U.S. Justice Dept to appeal approval of AT&T acquisition of Time Warner

WASHINGTON, July 12 (Reuters) - The U.S. Justice Department said on Thursday it would appeal a federal judge's approval of AT&T Inc's $85.4 billion acquisition of Time Warner, raising the prospect barely a month after the deal closed that it could be undone.

AT&T was sued by the Justice Department on antitrust grounds, saying that the deal would harm consumers, but U.S. District Judge Richard Leon last month approved the deal, allowing it to move forward following a lengthy trial. The merger, first announced in October 2016, was also opposed by President Donald Trump.

Leon ruled that the tie-up between AT&T's wireless and satellite businesses with Time Warner's movies and television shows was legal under antitrust law.

AT&T Chief Executive Randall Stephenson told reporters on Thursday at a conference in Sun Valley, Idaho, that the company was not surprised about the Justice Department's decision to appeal.

"They have the right to appeal. Everyone has the right to appeal. We have a very fact-based thoughtful order. It will be evaluated on those grounds," he said.

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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
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A Justice Department spokesman declined to comment.

The Justice Department opted in June not to seek an immediate stay of the court's approval of the merger, allowing the deal to close on June 14. The Justice Department still had 60 days, however, to appeal the decision approving the merger.

The government's notice of appeal filed in U.S. District Court in Washington did not disclose on what grounds it intends to challenge the approval.

Michael Carrier, an antitrust expert at Rutgers University, said the Justice Department could challenge Leon's analysis of the facts of the case, the economic arguments given or what Carrier described as an apparent pro-defendant approach by the judge.

Leon had sharply urged the Justice Department not to seek a stay of his ruling, saying it would be "manifestly unjust" to do so and not likely to succeed. In his ruling, he said the government had failed to show competitive harm.

AT&T told the Justice Department in a June 14 letter that it would manage Time Warner's Turner cable television networks as part of a separate business unit and take other steps until February 2019 or until any government appeal.

AT&T also said that in the short term, it would have no role in setting Turner prices and the number of Turner employees and target compensation and benefits would remain "largely unchanged." AT&T also said it would implement a firewall between Turner and AT&T to prevent the exchange of sensitive information of unaffiliated programmers or distributors.

In 2016, the Justice Department had demanded that AT&T sell the Turner networks, which include CNN, as part of approving the merger.

John Bergmayer, senior counsel at advocacy group Public Knowledge, said that since the deal was approved, AT&T had raised prices for some video and wireless services.

"The AT&T-Time Warner transaction is a bad deal for consumers and competition," he said. "Judge Leon's decision contained numerous errors, and we believe the DOJ's position should be vindicated."

Deals approved by a federal judge have been undone on appeal in the past.

In 2001, H.J. Heinz Co called off its acquisition of Beech-Nut after an appeals court overturned a lower court's decision to allow the merger. The Federal Trade Commission had argued the deal would have merged the No. 2 and No. 3 baby food makers and that competition would be "lessened substantially" if it were to go forward.

(Reporting by David Shepardson; Additional reporting by Carl O'Donnell in Sun Valley, Idaho; Editing by Leslie Adler and Peter Cooney)

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