After months of legal sniping and a six-week trial, a federal judge has approved AT&T’s $85 billion acquisition of Time Warner.

The deal, combining two media powerhouses into one giant, is expected to trigger a similar wave of media company mergers.

In his June 12 opinion, Judge Richard Leon of the U.S. District Court for the District of Columbia rejected the government’s notion that the deal was a violation of anti-trust law and suggested that the merger was a not-unreasonable move to buffer the challenges of a rapidly changing business space.

The deal, considered a “vertical merger,” because it brings together, in broad terms, a supplier and distributor means that Time Warner properties, including HBO, CNN, and Warner Bros., and Time Warner's other brands will become part of AT&T’s distribution system of smartphones and satellite networks, including DirecTV.

It was of note that Judge Leon emphatically urged the government not to exercise its option of seeking a stay of the decision and an appeal, because doing so would effectively kill the deal. AT&T and Time Warner’s agreement expires on June 21.

“If there ever were an antitrust case where the parties had a dramatically different assessment off the current state of the relevant market and a fundamentally different vision of its future development, this is the one,” Leon wrote. “Small wonder it had to go to trial!”

“The government claimed, in essence, that permitting the deal would lessen competition in the video programming and distribution market nationwide,” he explained. “Not surprisingly the defendants AT&T Time Warner and DirecTV strongly disagree. Their vision couldn't be more different. The video programming and distribution market they point out has been, and is, in the middle of her revolution where high-speed Internet access has facilitated a “veritable explosion” of new innovative video content … As a result of these tectonic changes brought on by the proliferation of high-speed Internet access, video programmers such as Time Warner and video distributors such as AT&T find themselves facing the stark reality of flat-lining television advertising revenues. Indeed, cost-conscious consumers increasingly choose the ‘cut’ or ‘shave the cord,’ abandoning their traditional cable or satellite TV packages for cheaper content alternatives available over the Internet. At the same time, Facebook and Google’s dominant digital advertising platforms have surpassed television advertising in revenue.”

Leon, in his opinion, stressed “the government has the burden of proof to demonstrate that the merger is likely to lessen competition substantially in the future.” Ultimately, it failed in that task.

As for a government appeal, Leon did his best to discourage such an action. A disruption of a June 20 deadline set by both companies would force AT&T to pay a $500 million “break-up” fee to Time Warner.

“There is a grave and understandable fear on the part of the defendants that the government will now seek to do indirectly what it couldn’t accomplish directly, by seeking a stay of this court order pending appeal to our circuit court,” he wrote. The consequence of doing so would bring “irreparable harm to the defendants.”

“I hope and trust that the government will have the good judgment, the wisdom, and the courage to avoid such a manifest injustice,” Leon added. “To do otherwise, I fear, would undermine the faith in our system of justice of not only the defendants but their millions of shareholders and the business community at large.”

“We are disappointed with the Court’s decision,” Assistant Attorney General Makan Delrahim said in a statement. “We continue to believe that the pay-television market will be less competitive and less innovative as a result of the proposed merger between AT&T and Time Warner. We will closely review the Court’s opinion and consider next steps in light of our commitment to preserving competition for the benefit of American consumers.”

Following the opinion, the Open Markets Institute, with a stated mission to “expose and reverse the stranglehold that corporate monopolies have on our country,” argued in support of the Government’s failed case.

“The decision is a big loss for the public. The vertical integration between a distributor, AT&T, and a creator of entertainment, Time Warner, paves the way for an even more concentrated and closed telecommunications industry. With Time Warner’s must-have content—including March Madness and HBO—AT&T will be able to hobble rival content distributors and dictate the terms on which competitors can participate in the market.” The group said in a statement. “Furthermore, the merger creates an effective duopoly in distribution in AT&T and Comcast (the other vertically integrated programmer-distributor). AT&T will be able to use Time Warner programming as a weapon to defend its business model, stifle existing and emerging competitive threats, and steer the trajectory of the industry.”

“Despite today’s defeat, the Department of Justice deserves credit for pursuing this case and should continue to challenge anticompetitive vertical mergers,” says Sandeep Vaheesan, policy counsel with the Open Markets Institute. “In recent years, government had responded to anticompetitive vertical deals by accepting complicated behavioral remedies. Breaking with recent practice, the DOJ recognized that the only way to preserve competition in the market for video programming and distribution was to block this deal.”

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