AT&T Witness Attacks US Merger Case as ‘Theoretically Unsound’

AT&T Inc. went on the offensive to defeat the U.S. lawsuit against the company’s proposed takeover of Time Warner Inc., making its economic case that pay-TV prices for consumers will actually fall after the merger.

University of Chicago economist Dennis Carlton testified Thursday in Washington that AT&T’s acquisition of Time Warner will benefit pay-TV subscribers. He said the analysis done by the Justice Department’s expert, Professor Carl Shapiro from the University of California at Berkeley, is riddled with errors.

“How much confidence should this court have in Professor Shapiro’s model?” Randy Oppenheimer, a lawyer for AT&T, asked Carlton.

“None,” said Carlton.

AT&T Picks Apart Star Witness as U.S. Wraps Up Merger Case

Carlton is the first witness called by the companies to make their case to U.S. District Judge Richard Leon that their $85 billion combination should be approved. The Justice Department sued to stop the deal because it says the tie-up of AT&T’s DirecTV unit and Time Warner’s programming will raise prices for pay-TV subscribers by hundreds of millions of dollars a year.

Carlton took the stand and outlined a series of flaws he said undermined Shapiro’s findings, which he called “theoretically unsound.”

He said Shapiro was wrong to ignore price effects in the pay-TV market at times when companies combined both distribution and programming, such as Time Warner and Time Warner Cable, which were once part of the same company, or when Comcast Corp. bought NBCUniversal. Carlton said he looked at those effects and found no support for the claim that combining pay-TV distribution and programming leads to higher prices.