Antitrust

Daniel M. Petrocelli of O'Melveny & Myers LLP successfully defended AT&T Inc.'s acquisition of Time Warner Inc. in what is often referred to as the "Antitrust Trial of the Century."

The Department of Justice's Antitrust Division sued to block the acquisition in late 2017, claiming that the planned $85.4 billion merger would harm competition and increase content prices for consumers. The Justice Department asked the court to block the deal, hinging its case upon the Clayton Act, which prohibits mergers that result in less competition.

"There was no fact-based evidence that this merger will harm competition," and "it is about making Time Warner and AT&T more competitive during a revolutionary transformation that is occurring in the video programming marketplace," Petrocelli wrote in his trial brief.

Time Warner is known for its cable television offerings, while telephone and internet services are the main focuses for AT&T.

It is uncommon for the government to challenge mergers between businesses operating in different sectors or verticals, Petrocelli said in an interview.

"This was a vertical merger and the government didn't have the benefits of the legal presumption that are applicable to a horizontal merger," he said. "In a horizontal merger, you have two competitors at the same level of commerce who are combining and by definition reducing the number of competitors by at least one."

"In a vertical merger you're reducing no number of competitors because they operate in different levels of chain of commerce," he said.

On June 12, 2018, U.S. District Judge Richard Leon, whose task was to decide whether both the producers and distributors of content could reduce competition, sided with Time Warner and AT&T.

"The government failed to meet its burden to establish that the proposed 'transaction is likely to lessen competition substantially,'" Judge Leon wrote in his ruling.

Petrocelli helped secure a favorable result even though he had never tried an antitrust case before.

Many lawyers worked together to secure a successful outcome for the clients, Petrocelli said.

"It was truly a collective enterprise of lawyers."

M. Randall Oppenheimer, co-chair of O'Melveny's litigation department, led a cross-disciplinary team of lawyers with Petrocelli. Antitrust partner Katrina Robson also had a dominant role in the case.

Gibson, Dunn & Crutcher LLP was co-counsel for AT&T. Cravath, Swaine & Moore LLP was co-counsel for Time Warner.

"We had more than enough talent and resources, and it really accredited the leadership of AT&T's general counsel David McAtee and Time Warner's [then] general counsel Paul Cappuccio," said Petrocelli.

The in-house attorneys organized a group of skilled lawyers to act as a virtual law firm and even acquired a 37,000-square-foot trial site in Washington D.C. outfitted just for the team "to be embedded in for a period of time leading up to and the duration of the trial," said Petrocelli.

However, just like the case at hand, the merger of both companies' legal teams proved to be an innovative one, a product symbolic of the trial's eventual successful outcome.

"Keeping in mind that this was about the actual facts and circumstances we had to bring into the courtroom, it was fascinating because the structure of the media industry was changing so rapidly and significantly," Oppenheimer said. "The industry was literally changing as this case went forward. We were translating the daily headlines of the media world directly into the trial in real time through our fact and expert witnesses."

The Department of Justice appealed Leon's ruling. In a unanimous decision, the appellate panel upheld the trial court's decision in March, eliminating any possibility for the merger to be unwound. Jonathan Hacker, chair of O'Melveny's appellate practice, assisted AT&T and Time Warner in aspects of the appeal. The federal government announced it would not pursue further legal action against the matter, attorneys confirmed.

-- Gina Kim