Wharton‘s Herbert Hovenkamp: US Set to Block AT&T-Time Warner Merger

President Trump’s Justice Department will likely succeed in halting AT&T’s $85 billion merger with Time Warner, a prominent Wharton professor known as the “dean of American antitrust law” reportedly predicts.

The Justice Department wants AT&T to divest Time Warner’s DirecTV unit or Turner networks as a condition of approving the acquisition. AT&T has argued that divestitures would destroy some of the consumer value of the merger,

President Trump expressed opposition to the merger during the campaign and his administration ultimately chose to fight it, with the Justice Department filing suit in November to block the agreement.

U.S. District Judge Richard Leon is expected to rule on the deal on June 12.

“To me, it is a close call, but I think the government has met its burden,” in his first public comments about the case since a trial wrapped up last month.

In its final push, the Justice Department earlier this month urged a federal judge to stop AT&T (T), which owns biggest pay TV provider DirecTV, from buying movie and TV show maker Time Warner (TWX), or at least cut a big chunk out of the proposed $85 billion transaction, Reuters reported.

The Justice Department reiterated that if AT&T owned Time Warner it would have the incentive and opportunity to withhold CNN, HBO and live sports from pay TV companies like Charter Communications (CHTR).

The government also said it would have the incentive to refuse to license its networks to cheaper online TV distributors, like Hulu since these cheaper services bite into pay TV revenues.

The government estimated the increased cost to industry rivals at $580 million a year and asked in its post-trial brief that the deal be deemed illegal and stopped.

The government said Leon could order AT&T to sell an asset – either DirecTV, with more than 20 million subscribers, or Time Warner’s Turner channels,

Hovenkamp thinks Justice Department has presented enough evidence that AT&T and Time Warner could boost their profits by raising prices for customers if they merged.

“It has nothing to do with proving their intent,” said Hovenkamp, who has written more than a dozen books on antitrust law and isn’t working on either side of the landmark case.

“The evidence demonstrated that the bulk (though not all) of the anticompetitive effects flow from the combination of Turner with DirecTV,” the Justice Department said.

AT&T said in its final brief, which was available earlier this month, that the judge should reject any request by the government to force it to sell DirecTV or Turner, claiming it would “destroy the very consumer value this merger was designed to unlock.”

AT&T and Time Warner also said the deal would help them compete with internet titans like Facebook (FB.O) and Netflix (NFLX). “The government did not even begin to make a credible case that the merger would likely harm competition, substantially or even just a little,” AT&T said. “This is not a close case.”

AT&T argued that Time Warner’s licensing fees from pay TV and online distributors were too valuable for the company to forego.

(Newsmax wire services contributed to this report).