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Justice Department won't appeal AT&T-Time Warner decision

It accepts the court's decision that it couldn't prove the merger would harm consumers.

AT&T logo seen displayed on a smart phone

The merger comes at a time when AT&T is trying to transform itself into a media powerhouse.

SOPA Images / Getty Images

The cloud of legal uncertainty surrounding AT&T's merger with Time Warner has lifted.

A US Appeals Court on Tuesday rejected a bid to unwind the merger between the companies. The merger was completed last year, following a six-week trial in which the US Department of Justice failed to convince a trial judge that the $85 billion merger would curtail competition and harm consumers.

The Justice Department said in a statement that it won't pursue the case further, which means it won't appeal the decision to the US Supreme Court.  

"We are grateful that the Court of Appeals considered our objections to the District Court opinion," Jeremy Edwards, a spokesman for the DOJ, said in a statement. "The Department has no plans to seek further review."

Tuesday's ruling from the Court of Appeals for the DC Circuit finally ended the legal uncertainty that has dogged AT&T as it moves forward with integrating Time Warner's assets into its business. Even though the merger was allowed to move ahead as the government appealed the original ruling, AT&T had agreed to temporary rules that made it easier to roll back the merger if the Justice Department had succeeded in its appeal. The rules were set to expire this month.

AT&T general counsel David McAtee applauded the court's decision.

"While we respect the important role that the US Department of Justice plays in the merger review process, we trust that today's unanimous decision from the DC Circuit will end this litigation," he said in a statement.

The merger, which combined one of the largest communications network providers with a major player in the entertainment market, comes at a time when AT&T is trying to transform itself into a media powerhouse. In 2015, AT&T purchased satellite TV provider DirecTV for nearly $49 billion.

The trial and the federal appeal were closely watched because the fate of the merger was expected to have ripple effects on future deals. A loss for AT&T and Time Warner could have signaled a new era of government scrutiny over so-called vertical mergers and could have halted attempts by broadband and wireless companies like Comcast or Verizon to announce megadeals with content companies such as Disney and Fox.

All of this comes as large media and broadband companies see tech giants like Amazon, Netflix and Facebook as competitors. Combining assets allows companies like AT&T, which has also invested heavily in streaming service DirecTV Now, to bulk up original programming with Time Warner content.

The court's decision marks a major blow to the Justice Department's antitrust division. This was the first antitrust case in 40 years that it's litigated to completion that challenged a "vertical" merger in which the companies being combined didn't compete head to head. It also marks the first major antitrust action under the Trump administration.

The government acknowledged that AT&T and Time Warner weren't direct competitors, but it argued that combining them would create an integrated company that could threaten video competitors and could lead to increased fees for Time Warner content. The government said this would ultimately lead to higher prices for consumers.

But US District Judge Richard Leon didn't buy this argument in the trial, nor did the three-judge panel on the US Court of Appeals, which affirmed his ruling.

Public interest advocates, who have opposed the merger, say the case highlights the need for antitrust reform.

The decision shows that US antitrust laws and Justice Department merger guidelines, which are 35 years old, are "grossly outdated," said Gigi Sohn, a distinguished fellow at the Georgetown Law Institute for Technology Law & Policy and a former adviser to FCC Chairman Tom Wheeler. 

"It has become nearly impossible for the government to meet its burden of showing that a merger violates the antitrust laws, especially when it comes to vertical mergers," she said in a statement.  

The below video, produced by CNET last year when Leon rejected the Justice Department's arguments against the merger, outlines the key issues in the case and why consumers should care about the outcome. 

Now playing: Watch this: AT&T fends off Trump's DoJ fight to block Time Warner...
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Originally published Feb. 26, 7:48 a.m. PT.
Updates, 8:22 a.m. PT: Adds details. 9:25 a.m.: Adds AT&T comment and additional context. 1:42 p.m.: Adds Justice Department comment.