US sues to block AT&T purchase of Time Warner

The US Department of Justice sued AT&T Inc on Monday to block its $85.4 billion acquisition of Time Warner Inc, saying the deal could raise prices for rivals and pay-TV subscribers.

The legal challenge came after AT&T rejected a demand by the Justice Department earlier this month to divest its DirecTV unit or Time Warner’s Turner Broadcasting – which contains news network CNN – in order to win antitrust approval.

The Justice Department said AT&T would use Time Warner’s films and movies to force rival pay TV companies to pay “hundreds of millions of dollars more per year for Time Warner’s networks” in its lawsuit filed late Monday in federal court in Washington.

The government also argued that AT&T would use Time Warner content to slow the industry’s transition to online video and other innovative distribution models.

AT&T described the lawsuit as ”a radical and inexplicable departure from decades of antitrust precedent,” according to AT&T head lawyer David McAtee. He said so-called vertical mergers, between companies that are not direct competitors, are routinely approved.

”We see no legitimate reason for our merger to be treated differently,” said McAtee, adding that AT&T is confident a judge will reject the Justice Department’s case.