U.S. Said to Investigate AT&T and Verizon Over Wireless Collusion Claim


The investigation highlights a push by the Justice Department’s antitrust chief, Makan Delrahim, to crack down on the opaque world of intellectual property, or I.P., standards. He has said the Justice Department will scrutinize potential coordination in standards-setting organizations that can hurt competition.

“In the context of antitrust and I.P., we will be inclined to investigate and enforce when we see evidence of collusive conduct undertaken for the purpose of fixing prices, or excluding particular competitors or products,” Mr. Delrahim said in a speech this month at a conference in Washington. He previously warned of the potential for “cartel-like behavior” by competitors that got together with standards-setting organizations.

At the same time, the Justice Department is suing AT&T to block its $85.4 billion merger with Time Warner. Mr. Delrahim has said the deal will hurt competition and lead to higher prices for cable customers. AT&T and Time Warner have strongly disputed the claims in a federal trial that is expected to end this month.

Currently, most mobile phones use SIM cards, which contain unique identifying information about a user and are inserted into the devices so the phones can function. People typically have to buy a new SIM card when changing carriers.

The eSIM technology, which was introduced in early 2016, is embedded in mobile phones and other devices so that people do not need SIM cards anymore.

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The investigation may also include major American carriers other than AT&T and Verizon, a person with knowledge of the inquiry said.

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Brandon Thibodeaux for The New York Times

The eSIM technology is supported by gadget makers including Apple, Google and Microsoft, as well as several wireless carriers globally and in the United States. The Apple Watch 3, Google Pixel 2 smartphone and Microsoft Surface all have eSIM abilities, for example. The technology would make it easier for people to use local carriers when traveling internationally and would free up storage space in devices to use for other technologies like bigger processors and batteries.

The push by the major carriers to restrict the flexibility of eSIM runs counter to a movement in which consumers were gaining more flexibility to move from carrier to carrier. In late 2013, under pressure by the Federal Communications Commission, the wireless industry agreed to let people take devices off any particular network without penalty once the devices were fully paid for.

After the formal complaints against AT&T and Verizon were filed, several device makers and other wireless companies voiced similar concerns to the agency about the carriers’ actions around eSIM, four people familiar with the investigation said. The investigation may also include other major American carriers, another person said.

“The actions would limit choice for consumers and harm competition,” said Ferras Vinh, a policy expert at the Center for Democracy and Technology.

In a private meeting of a task force called G.S.M.A. North America this year, AT&T and Verizon pushed for the ability to lock phones to their networks, bypassing the purpose of eSIM technology, said Harold Feld, a senior vice president of Public Knowledge, a nonprofit consumer group, who was briefed on the meeting. Verizon has said it needed to be able to lock down phones to prevent theft and fraud.

“There is a constant problem with industry standards-setting organizations that on the one hand allow the industry to come together for the purpose of efficiency but can be very anticompetitive and operate in secrecy,” Mr. Feld said.

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DealBook Briefing: Did Jeff Bewkes Help Time Warner’s Cause in Court?


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William Hejl, a farmer worried by the threat of Chinese tariffs.

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Dan Koeck for The New York Times

The timeline for a potential U.S.-China trade war

As the U.S. and China continue to posture over trade — alarming U.S. farmers, many of whom are in key electoral districts in the Midwest — it’s worth noting three upcoming dates, Peter Eavis writes.

On May 1, exemptions to the tariffs on imported steel and aluminum expire.

On May 22, the public comment period ends for another $50 billion worth of tariffs, and the Trump administration can announce a final list of targets.

And Aug. 18 is potentially the deadline for the administration to act on an investigation into Chinese trade practices. But there’s a provision for a 180-day delay after that.

Key caveats: President Trump has the power to pursue trade policy almost at whim. And a W.T.O. proceeding against China could take years.

Elsewhere in trade: How Qualcomm became collateral damage in the fight (China says its takeover of NXP Semiconductors has “hard to resolve” issues), while Washington continues to fret about Chinese tech. Rusal is betting on China for relief from U.S. sanctions. What worries the Fed about trade. And why Wall Street and trading allies increasingly ignore presidential statements.

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Assembling a rifle at the Sturm, Ruger & Co. factory.

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Eric Thayer/Reuters

Breaking: Amalgamated presses Sturm, Ruger on gun limits

The politically minded bank already adopted principles for limiting firearm sales laid out by the advocacy group Everytown for Gun Safety. Now it’s using its position as a (small) shareholder in Sturm, Ruger to urge the gun maker to adopt six Everytown principles.

Among them: Supporting mandatory background checks for all sales; binding sellers to a code of conduct; and adopting smart-gun tech. If Ruger doesn’t support those principles, Amalgamated would withhold votes for Sandra Froman, a Ruger director who’s also on the N.R.A.’s board.

Elsewhere in gun sales: Dicks’s Sporting Goods plans to destroy its stock of assault-style rifles.

The political flyaround

• Attorney General Eric Schneiderman of New York wants to change state law to allow repeat criminal charges against offenders granted a presidential pardon. An adviser to President Trump warned that Michael Cohen could flip. And meet the judge in his case, Kimba Wood.

• Karen McDougal and the publisher of the National Enquirer have settled. She can now publicly discuss her claim to have had an affair with Mr. Trump, who is spared the risk of legal proceedings. (NYT)

• A resolution demanding that Scott Pruitt quit the E.P.A. attracted signatures from 170 Democratic lawmakers. (The Hill)

• Ted Cruz’s Democratic challenger, Beto O’Rourke, is within 3 points in the latest Quinnipiac poll. (Axios)

• The Senate voted to overturn an Obama-era rule restricting car lenders from discriminating against minorities. (NYT)

• The S.E.C. voted to move ahead with public consultations on a rule requiring brokers to put clients’ “best interest” first. (Bloomberg)

• The rise and fall of the lobbyist Tony Podesta. (WSJ)

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Jason Redmond/Agence France-Presse — Getty Images

The most important part of Jeff Bezos’s annual letter

It’s the disclosure that Prime now has over 100 million members. These are Amazon’s stickiest and most valuable customers, who order often and can access its streaming service. The company had $9.72 billion in revenue from subscription services, including Prime fees.

Mr. Bezos also talks about the importance of “high standards” for his digital behemoth. (And about yoga handstands.)

Elsewhere in Amazon: The company is moving its entertainment division to the Culver Studios, where “Raging Bull” and “E.T.” were made.

The tech flyaround

• Facebook is reportedly designing chips, and working to move 1.5 billion users worldwide beyond the reach of European data privacy rules. An Irish watchdog still has qualms about its facial recognition. And ad agencies are seeking substitutes for its hoard of personal data.

• Uber is reportedly in talks to hire VMware’s Zane Rowe as C.F.O., to help prepare an I.P.O. next year. The last of Otto’s founders, Don Burnette, has left Uber.

• Qualcomm has begun cutting about 1,500 jobs. (Bloomberg)

• Intel is closing its wearable tech group. (CNBC)

• Tencent, JD.com and others will put $437 million into a unit of the embattled tech conglomerate LeEco. (FT)

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Lucas Jackson/Reuters

Goldman’s big task: looking less like the Goldman of old

As the firm moves more into consumer businesses — pushing its Marcus online lending platform, buying Adam Dell’s budget-planning app — it is looking less like a traditional investment bank and trading house and more like a one-stop shop. Like the universal banks JPMorgan Chase, Bank of America and Citigroup.

But the shift carries plenty of risk. “It goes against their history as a firm; they’ve no track record of expanding consumer, commercial or corporate banking,” the analyst Brian Kleinhanzl of KBW told the FT.

Elsewhere in banking: Credit Suisse and UBS are reportedly in talks to combine some of their back-office operations. The activist investor Edward Bramson has built a 5 percent stake in Barclays and wants to wind down its trading division, unnamed sources told the London Evening Standard.

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William P. O’Donnell/The New York Times

The deals flyaround

• Bankers for Meredith have reportedly ruled out the National Enquirer owner A.M.I. as a bidder for Time, Fortune, Inc. and Sports Illustrated, rejecting a $300 million offer. (Vanity Fair)

• P.&G. agreed to buy Merck of Germany’s consumer health business for $4.2 billion. (WSJ)

• Total of France agreed to buy Direct Energie, a utility focused on clean energy, for $1.7 billion. (NYT)

• Lloyd Blankfein of Goldman Sachs and Jon Gray of Blackstone butted heads over a potential debt deal at a recent lunch. (Bloomberg)

• The U.K. will reportedly approve Melrose Industries’ bid for GKN. (FT)

• Avenue Capital is reportedly planning a social-impact debt fund. (Reuters)

• Bon-Ton Stores is going out of business. (WSJ)

• Grail, a cancer-detection start-up backed by Jeff Bezos and Bill Gates, is reportedly working to raise $1 billion. RealSelf, an online hub for cosmetic surgery information, has raised $40 million. And Green Bits, which makes software to help cannabis dispensaries stay legal, has raised $17 million from Tiger Global Management and others.

Revolving door

• Cerberus Capital Management has hired the former JPMorgan Chase C.O.O. Matt Zames as president. Frank Bruno, a Cerberus veteran, will become co-C.E.O. alongside Stephen Feinberg. (WSJ)

• Wynn Resorts has added three women to its board: Dee Dee Myers, who was a White House spokeswoman in the Clinton administration; Betsy Atkins, an advocate of stronger corporate governance; and Wendy Webb, a former investor-relations chief for Disney. (Bloomberg)

• Deutsche Bank’s C.O.O., Kim Hammonds, and investor-relations chief, John Andrews, are leaving. (WSJ)

• GlaxoSmithKline has hired Kevin Sin from Genentech as a top internal deal maker. (Reuters)

• Jana Partners has hired Dan Hanson, once of BlackRock, and Pulkit Agarwal, formerly of the International Finance Corporation, to work on its social impact investing fund. (Reuters)

The speed read

• The highest-ranking civil servant in Japan’s Finance Ministry resigned after accusations that he had sexually harassed female journalists. (NYT)

• Starbucks will become a test case for training to combat unconscious bias; its effectiveness is still a matter for debate. (NYT)

• Coastal communities are no longer the only ones suing fossil-fuel companies over the costs of climate change. (NYT)

• Porsche’s headquarters in Germany were raided by the police yesterday as part of an investigation into emissions cheating. (NYT)

• The departing editor of Harper’s Magazine, James Marcus, said he had been fired for opposing the publication of a contrarian essay on #MeToo. The magazine disputes that. (NYT)

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Time Warner C.E.O. Testifies That AT&T Deal Is Needed to Battle Silicon Valley


AT&T’s chief executive, Randall Stephenson, is expected to testify as soon as Thursday, with John Stankey, AT&T’s senior vice president who is poised to run Time Warner after the merger, testifying later on Wednesday. Arguments are expected to close as early as April 30. Judge Richard J. Leon of the United States District Court for the District of Columbia, who is presiding over the case, is expected to take about a month before giving his opinion.

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AT&T and Time Warner have argued that it is extremely unusual for the federal government to try to block what is known as a vertical merger, a union of companies that don’t compete directly.

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Brandon Thibodeaux for The New York Times

For Mr. Bewkes, 65, the courtroom appearance was a rare public pleading to salvage a career-defining deal. The media titan is a 39-year veteran of Time Warner and has been chief executive since 2008, overseeing the rise of HBO, the spinoff of Time Warner Cable in 2009 and the turbulent evolution of CNN and the Warner Bros. movie studio.

Confident and congenial, Mr. Bewkes engaged directly with Judge Leon, leaning forward in his chair and making eye contact as he explained how the media industry is being challenged by Apple, Amazon, Facebook, Google and Netflix.

Among the biggest problems for Time Warner as a stand-alone television and movie producer is that it does not have access to viewer data to target advertising and other customer information, the same way that Amazon and Netflix do, Mr. Bewkes said.

“We don’t have emails, contact information, billing information … any of these things,” he said.

At the center of the antitrust trial are arguments over consumer and competitive harms, with attention focused on economic analyses presented by both sides last week. The Justice Department and several consumer groups said the deal would hurt consumers, who would have to pay bigger bills as a result of higher prices for Time Warner programs.

The companies have argued that the Justice Department’s lawsuit is at least a decade behind the times. They portray their companies as underdogs struggling to compete against Silicon Valley titans. AT&T and Time Warner also have said it is highly unusual for the federal government to block a so-called vertical merger of companies that don’t directly compete.

Judge Leon has said the action was indeed a “rare breed of horse” but not a “unicorn.”

Mr. Bewkes and Mr. Stephenson have previously suggested that the Justice Department was influenced to block the deal by presidential politics. President Trump said during his election campaign that the deal should be denied. Mr. Trump has also repeatedly bashed CNN, the news network owned by Time Warner, for its coverage of his administration.

The Justice Department has denied any political interference in its suit to block the deal.

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When Mr. Gates Went to Washington


Mr. Zuckerberg even said several times that he was open to new regulations aimed at his company, without committing to any particular approach.

The difference was clear, said Senator Richard Blumenthal, a Democrat from Connecticut, who has seen both Facebook and Microsoft up close. He questioned Mr. Zuckerberg in Congress, and in the 1990s, as Connecticut’s attorney general, he helped lead the states’ antitrust assault on Microsoft.

“Facebook has already taken very much to heart the clear lessons of Microsoft, which is to engage fully and aggressively in dialogue with federal powers,” he said by phone. “Microsoft basically refused to have any real conversations with D.O.J. or the states before we filed suit. Essentially, it stonewalled negotiations before there was a judgment by the courts.”

Asked if the example of Microsoft had guided any of Facebook’s strategy in dealing with federal powers, a Facebook spokeswoman said, “As Mark told Congress, we made mistakes and we’re taking action to make sure that they don’t happen again.

“Everything we’re doing has been guided by the understanding that we need to do better,” the spokeswoman, Vanessa Chan, added.

By March 1998, when Mr. Gates appeared in Congress, Microsoft seemed all but invincible, its market dominance and ambitions at their peak. It had made forays into online commerce, media and advertising, and executives in one industry after another anxiously awaited the company’s next move.

Bankers raised the specter of a new online rival: The First National Bank of Redmond they called it, referring to Microsoft’s headquarters in Redmond, Wash. Rupert Murdoch declared that the company he feared most was Microsoft. Microsoft had its own online magazine, Slate, as well as newsroom and programming studios, and it joined forces with NBC to help start MSNBC.

The first internet boom was also in full swing, and Microsoft’s Windows software — the operating system on 90 percent of the world’s personal computers — controlled that gateway to the future with its browser, Internet Explorer.

But there was an insurgent in Microsoft’s world, the Silicon Valley start-up Netscape, creator of the first commercially successful internet browser. The browser had the potential to be the on ramp to the internet, undermining Windows. Microsoft portrayed Internet Explorer as a mere feature of its operating system. The software giant was intent on winning the “browser war” with Netscape, using every weapon it had to squelch the upstart.

The federal government and several states investigated Microsoft’s behavior. Years of tangles with competition regulators in Europe followed, along with a string of private antitrust lawsuits.

After it lost the federal antitrust case in America, Microsoft, with little choice, sued for peace, spending billions of dollars in settlements and fines. It submitted to monitors who would file regular reports on the company’s compliance with its settlements. Several years later, Mr. Gates gave up day-to-day control of the company and became the country’s leading philanthropist.

“The view was that government was irrelevant and we can do anything we want,” said David Yoffie, a professor at the Harvard Business School, who has studied Microsoft for years. “There was little respect for government, and that was the culture inside Microsoft at the time.”

Today, Facebook finds itself squarely in the public spotlight, but confronting a different set of policy challenges.

The concern about Microsoft was economic. Consumers might pay somewhat higher prices, but mainly they would suffer because future innovations would be thwarted.

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Richard Blumenthal, a Connecticut Democrat, helped lead an antitrust case against Microsoft by the states in the 1990s. Now a senator, he questioned Mr. Zuckerberg on Tuesday.

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Alex Brandon/Associated Press

Facebook is under attack because of privacy concerns, its data-handling practices and its vulnerability to be used by others to spread lies, hatred and political propaganda. The main worry is that the social network is being manipulated to shape human behavior. And Facebook’s data harvesting and the potential impact are far more personal than anything Microsoft did.

Tom Rubin, a former senior lawyer at Microsoft who is now a lecturer at Stanford University, sees many parallels between the government scrutiny of Microsoft and of Facebook, which he discussed with a class on tech policy at the school this past week.

“They both involve an allegation that a digital gatekeeper, with insufficient internal controls, drove for dominance by harming the ecosystem in which it operates,” said Mr. Rubin, who was an assistant United States attorney before joining Microsoft.

But the stakes now, he said, are higher than in the days when the public was still figuring out how to get onto the internet. “Competition in the marketplace for browsers pales in comparison to protecting personal privacy and a functioning democracy,” Mr. Rubin said. “It’s hard to conceive of a higher priority for legislators and regulators than that.”

One risk for Facebook could come from an emerging group of antitrust experts who advocate expanding the definition of consumer welfare beyond pricing and innovation, to include the impact on workers, small retailers and privacy. The German antitrust authorities are pursuing a case against Facebook alleging that its market dominance essentially forces users to accept a service that violates their privacy.

But that approach, most experts say, is a stretch, particularly in the United States.

“The idea is that they’re big, so antitrust should be used to address the problem,” said Andrew I. Gavil, a law professor at Howard University. “But if you’re looking for a privacy remedy, antitrust is not the right tool.”

An alternative threat is much stricter privacy regulation, following the European lead. The European Union’s General Data Protection Regulation, which goes into effect next month, is far more restrictive than data collection and trading practices in America. It requires companies to collect and store only the minimum amount of user data needed to provide a specific, stated service.

In the United States, that would mean stronger laws and more resources for privacy and data-protection enforcement by the Federal Trade Commission and states.

“That is arguably a much more effective solution to this kind of problem — get the privacy regime right,” said William Kovacic, an antitrust expert at the George Washington University Law School and a former chairman of the F.T.C.

But like the antitrust concerns, any major overhaul of privacy law in Washington appears unlikely anytime soon.

Still, the smart move for Facebook, said A. Douglas Melamed, who was a senior antitrust official in the Justice Department during the Microsoft case, would be to depart from the old Microsoft playbook of resistance and embrace new, tougher rules on privacy and data-handling practices — and help guide them.

“That would move the conversation away from ‘Are these bad guys?’ to ‘How can we work together to solve these problems?’” Mr. Melamed, a professor at Stanford Law School, said. “And if Facebook really does that, Mark Zuckerberg is likely to get answers he can live with and that actually might be helpful.”

What Facebook wants to avoid, said Charles Fitzgerald, a former Microsoft strategist who is now an angel investor in tech start-ups, is what happened to Microsoft: The double whammy of government and legal entanglements and a stock price in the dumps had consequences for Microsoft’s ability to hold on to talent.

Facebook, he said, could see the same phenomenon if its growth slows and employees tire of oversight and constant attacks on the company’s reputation.

“The combination of a flat or declining stock price and having to spend lots of time on miserable legal issues instead of building product made a lot of people rethink how they wanted to spend their days,” Mr. Fitzgerald said. “And Facebook employees may have a harder time gazing in an ethical mirror.”

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European Authorities Raid Offices of 21st Century Fox Unit


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Sports programming has played a key role in Rupert Murdoch’s ability to gain a foothold in the European pay-TV market.

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Jewel Samad/Agence France-Presse — Getty Images

European authorities raided the London offices of a unit of 21st Century Fox on Tuesday as part of an antitrust investigation into the distribution of sports programming.

The search at Fox Networks Group was one of several the European Commission said it had conducted across Europe as part of an investigation into potential violations of rules prohibiting price-fixing cartels. The investigation adds to the regulatory challenges that 21st Century Fox, Rupert Murdoch’s media giant, is facing in Europe, where officials have held up its bid to take full control of the British satellite broadcaster Sky.

In a statement, Fox Networks Group said it was “cooperating fully with the E.C. inspection.” The raid was first reported by The Daily Telegraph in London, which said the authorities had seized documents and computer files. The European Commission, the executive arm of the European Union, declined to comment on what companies were involved in the searches.

Sports programming has played a key role in Mr. Murdoch’s ability to gain a foothold in the European pay-TV market. Through 21st Century Fox, he owns a 39 percent stake in Sky, which has 23 million customers and owns rights to show the English Premier League and other professional soccer leagues.

Mr. Murdoch has sought to buy the remaining 61 percent of Sky, but the British authorities have not given their final approval. Sky is an important part of the Walt Disney Company’s proposed $52 billion deal to buy much of 21st Century Fox.

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Live Nation Rules Music Ticketing, Some Say with Threats


Take, for example, an April 2016 concert in Nashville where Ticketmaster added a $14.75 fee on top of a $36 ticket for a show in an amphitheater Live Nation owned. Even Michael Rapino, Live Nation’s chief executive, called that fee “not defendable,” according to an internal email.

Holding onto venues is critical to a company that relies so much on ticket fees. Mr. Rapino has repeatedly boasted to Wall Street that the number of venues it tickets around the world – a statistic it does not release — is constantly growing.

For the live music market, a larger question going forward is whether Live Nation is now so big, so empowered by the merger, that competition in ticketing at the major venues is effectively blocked. Jared Smith, the president of Ticketmaster in North America, said no, that evidence of vibrant competition can be seen in the innovative technology and better deals that his company must now offer venues to keep them from switching to a rival.

“The space is more competitive than it’s ever been,” he said. “We’re working harder each and every year.”

AEG acknowledges that some part of its difficulty in securing contracts is rooted in its own missteps in developing a competitive ticketing system. And certainly, at the lower reaches of the market, Ticketmaster’s share is not nearly so commanding.

But it’s clear that Ticketmaster, by whatever means, has kept its rivals from gaining a meaningful foothold in the market for major music venues.

Preserving competition in the ticketing market was a chief concern for regulators when the Live Nation-Ticketmaster merger was proposed in 2009. Live Nation, which had long stayed in its lane as a promoter and venue operator, had just begun to sell tickets and was taking on that role at some 110 venues.

If the two companies merged, that competition — a healthy marketplace development, as regulators saw it — would disappear.

So, as part of the consent decree, Justice officials ordered steps that they hoped would enable two new robust challengers. One measure required Ticketmaster to license its ticketing software — the proprietary system that allowed it to service swarms of customers when a popular concert went on sale — to its competitor AEG.

It was also required to divest a ticketing subsidiary, Paciolan, to another competitor.

But, as it turned out, AEG never licensed the Ticketmaster software because, it said, it did not view the technology as cutting edge. The company that Ticketmaster sold off, Paciolan, remained a niche player in the music end of the business.

“It has now been eight years since the merger and the world does not look a lot different,” said John E. Kwoka Jr., a professor of economics at Northeastern University and a longtime critic of the merger.

Ms. Varney declined to comment on the effectiveness of the agreement she had shepherded. But the antitrust division’s former chief counsel, Gene Kimmelman, said the Justice Department had been hampered in what it could do to create competition in an industry already so dominated by one company.

“The people who came in to oversee this transaction were very interested in doing everything imaginable to create more competition in ticketing in the marketplace,” he said, “and were frustrated that the options were unbelievably limited.”

Talent Needs

Few buildings in Louisville are as important to the local economy as the KFC Yum! Center, a 22,000-seat arena on the banks of the Ohio River that features a mix of events, from Louisville Cardinals basketball games to concerts by Garth Brooks.

In 2012, Live Nation submitted a joint bid with another company for a contract to manage the arena. Three people who listened to Live Nation’s pitch said in interviews that the company said some of its tours might skip the arena if it lost the deal.

“One of their main selling points was the relationship with the talent that they had and their ability to determine where that talent chose to play,” said Larry Hayes, who was then chairman of the Louisville Arena Authority, which oversees the venue.

The arena picked AEG anyway.

Mr. Fikre and other AEG officials say that two years later, when their company considered replacing Ticketmaster with their own ticketing service, AXS, Live Nation gave a warning.

Over dinner on the night of a Miley Cyrus concert in August 2014, they said, a Live Nation executive told AEG’s local venue manager that some Live Nation tours would likely bypass Louisville if AEG made good on its plan to replace Ticketmaster.

This is one of the incidents that AEG complained about to the Justice Department, pointing out that the consent decree specifically forbids Live Nation from threatening to withhold shows from venues that do not hire Ticketmaster.

The AEG account is supported by an internal email in which its employee reports being warned that the Yum! Center might lose “toss of the coin shows” — the kind that could go to a nearby arena — if Ticketmaster was dumped.

Mr. Hayes said in an interview that he had not been aware of a second warning. He had, in fact, endorsed retaining Ticketmaster, he said: it had served the arena well. But the letter of endorsement he wrote to AEG made plain that he understood there was a nexus between employing Ticketmaster and retaining access to Live Nation talent.

“Due to the relationship between Ticketmaster and Live Nation,” Mr. Hayes wrote, “and knowing how important content is to our financial stability, the Louisville Arena Authority is requesting that AEG receive a formal bid from Ticketmaster to retain its business at the KFC Yum! Center.”

AEG officials say they ultimately ditched the plan to replace Ticketmaster because they worried the venue might lose show revenue.

Live Nation disputed the account of warnings and supplied data showing that since 2012 the number of tours it has sent to the KFC Yum! Center has only increased. (Even at the Gwinnett Center outside Atlanta, now known as the Infinite Energy Center, the number of Live Nation shows rebounded after dropping off in 2014.)

There is little evidence, actually, of Live Nation retaliation. Competitors say that is because venues so rarely stray.

Critics say enforcement of the consent decree has been complicated by what they call its ambiguous language. Though it forbids Live Nation from forcing a client to buy both its talent and ticketing, the agreement lets the company “bundle” its services “in any combination.” So Live Nation is barred from punishing an arena by, say, steering a star like Drake to appear at a rival stop down the road. But it’s also allowed, under the agreement, to redirect a concert if it can defend the decision as sound business.

Mr. Buffier, of the New York Attorney General’s office, said the ambiguity creates “high burdens to prove violations in court.”

Competitors assert that the bundling lets Live Nation pressure venues without ever uttering a threat.

“They don’t need to,” said Marc Leibowitz, co-owner of One Percent Productions, an independent concert promoter in Omaha. “It’s just implied.”

David Willis, a former ticketing executive who left Ticketmaster in 2014, said the company was always careful to instruct the sales staff to respect the rules as to how talent could be mentioned when pitching an arena for business.

“We were not saying, certainly, ‘If you don’t go with us you are losing that,’” he said. But he acknowledged, “I would imagine that that is what they assumed to be the case.”

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Live Nation’s agreement with the government lets it sell package deals to venues, offering ticketing as well as tours by top artists like Drake, bottom left.

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Photos, via Getty Images

A Regulator’s Quandary

Live Nation and AEG both have their headquarters in Los Angeles, and last summer the companies faced off in a contract dispute over a new Major League Soccer team there, the Los Angeles Football Club.

Trouble began brewing when the team began looking for someone to ticket its new stadium downtown, due to open later this month.

Ticketmaster put in a bid. But the team insisted that Live Nation bring in some concerts as well. Live Nation balked — soccer stadiums, executives said, were a poor fit for concerts — but it struck a preliminary deal that included ticketing and a commitment to provide a handful of shows each year.

Then the plan hit a snag. AEG owned another professional soccer team in Los Angeles — the Galaxy — and had an agreement with Major League Soccer: if another franchise from Los Angeles joined the league, AEG had the right to match any competitor’s ticketing offer.

Wielding that clause as leverage, AEG blocked the selection of Ticketmaster, and the contract instead went to SeatGeek, an upstart company that had deals with a number of M.L.S. teams.

The Ticketmaster executives were furious and threatened to sue.

They told the team owners that, if there was no Ticketmaster contract, they would not be getting the promised Live Nation shows. The team then complained to Major League Soccer that Live Nation had threatened to withhold talent, according to a statement by the league.

Live Nation denied it had made any kind of threat and pointed out that the soccer league has a small equity stake in SeatGeek.

It said the arena had simply pulled out of a package deal that covered both ticketing and concerts — just the sort of bundling, it said, the Justice Department settlement had allowed. Without ticketing, according to Live Nation officials, it simply made no economic sense to put concerts in a space built for soccer.

But the consent decree, which expires in 2020, also says Live Nation cannot “condition or threaten to condition the provision of live entertainment events” if a venue decides to use another company for ticketing.

So is this a case of bullying, or just a business decision?

“Live Nation and Ticketmaster,” the company said in a statement “do not ‘condition’ the placement of concerts at venues on becoming the venue’s ticketing provider. Venues, on the other hand, often condition the ticketing contract on guaranteed content.”

Antitrust experts said this was the kind of thicket that Justice officials must navigate as they reviewed the antitrust complaints.

Since the dust up Live Nation has returned to the table and is discussing bringing acts to the stadium. The team declined to comment on the dispute. SeatGeek ended up holding onto the contract.

But the perception that Live Nation might withhold talent is prevalent enough that SeatGeek now structures some bids to address the concerns of venues who fear losing big stars, and revenues.

For example, last year, when SeatGeek tried to unseat Ticketmaster from its contract at the TD Garden in Boston, it included in its bid a promise to pay the arena $250,000 for every show that Live Nation pulled, according to a bid document reviewed by the Times and three people with knowledge of the negotiations.

Ticketmaster still won. TD Garden officials said the contract was awarded on the merits and that they had not received any threats.

A SeatGeek spokesperson declined to discuss the negotiations. But Russ D’Souza, a founder of the company, said he has seen evidence that competition in the market is less than open.

“When we sell to teams,” he said, “we have heard fears about losing concerts if they choose us.”

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Live Nation Rules Music Ticketing, Some Say with Threats


Take, for example, an April 2016 concert in Nashville where Ticketmaster added a $14.75 fee on top of a $36 ticket for a show in an amphitheater Live Nation owned. Even Michael Rapino, Live Nation’s chief executive, called that fee “not defendable,” according to an internal email.

Holding onto venues is critical to a company that relies so much on ticket fees. Mr. Rapino has repeatedly boasted to Wall Street that the number of venues it tickets around the world – a statistic it does not release — is constantly growing.

For the live music market, a larger question going forward is whether Live Nation is now so big, so empowered by the merger, that competition in ticketing at the major venues is effectively blocked. Jared Smith, the president of Ticketmaster in North America, said no, that evidence of vibrant competition can be seen in the innovative technology and better deals that his company must now offer venues to keep them from switching to a rival.

“The space is more competitive than it’s ever been,” he said. “We’re working harder each and every year.”

AEG acknowledges that some part of its difficulty in securing contracts is rooted in its own missteps in developing a competitive ticketing system. And certainly, at the lower reaches of the market, Ticketmaster’s share is not nearly so commanding.

But it’s clear that Ticketmaster, by whatever means, has kept its rivals from gaining a meaningful foothold in the market for major music venues.

Preserving competition in the ticketing market was a chief concern for regulators when the Live Nation-Ticketmaster merger was proposed in 2009. Live Nation, which had long stayed in its lane as a promoter and venue operator, had just begun to sell tickets and was taking on that role at some 110 venues.

If the two companies merged, that competition — a healthy marketplace development, as regulators saw it — would disappear.

So, as part of the consent decree, Justice officials ordered steps that they hoped would enable two new robust challengers. One measure required Ticketmaster to license its ticketing software — the proprietary system that allowed it to service swarms of customers when a popular concert went on sale — to its competitor AEG.

It was also required to divest a ticketing subsidiary, Paciolan, to another competitor.

But, as it turned out, AEG never licensed the Ticketmaster software because, it said, it did not view the technology as cutting edge. The company that Ticketmaster sold off, Paciolan, remained a niche player in the music end of the business.

“It has now been eight years since the merger and the world does not look a lot different,” said John E. Kwoka Jr., a professor of economics at Northeastern University and a longtime critic of the merger.

Ms. Varney declined to comment on the effectiveness of the agreement she had shepherded. But the antitrust division’s former chief counsel, Gene Kimmelman, said the Justice Department had been hampered in what it could do to create competition in an industry already so dominated by one company.

“The people who came in to oversee this transaction were very interested in doing everything imaginable to create more competition in ticketing in the marketplace,” he said, “and were frustrated that the options were unbelievably limited.”

Talent Needs

Few buildings in Louisville are as important to the local economy as the KFC Yum! Center, a 22,000-seat arena on the banks of the Ohio River that features a mix of events, from Louisville Cardinals basketball games to concerts by Garth Brooks.

In 2012, Live Nation submitted a joint bid with another company for a contract to manage the arena. Three people who listened to Live Nation’s pitch said in interviews that the company said some of its tours might skip the arena if it lost the deal.

“One of their main selling points was the relationship with the talent that they had and their ability to determine where that talent chose to play,” said Larry Hayes, who was then chairman of the Louisville Arena Authority, which oversees the venue.

The arena picked AEG anyway.

Mr. Fikre and other AEG officials say that two years later, when their company considered replacing Ticketmaster with their own ticketing service, AXS, Live Nation gave a warning.

Over dinner on the night of a Miley Cyrus concert in August 2014, they said, a Live Nation executive told AEG’s local venue manager that some Live Nation tours would likely bypass Louisville if AEG made good on its plan to replace Ticketmaster.

This is one of the incidents that AEG complained about to the Justice Department, pointing out that the consent decree specifically forbids Live Nation from threatening to withhold shows from venues that do not hire Ticketmaster.

The AEG account is supported by an internal email in which its employee reports being warned that the Yum! Center might lose “toss of the coin shows” — the kind that could go to a nearby arena — if Ticketmaster was dumped.

Mr. Hayes said in an interview that he had not been aware of a second warning. He had, in fact, endorsed retaining Ticketmaster, he said: it had served the arena well. But the letter of endorsement he wrote to AEG made plain that he understood there was a nexus between employing Ticketmaster and retaining access to Live Nation talent.

“Due to the relationship between Ticketmaster and Live Nation,” Mr. Hayes wrote, “and knowing how important content is to our financial stability, the Louisville Arena Authority is requesting that AEG receive a formal bid from Ticketmaster to retain its business at the KFC Yum! Center.”

AEG officials say they ultimately ditched the plan to replace Ticketmaster because they worried the venue might lose show revenue.

Live Nation disputed the account of warnings and supplied data showing that since 2012 the number of tours it has sent to the KFC Yum! Center has only increased. (Even at the Gwinnett Center outside Atlanta, now known as the Infinite Energy Center, the number of Live Nation shows rebounded after dropping off in 2014.)

There is little evidence, actually, of Live Nation retaliation. Competitors say that is because venues so rarely stray.

Critics say enforcement of the consent decree has been complicated by what they call its ambiguous language. Though it forbids Live Nation from forcing a client to buy both its talent and ticketing, the agreement lets the company “bundle” its services “in any combination.” So Live Nation is barred from punishing an arena by, say, steering a star like Drake to appear at a rival stop down the road. But it’s also allowed, under the agreement, to redirect a concert if it can defend the decision as sound business.

Mr. Buffier, of the New York Attorney General’s office, said the ambiguity creates “high burdens to prove violations in court.”

Competitors assert that the bundling lets Live Nation pressure venues without ever uttering a threat.

“They don’t need to,” said Marc Leibowitz, co-owner of One Percent Productions, an independent concert promoter in Omaha. “It’s just implied.”

David Willis, a former ticketing executive who left Ticketmaster in 2014, said the company was always careful to instruct the sales staff to respect the rules as to how talent could be mentioned when pitching an arena for business.

“We were not saying, certainly, ‘If you don’t go with us you are losing that,’” he said. But he acknowledged, “I would imagine that that is what they assumed to be the case.”

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Live Nation’s agreement with the government lets it sell package deals to venues, offering ticketing as well as tours by top artists like Drake, bottom left.

Credit
Photos, via Getty Images

A Regulator’s Quandary

Live Nation and AEG both have their headquarters in Los Angeles, and last summer the companies faced off in a contract dispute over a new Major League Soccer team there, the Los Angeles Football Club.

Trouble began brewing when the team began looking for someone to ticket its new stadium downtown, due to open later this month.

Ticketmaster put in a bid. But the team insisted that Live Nation bring in some concerts as well. Live Nation balked — soccer stadiums, executives said, were a poor fit for concerts — but it struck a preliminary deal that included ticketing and a commitment to provide a handful of shows each year.

Then the plan hit a snag. AEG owned another professional soccer team in Los Angeles — the Galaxy — and had an agreement with Major League Soccer: if another franchise from Los Angeles joined the league, AEG had the right to match any competitor’s ticketing offer.

Wielding that clause as leverage, AEG blocked the selection of Ticketmaster, and the contract instead went to SeatGeek, an upstart company that had deals with a number of M.L.S. teams.

The Ticketmaster executives were furious and threatened to sue.

They told the team owners that, if there was no Ticketmaster contract, they would not be getting the promised Live Nation shows. The team then complained to Major League Soccer that Live Nation had threatened to withhold talent, according to a statement by the league.

Live Nation denied it had made any kind of threat and pointed out that the soccer league has a small equity stake in SeatGeek.

It said the arena had simply pulled out of a package deal that covered both ticketing and concerts — just the sort of bundling, it said, the Justice Department settlement had allowed. Without ticketing, according to Live Nation officials, it simply made no economic sense to put concerts in a space built for soccer.

But the consent decree, which expires in 2020, also says Live Nation cannot “condition or threaten to condition the provision of live entertainment events” if a venue decides to use another company for ticketing.

So is this a case of bullying, or just a business decision?

“Live Nation and Ticketmaster,” the company said in a statement “do not ‘condition’ the placement of concerts at venues on becoming the venue’s ticketing provider. Venues, on the other hand, often condition the ticketing contract on guaranteed content.”

Antitrust experts said this was the kind of thicket that Justice officials must navigate as they reviewed the antitrust complaints.

Since the dust up Live Nation has returned to the table and is discussing bringing acts to the stadium. The team declined to comment on the dispute. SeatGeek ended up holding onto the contract.

But the perception that Live Nation might withhold talent is prevalent enough that SeatGeek now structures some bids to address the concerns of venues who fear losing big stars, and revenues.

For example, last year, when SeatGeek tried to unseat Ticketmaster from its contract at the TD Garden in Boston, it included in its bid a promise to pay the arena $250,000 for every show that Live Nation pulled, according to a bid document reviewed by the Times and three people with knowledge of the negotiations.

Ticketmaster still won. TD Garden officials said the contract was awarded on the merits and that they had not received any threats.

A SeatGeek spokesperson declined to discuss the negotiations. But Russ D’Souza, a founder of the company, said he has seen evidence that competition in the market is less than open.

“When we sell to teams,” he said, “we have heard fears about losing concerts if they choose us.”

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AT&T Would Use Time Warner as a ‘Weapon,’ Justice Dept. Says


“The government’s theory is fundamentally stuck in the past,” said Daniel Petrocelli, the lead lawyer for AT&T and Time Warner. He said the merger would do the opposite of what the government asserts: The company would have no incentive to withhold Turner channels, which are owned by Time Warner.

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Mr. Stephenson leaving the federal courthouse on Thursday. The Justice Department argues that AT&T would charge its rivals more money for Time Warner content if the merger were approved.

Credit
Jose Luis Magana/Associated Press

“It would be financially ruinous if Turner were not as widely distributed as possible,” Mr. Petrocelli said.

The opening statements previewed the fierce legal battle that will play out before Judge Richard Leon of the United States District Court for the District of Columbia. His decision in the case will help set the direction for antitrust law for years to come. It will also frame the shape of the media industry, which is facing major shifts as more people move from cable television to viewing streaming entertainment over the internet.

Hundreds of company officials, reporters, hedge fund investors, antitrust scholars and industry analysts stood in line for hours to get a seat at the trial. Randall Stephenson, AT&T’s chief executive, and Jeffrey Bewkes, Time Warner’s chief executive, sat together during the 90 minutes of opening remarks. Makan Delrahim, the Justice Department’s top antitrust official, watched from the front row on the other side of the room. The chief executives and Mr. Delrahim did not interact.

The case has drawn unusual public attention partly because of questions about whether it had a tinge of political interference. The Justice Department’s opposition came as a surprise when it was announced in November, and AT&T suggested it had been instigated by President Trump, who has said that he opposed the deal. The government said that Mr. Trump did not communicate with antitrust officials on the deal and that their decision to oppose the merger had not been ordered by the White House.

Judge Leon has rejected many of AT&T’s efforts to introduce evidence about political interference into the case. Instead, the trial, which is expected to last six to eight weeks, will largely focus on fundamental principles of antitrust law: whether the merger would cause prices to increase and competition to decrease.

The court’s decision will determine what sort of media mergers will be permitted between the creators and the distributors of content. Such deals, called “vertical mergers,” generally pass regulatory scrutiny because they don’t make a company dominant in one specific market area. Judge Leon has noted the unusual case is like a “rare horse” but not a “unicorn.”

Blair Levin, an analyst for New Street Research, a firm focused on the telecommunications industry, wrote in a research note that a Justice Department victory would “set a standard for what constitutes substantial harm that would call into question a number of other potential and pending mergers.”

About 60 witnesses are expected to take the stand over the course of the trial, including Mr. Stephenson of AT&T and Mr. Bewkes of Time Warner, and executives from digital services like SlingTV and YouTube.

The Justice Department said it would present internal documents from Time Warner and AT&T to show that the merged company would have the incentive to raise prices on rivals and consumers. In one email Mr. Conrath mentioned on Thursday, a Turner executive explained how Dish TV, AT&T’s top rival in satellite TV service, would be weakened without his company’s channels.

“Time Warner,” Mr. Conrath said, “would be a weapon for AT&T because AT&T’s competitors need Time Warner programming.” The government said consumers would have to pay an extra $436 million a year because of the deal.

Mr. Petrocelli foreshadowed a plan to attack that economic analysis. He said the Justice Department’s calculations, made by the antitrust economist Carl Shapiro, had omitted key information and were therefore flawed.

Mr. Petrocelli promised to show Judge Leon that cable consumers could end up paying about 50 cents less a month if the deal goes through.

“This is what I call the government’s shrinking case,” he said.

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Streaming Soon: A Fight Over AT&T, Time Warner, and the Future of TV


The Justice Department’s move to block the deal in November took Wall Street and the entertainment industry by surprise. Many executives and lawyers thought President Trump’s administration would usher in a hands-off approach to antitrust enforcement, despite Mr. Trump’s criticism of the deal on the campaign trail.

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Makan Delrahim, assistant attorney general in the antitrust division of the Justice Department. The department demanded the sale of certain assets before it would approve a merger of AT&T and Time Warner.

Credit
Stephen Voss for The New York Times

Instead, the Justice Department, under its antitrust chief Makan Delrahim, moved aggressively, demanding the sale of major parts of the businesses before a deal could go through. AT&T responded by suggesting that Mr. Delrahim’s decision was politically motivated and not based on established antitrust law.

In recent weeks, though, the judge overseeing the case, Richard Leon of the United States District Court of the District of Columbia, has rejected moves by AT&T to inject politics into the arguments.

Unless the two sides settle — and there have been no signs of that happening — the trial is expected to showcase two starkly different visions of the country’s video future. Drama is also in the cards: Executives from AT&T and Time Warner, as well as competing cable, satellite, tech and media firms, are expected to take the stand over the course of several weeks — and possibly reveal details about the inner workings of the industry.

The Justice Department argues that the merged company’s combination of distribution and content would give it too much leverage in negotiations with the rest of the industry. It also says that the new company would demand higher licensing fees from other cable and satellite firms for what the government calls “must-watch” programming. Those higher charges would immediately trickle down to consumers at an estimated cost of 45 cents a month, or a combined $436 million annually for cable and satellite subscribers, the agency said.

The government’s case will be led by Craig Conrath, a plain-spoken and longtime litigator who has worked on merger cases for several administrations. He is expected to argue that if the merger is approved, AT&T and Comcast, a corporation that owns distribution and programming — the same combination that AT&T is seeking — would have the incentive to raise prices for access to their shows. That would hurt other cable companies and online streaming businesses.

Judge Leon oversaw the final approval of Comcast’s merger with NBC Universal in 2011, the deal that added programming to Comcast’s holdings.

“Either important video content will be available through a competitive market to all distributors, including up-and-coming innovators,” the Justice Department said in pretrial filings with the court. “Or it will likely only be available through vertically integrated, well-funded silos.”

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Time Warner’s cable and movie holdings would be paired with AT&T’s mobile and satellite distribution networks to create an entertainment giant.

Credit
An Rong Xu for The New York Times

AT&T scoffs at the government’s predictions of price increases. And even if the analysis is accurate, the company has said, it would amount to the price of a fancy cup of coffee for each consumer. Contrary to the government’s theory that it would withhold content, AT&T says it wants to make sure its shows and movies are as widely distributed as possible.

Leading AT&T’s defense is Daniel Petrocelli, a Los Angeles-based lawyer with a long track record in high-profile cases but not someone who is considered an antitrust expert. Two decades ago, he won a wrongful death case against O. J. Simpson on behalf of the family of Ron Goldman. In 2006, he lost a case defending Jeffrey Skilling, the chief executive of Enron, of fraud and conspiracy.

Mr. Petrocelli is expected to argue that the government is missing the bigger picture. AT&T says that Silicon Valley companies like Netflix, Amazon, and Google have disrupted the entertainment industry by spending billions of dollars a year on original content and pushing the programming through their own distribution systems. Facebook and Google dominate the market for advertisements that run with those videos.

AT&T argues that a merger with Time Warner would add a new competitor against those giants, instead of reducing competition. AT&T will also promise to work out any contract disputes with cable and satellite companies through a third-party arbitrator, he is expected to argue.

“The new video revolution is defined by the spectacular rise of Netflix, Amazon, Google and other vertically integrated, direct-to-consumer technology companies,” AT&T said in its pretrial brief.

The merger is opposed by several Democratic lawmakers and many consumer groups, who say that AT&T’s control of more than 100 million mobile phone subscriptions gives it unparalleled power. Google, Facebook and Netflix, though mighty, don’t own the pipes that connect people to the internet, they say.

Streaming competition is the “best hope consumers have, but network operators will kill that competition if they are not stopped,” said Mark Cooper, the director of research at the Consumer Federation of America.

Many Wall Street analysts, however, say the government’s intervention in the deal will eventually harm consumers, because it will limit true competitors to the big tech companies.

“The government is about three years behind reality and is defining the marketplace as it was about three years ago,” said Laura Martin, an analyst at Needham & Company.

AT&T had asked for detailed communications logs between the White House and Justice Department staff members, including Mr. Delrahim, a former Trump White House lawyer. Judge Leon rejected those demands, and AT&T ultimately decided to exclude its concerns of potential presidential interference — which it described as “selective enforcement” — from the case.

But even without arguments of political interference entering the trial, many on Wall Street will be looking for clues about the kinds of corporate deals that will pass muster during the Trump administration.

The decision to block a merger between companies that don’t directly compete is rare. Mr. Delrahim has said that one of the common regulatory remedies to prevent anticompetitive behavior in such deals — getting companies to promise they’ll be on their best behavior — is not effective.

That view may ripple across merger and acquisition plans in other sectors, including the drugstore chain CVS’s $69 billion bid for the health insurance provider Aetna — as well as proposed media deals like Disney’s acquisition of Fox and Sinclair Broadcasting’s purchase of Tribune Media. Wall Street analysts expect the results of the trial will determine if more telecom and entertainment companies will pursue ambitious vertical mergers.

“This could direct the future path of the industry,” said Steven Salop, a professor of economics and law at Georgetown University Law School. “If it is permitted, vertical integration will continue.”

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