randall Stephenson (L) and Trumbull Unmanned CEO Dyan Gibbens (R), holds an event highlighting emerging technologies, in the East Room at the White House in Washington, U.S., June 22, 2017. REUTERS/Jonathan Ernst
U.S. President Donald Trump (C), flanked by New Enterprise Associates (NEA) Managing General Partner Peter Barris, AT&T CEO Randall Stephenson, Trumbull Unmanned CEO Dyan Gibbens, Honeywell President Darius Adamczyk and White House National Economic Council Director Gary Cohn, holds an event highlighting emerging technologies, in the East Room at the White House in Washington, U.S., June 22, 2017. REUTERS/Jonathan Ernst
U.S. President Donald Trump greets AT&T CEO Randall Stephenson (C) as he arrives for an event highlighting emerging technologies, in the East Room at the White House in Washington, U.S., June 22, 2017. REUTERS/Jonathan Ernst
AT&T CEO Randall Stephenson shows U.S. President Donald Trump a model of how his company plans to install 5G networks in urban settings during in an event highlighting emerging technologies, in the East Room at the White House in Washington, U.S., June 22, 2017. REUTERS/Jonathan Ernst
AT&T CEO Randall Stephenson shows U.S. President Donald Trump a model of how his company plans to install 5G networks in urban settings during in an event highlighting emerging technologies, in the East Room at the White House in Washington, U.S., June 22, 2017. REUTERS/Jonathan Ernst
AT&T's Randall Stephenson (L) speaks as U.S. President Donald Trump meets with technology and telecommunications executives at the White House in Washington, U.S., June 20, 2017. REUTERS/Jonathan Ernst
BEVERLY HILLS, CA - OCTOBER 04: Chairman and CEO of AT&T Randall Stephenson speaks onstage during Vanity Fair New Establishment Summit at Wallis Annenberg Center for the Performing Arts on October 4, 2017 in Beverly Hills, California. (Photo by Matt Winkelmeyer/Getty Images)
BEVERLY HILLS, CA - OCTOBER 04: Chairman and CEO of AT&T Randall Stephenson and Deputy Editor Stephanie Mehta speak onstage during Vanity Fair New Establishment Summit at Wallis Annenberg Center for the Performing Arts on October 4, 2017 in Beverly Hills, California. (Photo by Matt Winkelmeyer/Getty Images)
Randall Stephenson, chairman and chief executive officer of AT&T Inc., speaks during the International Business Machines Corp. (IBM) InterConnect 2017 conference in Las Vegas, Nevada, U.S., on Tuesday, March 21, 2017. IBM InterConnect brings together industry leaders with sessions dedicated to the education and development skills needed to elevate businesses with cloud computing. Photographer: David Becker/Bloomberg via Getty Images
Randall Stephenson, chairman and chief executive officer of AT&T Inc., left, speaks as Ginni Rometty, chief executive officer of International Business Machines Corp. (IBM), smiles during the IBM InterConnect 2017 conference in Las Vegas, Nevada, U.S., on Tuesday, March 21, 2017. IBM InterConnect brings together industry leaders with sessions dedicated to the education and development skills needed to elevate businesses with cloud computing. Photographer: David Becker/Bloomberg via Getty Images
Randall Stephenson, chairman and chief executive officer of AT&T Inc., reacts during a Bloomberg Television interview at the World Economic Forum (WEF) in Davos, Switzerland, on Wednesday, Jan. 18, 2017. World leaders, influential executives, bankers and policy makers attend the 47th annual meeting of the World Economic Forum in Davos from Jan. 17 - 20. Photographer: Simon Dawson/Bloomberg via Getty Images
Randall Stephenson, chairman and chief executive officer of AT&T Inc., right, stands in an elevator at Trump Tower in New York, U.S., on Thursday, Jan. 12, 2017. Donald Trump is slated to meet with AT&T Inc.'s top executives on Thursday to discuss the company's proposed $85.4 billion bid for Time Warner Inc., according to people familiar with the matter. The president-elect has said he opposes the deal. Photographer: John Taggart/Bloomberg via Getty Images
Randall Stephenson, chairman and chief executive officer of AT&T Inc., arrives at Trump Tower in New York, U.S., on Thursday, Jan. 12, 2017. Donald Trump is slated to meet with AT&T Inc.'s top executives on Thursday to discuss the company's proposed $85.4 billion bid for Time Warner Inc., according to people familiar with the matter. The president-elect has said he opposes the deal. Photographer: John Taggart/Bloomberg via Getty Images
HIDE CAPTION
SHOW CAPTION
of
SEE ALL
BACK TO SLIDE

"We see no legitimate reason for our merger to be treated differently,” he said, adding that AT&T is confident a judge will reject the Justice Department’s case.

Time Warner's shares dropped 1.1 percent to close at $87.71, while AT&T shares closed up 0.4 percent at $34.64.

The No. 2 U.S. wireless carrier struck a deal in October 2016 to buy Time Warner, which also owns the premium channel HBO and movie studio Warner Bros, so it can bundle video entertainment on its mobile service.

AT&T says that would help it compete with emerging technology companies such as Netflix Inc, Amazon.com Inc's Prime Video and other competitors.

The deal instantly became a political lightning rod. Donald Trump, a frequent critic of Time Warner's CNN, attacked the merger on the campaign trail last year, vowing that as president his Justice Department would block it.

The deal is also opposed by an array of consumer groups and smaller television networks on the grounds that it would give AT&T too much power over the content it would distribute to its wireless customers.

Reuters reported earlier this month that the Justice Department believed the merger would raise costs for rival entertainment distributors and stifle innovation and could allow AT&T to withhold key content from HBO, CNN or other of its channels from competitors.

Last week, the Justice Department had approached 18 state attorneys general asking them to join the challenge of the deal, but as of Monday none had publicly agreed to do so, Reuters reported.

During his campaign, Trump said that reporters had covered him unfairly and has continued to attack CNN as president, which he has labeled as "fake news." He has not commented on the AT&T deal since his inauguration in January.

U.S. Attorney General Jeff Sessions declined to say last week if anyone from the White House had discussed the merger with any Justice Department officials.

(Reporting by David Shepardson and Diane Bartz; Editing by Bill Rigby)

Read Full Story

Can't get enough business news?

Sign up for Finance Report by AOL and get everything from retailer news to the latest IPOs delivered directly to your inbox daily!

Subscribe to our other newsletters

Emails may offer personalized content or ads. Learn more. You may unsubscribe any time.