By Brent Kendall 

WASHINGTON -- The Justice Department asked a federal judge not to allow AT&T Inc.'s defense of its proposed acquisition of Time Warner Inc. to include a claim that the Trump administration improperly challenged the deal for political reasons.

In a 90-minute hearing, lawyers for the department and the companies clashed over whether there is a basis for the companies' claim that the government's challenge to the merger was illegitimate.

The two sides also voiced deep disagreement over whether there was any relevance to past statements by President Donald Trump criticizing Time Warner's CNN and his pledging during the presidential campaign to block the merger if elected.

Mr. Trump doesn't like CNN "and we don't dispute that," Justice Department lawyer Craig Conrath said, adding that "AT&T wants to turn that into a get-out-of-jail card for their illegal merger."

Mr. Conrath said there was no political motivation behind the Justice Department lawsuit, filed in November, seeking to block the deal. He called AT&T's efforts to raise the issue "an unnecessary distraction, a sideshow."

Mr. Conrath also presented to U.S. District Judge Richard Leon an affidavit from Justice Department antitrust chief Makan Delrahim in which the top antitrust official said he hadn't received instructions or directions from Mr. Trump or anyone else outside the department's antitrust division on whether to challenge the merger.

Daniel Petrocelli, the lead trial counsel for AT&T and Time Warner, said the issue was "an uncomfortable subject. This is not something we relish getting into."

Mr. Petrocelli said the companies have ample reason for exploring questions about whether they were sued improperly, and he asked Judge Leon to require the government to provide logs of certain communications at the Justice Department and the White House that may shed light on that question.

What is at stake is "the public's trust and confidence in the integrity of their enforcement decisions," Mr. Petrocelli said.

The affidavit from Mr. Delrahim didn't settle the matter, said Mr. Petrocelli, who noted that the antitrust chief previously served as a deputy counsel in the White House. "What about conversations when Mr. Delrahim was in the White House?" he asked.

Judge Leon said he would rule by Tuesday on whether AT&T can seek more materials from the Justice Department on the issue.

The trial is scheduled to begin March 19.

The Wall Street Journal reported Wednesday that AT&T had placed Mr. Delrahim on its list of possible witnesses for the trial. It's highly unusual for defendant companies to seek testimony from the official who sued them. Mr. Petrocelli confirmed that he placed Mr. Delrahim on the list, "just in case" his testimony might be needed. He agreed to strike the antitrust chief from the list for now, so long as he could add him later if there were good cause for doing so.

Friday's hearing saw the government and the companies reveal an array of behind-the-scenes discussions that took place before and after the Justice Department brought its case.

In debating whether there was anything unusual about the department's decision to challenge the deal, the two sides offered starkly different views of negotiations that took place in the run-up to the lawsuit.

Mr. Conrath said the Justice Department presented AT&T with four different types of settlement offers that would have allowed government approval of a modified version of the merger. Some of those offers would have allowed the merged company to keep full or partial ownership of CNN and the other Turner networks, he said.

Mr. Conrath also said the department was "clear throughout" its yearlong investigation that a lawsuit was a possibility, and most of the investigation took place before Mr. Delrahim won Senate confirmation for the antitrust post. The department before Mr. Delrahim's arrival already had told the companies they would need to make structural changes to their transaction if they wanted to save it, Mr. Conrath said.

"They totally ignored that," he said.

Mr. Petrocelli, in contrast, said that before Mr. Delrahim arrived, the two sides were well on their way to negotiating a settlement that involved AT&T winning approval based on making commitments to refrain from certain conduct after the merger that might dampen competition.

Such conditions were similar to those the department allowed when it gave approval for Comcast Corp. to take control of NBCUniversal in 2011, he said.

When Mr. Delrahim arrived at the Justice Department after his stint in the White House, "those discussions stopped," Mr. Petrocelli said.

He said the department from that point sought "drastic remedies" that "were not viable proposals."

Write to Brent Kendall at brent.kendall@wsj.com

 

(END) Dow Jones Newswires

February 16, 2018 19:33 ET (00:33 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.
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