AT&T Says Turner Pledge to Not `Go Dark' Resolves U.S. Suit

(Bloomberg) -- Time Warner Inc.'s promise not to pull channels like TNT and CNN off the air in contract disputes with cable and satellite companies, is a commitment that should resolve U.S. concerns that its merger with AT&T Inc. would harm competition, the companies said.

Time Warner offered to submit to arbitration in the event an agreement about carrying Turner programming can't be reached, according to a court filing Tuesday in Washington. During arbitration, Turner content can't "go dark" and be withheld from distributors, according to the document, in which the companies respond to a Nov. 20 U.S. antitrust lawsuit seeking to block their tie-up.

"By agreeing to submit all carriage disputes to commercial arbitration and relinquishing its ability to go dark during the arbitration process, Turner has demonstrated not only how strongly it believes that this transaction will not harm its distributors, but also that the government's demand to block this merger is unwarranted," AT&T and Time Warner said.

The filing is the companies' first formal response to the Justice Department lawsuit seeking to block AT&T's $85 billion merger with Time Warner Inc. on the grounds that it would reduce competition and increase consumer costs for viewing popular television programming. The Justice Department said it's reviewing the filing.

The two sides disagree over when the case should go to trial. AT&T has proposed a Feb. 20 start date, while the the Justice Department says it should be May 7. That's after the companies' merger deadline of April 22, a date the Justice Department says is self-imposed and can be extended.

U.S. District Judge Richard Leon, who is overseeing the case, set the first hearing in the case for Dec. 7, when he may set the trial date.

Combined with Time Warner, AT&T could use its control over channels like CNN and HBO to harm rivals by forcing them to pay hundreds of millions of dollars more per year for the right to distribute the content, according to the complaint filed by the Justice Department's antitrust division. The deal also would enable AT&T to impede competition from online video distributors, which would reduce choices for consumers, the government said.

In the "baseball-style" arbitration offered by Time Warner, both sides would submit their best offers to the arbitrator, and the arbitrator would choose the one that represents fair market value, the companies said. That commitment would last for seven years.

"Turner's commitment eliminates even the theoretical risk that lies at the heart of the government's case -- the risk that, post-close, Turner would be inclined to threaten to ‘go dark' on a distributor," the companies said.

The case is U.S. v. AT&T Inc., 17-cv-2511, U.S. District Court, District of Columbia (Washington).

--With assistance from Andrew Harris

To contact the reporter on this story: David McLaughlin in Washington at dmclaughlin9@bloomberg.net.

To contact the editors responsible for this story: Sara Forden at sforden@bloomberg.net, Joe Schneider

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