(Corrects name in penultimate paragraph to Gigi Sohn)
By Diane Bartz and David Shepardson
WASHINGTON, Feb 26 (Reuters) - A U.S. appeals court approved wireless carrier AT&T Inc’s deal to buy media company Time Warner on Tuesday, a defeat for the Trump administration which had argued the $85.4 billion merger would mean higher prices for consumers.
AT&T’s second major court victory against the Justice Department sets the stage for the No. 2 wireless carrier to integrate its WarnerMedia business as well as its new Xandr advertising unit.
The deal had been a target of criticism from U.S. President Donald Trump, who opposed it because he saw it helping Time Warner’s CNN unit, which he has accused of broadcasting “fake news.”
The three-judge panel on the U.S. Court of Appeals for the District of Columbia ruled unanimously in favor of the deal. The decision could end a 15-month effort by the Justice Department to block the deal.
The judges said in their opinion the government’s case was “unpersuasive.”
The Justice Department had asked the court to declare the deal illegal, arguing that AT&T, which owns DirecTV, would use ownership of Time Warner’s content, such as CNN and HBO’s “Game of Thrones,” to make pay-TV rivals pay more, thus raising prices for consumers.
The deal was seen as a turning point for a media industry that has been upended by companies like Netflix Inc and Alphabet Inc’s Google which produce content and sell it online directly to consumers without a cable subscription.
The case marked a rare instance of the U.S. government seeking to stop a merger of a distributor and a supplier.
The appeals court said it would give the Justice Department seven days to seek a rehearing or a review by the full appeals court before issuing the formal legal mandate.
AT&T said it hoped that this ruling would end the court fight. The Justice Department had no immediate comment.
AT&T shares were flat around midday.
The merger, which was announced in October 2016, closed on June 14 shortly after Judge Richard Leon ruled the deal was legal under antitrust law.
AT&T, the No. 2 U.S. wireless carrier by subscribers, agreed to manage the Turner network separately until Feb. 28, 2019, or until the conclusion of any appeal by the Justice Department.
AT&T agreed it would have no role in setting Turner’s prices to distributors and the number of Turner employees would remain largely unchanged.
The company also agreed to maintain a firewall between Turner and AT&T Communications to prevent the transmission of competitively sensitive information of unaffiliated programmers or distributors.
The appeals court took a shot at District Court Judge Leon, who had been scathing in his assessment of the government’s attempt to stop the deal.
“Undoubtedly the district court made some problematic statements, which the government identifies and this court cannot ignore,” the panel said in its opinion.
Gigi Sohn, who worked in the Federal Communications Commission during the Obama administration, said that the ruling showed a need to reform antitrust laws so the government can stop problematic deals.
“AT&T is favoring both Time Warner and DirecTV content over its broadband services through its DirecTV Now and Watch services,” she said. “Consumers are the losers.” (Reporting by Diane Bartz and David Shepardson; additional reporting by Sheila Dang Editing by Chizu Nomiyama and Meredith Mazzilli)