Shortly after the Justice Department’s challenge to AT&T’s acquisition of Time Warner was announced, a rumor floated that AT&T had offered to divest CNN to assuage the Division’s concerns.  The gist of the rumor was that the Division is suing to block an otherwise legitimate transaction as an act of revenge against CNN because CNN is critical of President Trump.  In addition to the President’s remarks, the believers also point to statements by the Assistant Attorney General for Antitrust who, before his nomination, said that he didn’t think there was going to be an antitrust problem with the deal.  The suit, according to the theory, is an affront to the First Amendment.

Randall Stephenson and the Division quickly denied the rumors.  They do keep circulating, however.  Partly because the President has tweeted his support of the suit.  And, more recently, because of Carter Page.  Mr. Page recently filed a pro se request for leave to file an amicus brief in the case arguing, basically, that the combination is illegal because it concentrates too much social power in the hands of a large corporation.  Mr. Page was an advisor to Mr. Trump.  Acknowledging the court has wide latitude to consider amicus, the Division did observe, in its half-page response, that the brief was not helpful suggesting it should be disregarded.

So, is there a First Amendment defense to the Division’s challenge?  And if not, what is the purpose of this rhetoric? 

In short, there is no First Amendment “defense” to a Section 7 challenge.  Section 7 prohibits mergers or acquisitions that substantially lessen competition or tend to create a monopoly.  In order to be a defense to Section 7, one would have to first establish that the transaction is anticompetitive, and then argue that, notwithstanding that fact, harm to competition is justified because it enhances speech.  First, there has never been such a case, so the argument is entirely novel.  Second, it’s not entirely clear how you would measure the value a transaction has for “speech.”  Arguably, an anticompetitive merger might enhance speech insofar as a larger, more powerful news organization would have more money to pay journalists and explore and publicize stories by virtue of their ability to extract rents.  But that would be true of any corporation and any deal.  On the other hand, one could use the same formulation to argue that no two organizations should be able to merge because it would result in the loss of a voice in the marketplace of ideas, a lessening of speech.  That would be a radical departure from past practice where news organization mergers that did not meaningfully reduce the number of competitors in a market were allowed to close.   Since ideas tend to come from human beings, who continue to have rights to their own thoughts outside of the workplace, one could argue that a relevant speech market is entirely atomistic, and could never be concentrated.  One could argue that the concentration of platforms could give rise to an “anti-speech” harm but that is not a First Amendment defense.  It’s an offensive justification for prohibiting transactions.

If on the other hand the argument is that the case was brought to stifle speech, then you are looking at Noerr-Pennington analysis.  Was the suit objectively and subjectively baseless and were the parties competitively harmed by the baseless litigation.  Petitioners are entitled under the First Amendment to seek redress in the courts for their grievances except if the suit is baseless on those lines.  The suit itself is based on an old, established economic model that suggests a vertical integration that gave a competitor control over an input critical for the functioning of that market could be a violation of the Clayton Act.  There is nothing controversial about that theory (other than it is actually still a theory).  To the extent there is anything controversial, it’s whether TimeWarner has control over content that confers market power.  But that is an issue of fact.  It would be very hard to prove that this challenge was baseless.

So what’s really going on?

What’s really going on is a clever and subtle effort to bias the judge against the suit and the government.  It’s important to consider the procedural posture of a merger challenge.  In a merger challenge, the Division files a complaint, a motion for a preliminary injunction (P/I) enjoining the parties from consummating the transaction pending a full trial, and a motion for a temporary restraining order (TRO) restraining the parties from consummating pending the decision on the preliminary injunction.  The TRO is usually a consent motion.  What the parties actually litigate is the P/I.  It looks like a full-blown trial, but it’s not.  And this is important because of what the court is being asked.  It’s not being asked if the Division has proved by a preponderance of the evidence whether the merger may substantially lessen competition but whether the Division is likely to succeed on the merits at a full trial.

They are not litigating the merits.  The As a matter of practice and practicality, if the government wins at the P/I stage in a merger challenge, usually the parties abandon the deal.  If the parties win, the government abandons the challenge.  But there’s nothing in the law that compels them to drop the case.  The fact that the substantive challenge remains, procedurally, a motion for a preliminary injunction is important because the judge in a P/I hearing is only making preliminary findings of fact for purposes of deciding whether the order should enter.  P/I motions are appealable with the leave of the court and the appellate court.  Most factual determinations by a trier of fact are given significant deference.  They are only overturned on appeal if there was clear error.  The factual determinations at the P/I stage aren’t even final.  A careful judge may be disinclined to bother an appellate court with such questions as the significance of those preliminary fact findings are not, in the ordinary course of things, that significant.  An appellate court may feel similarly.  As a consequence, these preliminary findings are almost unassailable but they determine the substantive outcome of the case.

This is where the “CNN Defense” comes in.  Most lawyers are taught in law school, and believe irrespective of political affiliation, that the First Amendment is one of the crowning glories of American Democracy and of the utmost importance to how our society functions.  By attacking a deal because CNN is critical of the government, the Division becomes a totalitarian anti-American devil.  A judge who thinks a case is being brought to quash free speech is highly likely to be biased against the parties bringing the case.  And over the course of a P/I hearing, a judge who thinks that may very well make many subtle factual findings that benefit the parties.  There is very little the Division can do to fight those findings except to appeal, or go through the trial on the merits both of which are highly unlikely.

This is a fairly unique strategy in the world of merger challenges largely because we haven’t had many presidents who have inserted themselves into antitrust investigations (Nixon was the only other one in modern history), or who have been such outspoken critics of particular news organizations.  One also doesn’t see many merger investigations being tried in the press either like this one.  A substantial lessening of competition doesn’t typically rile up the masses.

As a member of the defense bar, I cannot say that stirring the pot with regard to the President and his animosity toward CNN is a bad strategy.  We will not see any evidence that it in fact worked because the court is unlikely to say something that would implicate the bias.  Which would be what, we believed this fact witness because the President is a mean person.

The CNN Narrative is clever.  But it is not a legal defense.    So no there’s no such thing as a First Amendment Defense in the merger context.