Net Neutrality Could Become a Merger Antitrust Issue. Someday.

Watch for net neutrality arguments in future antitrust analysis of mergers, competition lawyers said.

The Justice Department’s high-profile attempt to block AT&T Inc. from buying Time Warner Inc. didn’t address the possibility that the AT&T customers could see slowed internet traffic for some content. But that kind of argument could come up one day.

The DOJ has looked at past merger cases on the grounds of its impact on open internet access, Ketan Jhaveri, a former trial lawyer at the DOJ’s Antitrust Division, told Bloomberg Law. “If net neutrality were to come up, it would come up in a merger of [internet service] providers,” he said, adding that those legal arguments are likely a long way off.

Allegations that a merged AT&T-Time Warner could throttle streaming content from rival ISPs would have improved the government’s case that the merger would cause harm. “But they couldn’t do that,” said Blair Levin, a former chief of staff at the Federal Communications Commission in both the Obama and Clinton administrations.

If the DOJ told a court that the combined AT&T-Time Warner would slow internet speeds for rival content services, it would have undermined the FCC’s successful push to undo net neutrality rules, Levin told Bloomberg Law.

The FCC, now headed by Trump-appointed Chairman Ajit Pai, voted to rescind the Obama-era net neutrality regulation in late 2017. He said the rollback would spur internet innovation and improve the consumer internet experience. Pai’s consumer claim would have been directly refuted if the DOJ would have argued that the combined AT&T-Time Warner would slow content delivery.

The net neutrality repeal officially took effect June 11. It’s too soon to tell whether the rollback of the rule has led to any throttling by an ISP, Jhaveri said.

Tough Sell

The net neutrality argument also could be a tough sell in court.

The government “would have had to prove that the merged company has both the incentive and the ability to do this,” said Jennifer Rie, an antitrust litigation analyst at Bloomberg Intelligence.

The FCC’s action may have given AT&T the legal right to throttle content, but it’s difficult to claim the tech giant would derive any benefit from doing so, she said. Slowing down service could drive AT&T subscribers to rival ISPs, such as Comcast Corp. and Verizon Communications Inc. AT&T also has an incentive to treat equally all streaming content channels such as Netflix because the customer is still using the network, Rie said.

Destroy Netflix?

Gigi Sohn, a distinguished fellow at Georgetown Law Institute for Technology Law & Policy, said the government erred in not making the argument to stop the AT&T-Time Warner deal.

“AT&T has the power to make Netflix nonexistent,” said Sohn, who was chief of staff to FCC Chairman Tom Wheeler, who shepherded the now-defunct net neutrality rule. “It’s not that AT&T-Time Warner would be competing with Netflix, it’s that they could destroy it.

“But to make that argument you have to talk about net neutrality,” Sohn told Bloomberg Law, which would undermine Pai’s agenda.

Still a Theory

Jhaveri, who is now co-CEO of the legal tech platform Bodhala said he’s skeptical that the DOJ will raise net neutrality concerns in a merger case anytime soon. It didn’t make such claims in 2011, when evaluating the tie-up between Comcast and NBCUniversal, which occurred before the 2015 net neutrality rule.

There is precedent for the argument, however. The DOJ’s 2002 challenge of the failed merger between WorldCom and Sprint Corp. showed that the government takes into account the theory of harm to open internet access when evaluating a merger, Jhaveri said.

The DOJ blocked the deal partially on the potential threat that interconnectivity would be diminished because the combined companies would have controlled a significant portion of the internet’s infrastructure.

The DOJ’s reasoning in that case “could be plausibly extended to the customer end of the network, which is the worry of net neutrality,” Jhaveri said.

The DOJ continues to move forward in its fight against the AT&T-Time Warner deal by appealing a district court’s ruling that the merger doesn’t harm competition. The government obtained an expedited appeal July 19, which means a decision could come in early 2019.

To contact the reporter on this story: Victoria Graham in Washington at vgraham@bloomberglaw.com

To contact the editor responsible for this story: Fawn Johnson at fjohnson@bloomberglaw.com