A federal trial judge rejected the Department of Justice’s challenge to AT&T Inc.’s proposed acquisition of Time Warner Inc., denying the government’s request to block the proposed merger of a leading communications provider with a major entertainment company. Aside from the intense public interest in this transaction, the opinion provides a rare judicial perspective on vertical mergers: adjudicated decisions on vertical mergers are infrequent and it has been about forty years since the last time the Antitrust Division of the Department of Justice (DOJ) went to court seeking to enjoin a vertical merger. About a week before the court handed down the AT&T decision, the Federal Trade Commission (FTC) announced the settlement of an enforcement action in another vertical merger in a distinctly unrelated business—solid rocket motors used in integrated missile systems. In that matter, Northrop Grumman Corp. agreed to continue to supply solid rocket motors to rivals on a nondiscriminatory basis to resolve the FTC’s concerns about its acquisition of Orbital ATK, Inc.

In antitrust parlance, companies are horizontally situated if they compete with one another at the same level of distribution, as was the case in AT&T’s proposed acquisition of rival cellular service provider T-Mobile, which was challenged and subsequently abandoned in 2011. On the other hand, a vertical merger involves companies that buy and sell to one another, in the way that Time Warner contracts with AT&T’s DirecTV to distribute HBO, CNN, TNT and other networks. Generally speaking, vertical mergers are less likely to raise antitrust concerns than horizontal mergers, where competition between head-to-head competitors may be eliminated.