AT&T and Time Warner beat the government in their battle cage antitrust trial. The judge blessed the merger and the companies now are one. In trials, one side wins. The other side loses. The AT&T-Time Warner trial is an exception. Both sides are losers.
The government lost. It lost so badly that the judge did things judges rarely do. He peppered his ruling with exclamation points. That happens less often than an undertaker does improv.
{mosads}Then, he admonished the government to not exercise its right to request a stay of his ruling because, he says, it would “undermine the faith in our system of justice of not only the defendants, but millions of shareholders and the business community at large.”
The government’s case was such a loser that the judge had to take on the responsibility of speaking for the business community and tell the government, “Go home, and don’t come back.”
That is not to say the judge wasn’t even-handed. He made it clear that the companies were even bigger losers. He described in detail how AT&T, whose roots go back to 1879 and is the world’s largest telecommunications company and distributor of traditional subscription television, and Time Warner, whose roots go back to 1923 and is the world’s third-largest entertainment company, are struggling to compete with 21-year-old Netflix and the even younger Google and Facebook.
The old mammoths are losing subscribers to Netflix and ad dollars to Google and Facebook so quickly that the judge thought the merger was critical to their survival and a delay while the government appeals would cause them irreparable harm.
That is not the sort of thing CEOs usually tell their shareholders. A message like that could make you wonder what the CEO has been doing the last decade or so. You might think that even a CEO who travels in quiet limousines and private jets has heard a word or two about Netflix or Facebook or Google doing pretty well.
Maybe he or she has noticed that his or her company has been losing enough subscribers and ad dollars to evoke sympathy from a tough-minded federal judge. On the other hand, maybe that is what we pay judges to do.
The government didn’t win. AT&T and Time Warner didn’t win. I suspect that you, I and other consumers didn’t win. The only obvious winners are the entrepreneurs at Netflix, Google and Facebook.
Starting with nothing at a time when AT&T and Time Warner were Fortune 500 mammoths, the entrepreneurs won so many subscribers and ad dollars that, if you believe AT&T and Time Warner’s claims as much as the judge believes them, the mammoths had to combine to keep competition alive.
Keeping competition alive is the point of antitrust law. If the government had won, the victory apparently would not have protected competition, it would have hurt the mammoths’ ability to compete with the entrepreneurs.
The ruling is a lively read and encouraging to entrepreneurs. I will use it in my entrepreneurship courses to hearten students who wonder how they can survive against companies with billions of dollars, big brand names, political clout and skyscrapers with their logos on top.
The ruling is Exhibit “A” for the proposition that it isn’t the mice who should worry about competing with the mammoths, it is the mammoths who should worry about the mice.
But don’t worry too much about the extinction of the world’s mammoth companies. They do have billions of dollars at their disposal. What they may lack in foresight and skill, they make up for in heft.
Even when they fail so thoroughly at giving customers what they want that pipsqueak entrepreneurs get an opening to build companies the mammoths soon can’t compete with, the mammoths can use their billions to buy their way out of extinction.
Mammoths can buy mammoths with the law’s blessing because the law’s purpose is to protect competition, and that includes protecting mammoths who are losing to competitors.
If you thought all the antitrust law did is protect consumers and little companies, you will be surprised to know that it also protects mammoths.
Erik Gordon is a clinical assistant professor at University of Michigan’s Ross School of Business where he focuses on entrepreneurship and technology commercialization, venture capital, private equity, mergers and acquisitions and corporate governance.