Compass Lexecon Client AT&T Prevails as U.S. Court of Appeals Rejects U.S. DOJ’s Appeal of AT&T-Time Warner Merger Clearance

On February 26, 2019, the U.S. Court of Appeals rejected the Department of Justice’s appeal of the US District Court’s opinion allowing the merger of AT&T and Time Warner to proceed without conditions. The Department of Justice announced soon thereafter that it would not seek additional review of this decision, thus bringing to successful close more than two years of Compass Lexecon work on this matter, involving more than 100 experts and staff.

Compass Lexecon was retained by AT&T and Time Warner, initially to provide economic support in the regulatory proceeding surrounding the merger of the two companies, and ultimately to assist with the litigation brought by the U.S. Department of Justice to block the deal (United States of America v. AT&T Inc., DirecTV Group Holdings, LLC, and Time Warner Inc., 1:17-cv-02511-RJL). On June 12, 2018, following almost two years of regulatory proceedings and a six-week trial, Judge Richard J. Leon ruled in favor of AT&T and Time Warner, permitting the merger to proceed without conditions, setting up the DOJ’s appeal, and the Court of Appeals’ affirmation of the District Court decision.

In a 35-page decision filed by Circuit Judge Rogers, the Court of Appeals, like Judge Leon, cited repeatedly to the testimony of Compass Lexecon expert Professor Dennis Carlton, the primary economic witness for AT&T and Time Warner, as well as referencing points made by Professor Michael Katz and other witnesses for whom Compass Lexecon provided support. For example, at trial, Professor Carlton emphasized that the Department of Justice’s predicted price increases from the merger were unreliable given that similar previous mergers had not produced statistically detectable increases in prices. Professor Katz emphasized that the Department’s model failed to account for AT&T’s arbitration commitment. The Court of Appeals agreed with both, stating that defendants presented:

“an expert’s analysis of real-world data for prior vertical mergers in the industry that showed ‘no statistically significant effect on content prices.’ The government offered no comparable analysis of data and its expert opinion and modeling predicting such increases failed to take into account Turner Broadcasting System’s post-litigation irrevocable offers of no-blackout arbitration agreements, which a government expert acknowledged would require a new model. … In this evidentiary context, the government’s objections that the district court misunderstood and misapplied economic principles and clearly erred in rejecting the quantitative model are unpersuasive. Accordingly, we affirm.”

Compass Lexecon experts Dennis Carlton, Michael Katz, Daniel Fischel and Rajiv Gokhale all filed reports in the litigation, and Professors Carlton and Katz were both called to testify. Compass Lexecon also provided support for Professor Peter Rossi. Compass Lexecon Senior Managing Director Mark Israel was the primary economic expert during the almost two-year regulatory process leading up to the trial.”

These experts were supported by a team of over one hundred people at Compass Lexecon. The overall chief of staff was Executive Vice President Allan Shampine. Other Executive Vice Presidents and Compass Lexecon economic experts involved included Mary Coleman, Philip Haile, Todd Kendall, Jessica Mandel, Loren Poulsen, Marius Schwartz, Hal Sider, Thomas Stemwedel, Theresa Sullivan, and David Weiskopf.

Other Compass Lexecon team members included Dzmitry Asinski, Daniel Cherette, Kelly Dickson, Georgi Giozov, Otto Hansen, Evan Hernstadt, Margaret Hlebowitsh, Nauman Ilias, Alice Kaminski, Constance Kelly, John Kelly, Andrew Linde, Evan McKay, Federico Mini, Avisheh Mohsenin, Robert Oandasan, Joel Papke, Michael Sabor, Saikun Shi, Judy Smith, Ben Spulber, Ka Hei Tse, Duo Xu and Allan Zhang.

In addition to in-house counsel for AT&T and Time Warner, including David R. McAtee, Paul T. Cappuccio, David Lawson, Jim Meza, David Smutny and many others, Compass Lexecon worked closely with counsel from seven outside law firms representing AT&T and Time Warner, including Daniel M. Petrocelli, M. Randall Oppenheimer, Katrina Robson and Sergei Zaslavsky from O’Melveny & Myers LLP; Wm. Randolph Smith, Christopher A. Cole and Jeane A. Thomas from Crowell & Moring LLP; Michael Kellogg, Evan Leo, Kevin Miller and Aaron Panner from Kellogg, Hansen, Todd, Figel & Frederick PLLC; Richard L. Rosen, Debbie Feinstein, Maureen R. Jeffreys and Jonathan Gleklen from Arnold & Porter Kaye Scholer LLP; Robert C. Walters, Mike Raiff, Joshua Lipton, Sean M. Royall and Eric J. Stock from Gibson, Dunn & Crutcher LLP; C. Frederick Beckner III, Peter D. Keisler and Jonathan E. Nuechterlein from Sidley Austin LLP; and Peter T. Barbur, Kevin J. Orsini, Christine A. Varney and Allison Davido from Cravath, Swaine & Moore LLP.