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Justice Department is suing to block AT&T-Time Warner merger

  • "Today's DOJ lawsuit is a radical and inexplicable departure from decades of antitrust
    precedent," said David McAtee,general counsel of AT&T
  • The Department of Justice called the deal "illegal" and "harmful" to consumers.
  • The DOJ has denied allegations it was blocking this deal to somehow punish the companies.

The Department of Justice is suing to block AT&T's $85 billion deal to buy Time Warner.

"Today's DOJ lawsuit is a radical and inexplicable departure from decades of antitrust
precedent," said David McAtee, senior executive vice president and general counsel of AT&T, in a statement. "Vertical mergers like this one are routinely approved because they benefit
consumers without removing any competitor from the market. We see no legitimate reason for our merger to be treated differently."

AT&T has already started a website to make its case for the deal.

Time Warner shares began falling into the close on Wednesday as news outlets began reporting the DOJ was planning a major antitrust action after the bell. The department later called the deal "illegal" and "harmful" to consumers.

The action was sure to stir controversy because of President Donald Trump's adversarial relationship with CNN, which is owned by Time Warner. Trump has repeatedly criticized CNN's reporting, calling it "fake news."

Just last week, Trump tweeted: "While in the Philippines I was forced to watch @CNN, which I have not done in months, and again realized how bad, and FAKE, it is. Loser!"

"That's really the big elephant in the room," David Goodfriend, president of Goodfriend Government Affairs, told CNBC's "Closing Bell," referring to Trump's adversarial relationship with CNN. "If there's politics involved, we'll find out when we see how the Justice Department deals with another big media merger that's pending, and that's the acquisition by Sinclair Broadcasting Group of Tribune Media."

The DOJ has denied allegations it was blocking this deal to somehow punish the companies for CNN's news coverage and a DOJ official denied that once again on a call with reporters to discuss the lawsuit.

White House Press Secretary Sarah Huckabee Sanders also told reporters in a briefing Monday that she was not aware of President Trump or anyone at the White House encouraging pushing for the deal to get blocked.

The next step for the fate of the merger is in the courts with the DOJ now having to prove that the combination would violate the law. AT&T was quick to point out that the DOJ has not successfully blocked a so-called vertical merger in court in nearly 50 years. Vertical mergers are when two companies on separate positions in the same supply chain combine, in this case content (Time Warner) and media distribution (AT&T).

The DOJ is likely to argue that while it is a mostly vertical merger, the combination would harm consumers by raising costs. Sources told CNBC last week that the Justice Department had reached out to at least 18 state attorneys general to join a case against the deal, but had not found any takers.

"We are confident that the Court will reject the Government's claims and permit this merger under longstanding legal precedent," added AT&T's McAtee in the statement.

WATCH: DOJ officials confident they'll prevail in court