On Thursday, the Department of Justice (DOJ) signaled that
they might sue to block the AT&T-Time Warner mega merger. Does this put in question the high
probability that analysts place on the likelihood that the vertical merger will
be approved or is it a ploy by the DOJ to extract rents from the firms?
For sure, it is the latter.
While there are anticompetitive concerns with the size and
scope of this merger (e.g. foreclosure, vertical price squeeze, and higher
entry barriers), regulators typically approve vertical mergers. But, more likely than not, AT&T will have
to commit to “good behavior” and some other minor concessions so that the DOJ
gets a “win” too when they approve the deal.
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