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AT&T counsel Dan Petrocelli, an ex-Trump attorney, calls DOJ's suit on Time Warner deal 'fake antitrust'

Matthew J. Belvedere

"There is no credible evidence" that AT&T (NYSE:T)'s proposed $85.4 billion acquisition of media powerhouse Time Warner (TWX) poses any threat to industry competition or consumer prices, AT&T attorney Dan Petrocelli told CNBC on Tuesday. AT&T's lead outside counsel spoke one day after the Department of Justice sued to block the deal. Regarding what he called a "vibrant" and "competitive" landscape for television and video distribution and content, Petrocelli argued: "If anything, this merger is going to cause people's cable bills or TV bills to go down, not up." "We want to go to court as soon as possible," he said on "Squawk on the Street." He said the "good news" was that the burden of proof is on the government. The last time the government won a case against this type of vertical merger — one in which two companies don't directly compete in any business arena — Richard Nixon was president, he added. "Someone could call this fake antitrust." In a pre-emptive move last week, AT&T hired Petrocelli to serve as lead trial counsel in the case. Petrocelli, a partner at O'Melveny & Myers in Los Angeles, last year defended then-candidate Donald Trump against fraud lawsuits related to Trump University real estate seminars. He has also defended Time Warner and Disney (DIS) in the past. His other clients have included Enron CEO Jeffrey Skilling and the family of Ron Goldman in the wrongful death lawsuit against O.J. Simpson. On Tuesday, Petrocelli pointed to a new live channel service from YouTube, a unit of Alphabet (GOOGL)'s Google, as "a real bullet in the government's theory" because it does not include content from the Turner networks, which are owned by Time Warner." "In today's world, consumers have so many options," he said. "If they don't like someone's programming they can go over the top; they can go to all of these new services through the internet." AT&T Chairman and CEO Randall Stephenson recently made a case that the content and distribution landscape has been shifting with the big tech companies becoming players in each. "The idea that somehow we're going to take distribution and content and create something that's so powerful that we've disrupted Google, Amazon (AMZN), Facebook (FB) and Netflix (NFLX), it borders on comical," he said at The New York Times' DealBook conference. "What we're trying to do is build a platform that gives us an opportunity to compete with those guys." Petrocelli echoed Stephenson's sentiments. "This allows Time Warner to hook up with the data that AT&T has, and to use all of that information to give consumers better product — one that is more innovative, one that's more customized. And that's the world today," he told CNBC. Earlier this month, reports circulated that the government had demanded AT&T sell its DirectTV unit or Time Warner's Turner Broadcasting, operator of the CNN, as a condition of approval. However, the government had pushed back at those reports, and AT&T said it had no intention of selling CNN. While confident in his case, Petrocelli said that AT&T was open to settling its differences the government from "Day 1." Asked on Tuesday whether the DOJ lawsuit was politically motivated, Petrocelli said: "We don't know what was said by whom, to whom, when. In my experience things have a way of coming out in the course of litigation. So if there's anything there, it will probably unfold." The DOJ has said there was no contact with the White House on whether to bring this case. The deal, announced in October 2016, was a hot topic on the presidential campaign trail. Trump, at the time, had said he would oppose the deal. But once he got into the White House, he remained mum. There's been speculation that Trump's feud with CNN, a network he's repeatedly called "fake news" in tweets, may have been a factor in the DOJ's action But Stephenson has been a staunch supporter of Trump and of what many corporate leaders view as business-friendly policies from the president. Complicating matters, Makan Delrahim, the DOJ's top antitrust official, said a year ago that the AT&T-Time Warner deal would be approved. He said his quotes from 2016 interview with a Canadian TV network were taken out of context. But Petrocelli on Tuesday pressed the case. "Nothing has changed in this deal from the time [Delrahim] made those remarks until today." AT&T said Monday the DOJ move was a radical departure from decades of antitrust regulation because the government does not usually fight what are known vertical mergers, deals between two companies that don't directly compete in any business arena. A DOJ official countered, telling reporters the merger would raise prices for consumers and potentially block creators of media content from distributing their product without paying more money. The official said the AT&T deal would be more harmful to consumers than the 2011 Comcast (CMCSA)-NBCUniversal deal, in part, because DirecTV satellite TV reach is nationwide. Comcast operates only in certain regions. Stephenson said during a news conference on Monday that the government's argument "defies logic." He said a sale of CNN was a "nonstarter," and he projected confidence that the company would not have to sell any assets. "Vertical mergers like this one are routinely approved because they benefit consumers without removing any competitor from the market," said AT&T general counsel David McAtee. "We see no legitimate reason for our merger to be treated differently." — Disclosure: Comcast owns NBCUniversal, the parent company of CNBC's owner. Correction: An earlier version incorrectly reported Petrocelli's role in the wrongful death lawsuit against O.J. Simpson. Petrocelli represented the family of slaying victim Ron Goldman.



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