By Peter Reap, J.D., LL.M.
In the suit by the U.S. asserting that AT&T, Inc.’s proposed $108 billion acquisition of Time Warner, Inc. (TWI) should be blocked on antitrust grounds, AT&T and TWI were not entitled to compel further discovery in the form of privilege logs and written and oral communications relating to the selective enforcement defense because the defendants failed to support their defense with showings of discriminatory effect and intent—essentially, the federal district court in the District of Columbia reasoned that although the case is a "rare breed of horse, it is not exactly a unicorn!" Therefore, the defendants motion to compel production of the requested privilege logs was denied, and the government’s motion to strike the defendants’ outstanding discovery and interrogatory requests for (1) all written communications about the merger between the White House and the Attorney General’s office; (2) all written communications about the White House’s view of the merger between the Attorney general’s office and the Antitrust Division; and (3) all oral communications between the White House and the Antitrust Division with regard to the AT&T merger was granted (U.S. v. AT&T, Inc., February 20, 2018, Leon, R.).
With their selective enforcement defense, the defendants claim that the government’s suit improperly seeks to selectively enforce the antitrust laws. They argue that the challenge to their vertical merger was motivated, not be legitimate antitrust concerns, but because one of the TWI networks to be acquired, CNN, has engaged in political speech disfavored by President Trump.
In December 2017, the defendants requested discovery relating to their selective enforcement defense, including summary documents known as privilege logs that catalogue the existence (but not contents) of certain communications regarding the White House’s views of the merger. The U.S. has already produced one such log, setting forth a list of "all written communications between the White House and the Antitrust Division" relating to the subject of the merger. And though that log indicates, apparently, no "untoward" communications between those two, according to the court, the defendants have asked the government to produce similar logs listing the three categories of information detailed above.
Both sides agree that the Supreme Court’s decision in U.S. v. Armstrong, 517 U.S. 456 (1996) controls the analysis of the defendant’s entitlement to additional discovery on their selective enforcement defense. In that case, the Court emphasized that court orders allowing discovery into the exercise of prosecutorial discretion, such as those resolving the merits of a selective enforcement claim, raise substantial concerns. Those concerns include the judiciary’s inability to competently assess the basis for a decision to prosecute, impairment of the Executive Branch’s core constitutional function, and the fact that selective enforcement discovery will divert prosecutorial resources and risks disclosure of the government’s prosecutorial strategy.
Under the standard established by Armstrong, the defendants must put forth some evidence showing the existence of the essential elements of their defense, discriminatory effect and discriminatory intent, according to the court. Here, AT&T and TWI could not do so, the court held.
AT&T and TWI fell short of showing that this enforcement action was selective—that there exist persons similarly situated who have not been prosecuted. Indeed, it was difficult to even conceptualize how a selective enforcement defense claim would apply in the antitrust context, where each merger must be functionally viewed in the context of its particular industry and in light of all of the other factors, including the size of the transaction, influencing the transaction’s effect on competition. The defendants produced only one specific example, Comcast’s 2011 acquisition of NBC Universal (NBCU), as the requisite comparator for their selective enforcement claim. But, as pointed out by the government, the Antitrust Division did file an antitrust suit to enjoin the Comcast-NBCU transaction and the suit was resolved through a settlement. Thus, the attempt to use the Comcast-NBCU transaction as the basis for the selective enforcement claim was rejected, the court ruled.
This is not the first time that the government has found an antirust problem with a proposed vertical merger or insisted on a structural remedy as a condition to the settlement, the court observed. While this case may "be a rare breed of horse, it is not exactly a unicorn!" the court exclaimed.
The case is No. 17-2511 (RJL).
Attorneys: Craig William Conrath, U.S. Department of Justice, for the United States. Katrina M. Robson (O'Melveny & Myers LLP) for AT&T Inc. and DIRECTV Group Holdings, LLC. Christine Anne Varney (Cravath, Swaine & Moore LLP) for Time Warner Inc.
Companies: AT&T Inc.; DIRECTV Group Holdings, LLC; Time Warner Inc.
MainStory: TopStory Antitrust AcquisitionsMergers AntitrustDivisionNews
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