All eyes in the media and financial worlds were on the U.S. District Court for the District of Columbia when Judge Richard Leon announced his decision in the closely watched legal battle over whether AT&T will be able to acquire Time Warner yesterday on June 12, when Leon approved the deal and allowed the merger to go through. The $84 billion deal merging the second-largest wireless company and the corporate parent of the Warner Bros. TV and film studio, CNN and HBO was proposed in October 2016.  At the time, the New York Times noted it would “create a new colossus capable of both producing content and distributing it to millions with wireless phones, broadband subscriptions, and satellite TV connections.”  The message to media companies was clear: Bigger isn’t just better. It’s stupendously awesome.  Critics of the deal, including the non-profit Public Knowledge, however, raised alarm bells. When the Justice Department announced in November 2017 that it filed suit to block the merger on the grounds that it would lead to high prices and harm consumers, AT&T Chief Executive Randall Stephenson was stunned by the news, saying it defied “logic.” On Tuesday, AT&T emerged from court with a victory over the US Department of Justice, winning its case to buy Time Warner, the high-profile entertainment company behind networks like HBO and movie franchises like Superman and Harry Potter.

The Justice Department argues that if AT&T were to own Time Warner, AT&T would reduce competition in three ways: Raising the costs of Time Warner’s content to AT&T’s rivals, restricting competitors’ use of Time Warner’s HBO network as a promotional tool, and impeding innovation unilaterally or through coordination with Comcast-NBC Universal. Government suits of this kind are rare, especially in so-called “vertical” mergers — that is, the combination of two companies that do not directly compete with one another. Time Warner is a content producer while AT&T is a content distributor via its DirecTV satellite services and mobile phone business. Owning these networks would give AT&T an advantage in negotiations with rival providers. AT&T could demand that those rivals start paying more to carry the channels, and if they refuse to do so, AT&T would threaten to walk away because then consumers would switch to AT&T’s own DirecTV. That would lead to higher prices overall, which would hurt the competitive market and consumers, the government’s attorneys alleged. The last time the government sued to stop a “vertical” merger was in the 1970s. The final decision rests entirely on Judge Richard Leon. Leon’s ruling will depend on whether he finds that the purchase would violate antitrust laws, which prohibit mergers or acquisitions that within “reasonable probability” are likely to lessen competition. Leon is not limited to ruling “yes” or “no.” He can also essentially force a third option, in which he tells AT&T and Time Warner he’d allow the deal to proceed, but only if the companies make certain changes to the transaction.

The now completed merger is a big deal on its own merits: The $85 billion takeover will bring one of the biggest programmers of movies and television under the roof of the second biggest mobile carrier in the US. Just as important: The ruling is also seen as a starting gun for other companies in media and technology to go off to the races to buy each other. This is a time when an AT&T doesn’t just see T-Mobile and its competitors, but Google, Facebook and Netflix too. Deals (especially ones of the magnitude of the AT&T/Time Warner merger) are always going to be scrutinized by the government in order to see if the spirit of competition of capitalism will be maintained. One must consider potential litigation when considering moving forward with a large scale company acquisition or merger. The better you are in your knowledge of M & A laws, the better you will be able to avoid annoying litigation and other legal red tape.