"We continue to believe that the pay-TV market will be less competitive and less innovative as a result of the proposed merger between AT&T and Time Warner", he said in a statement. The Justice Department could decide to appeal the ruling, however. The Judge also said the DOJ should appeal the ruling or ask for a stay that could force AT&T to pay Time Warner a fee. During the trial, AT&T made several efforts to introduce evidence about political interference into the case but was rebuffed by Judge Leon.
In making its case, the USA government argued that the merger of AT&T could harm consumers in a number of ways.
"This will be a blockbuster summer for media mergers", said Mary Ann Halford, senior adviser to OC&C Strategy Consultants.
The Justice Department's main argument against the merger was that by owning Time Warner's content, which includes must-have channels like CNN, AT&T could raise prices for pay-TV rivals and keep costs prohibitive for online streaming services.
The ruling is a stinging defeat for the Justice Department.
Prior to the news on the decision in the case, AT&T stock closed up 0.5% (to $34.50 per share) and Time Warner closed up 0.05% in regular trading (to $96.22 per share) which concluded at 4 p.m. ET.
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Rival cable company Comcast is now likely to go ahead with its planned attempt to woo Fox away from Walt Disney Co, which said it would acquire most assets of the media company for around $50 billion previous year. First floated in October 2016, the deal also brought fire from then-candidate Donald Trump, who promised to kill it "because it's too much concentration of power in the hands of too few". It's unusual for the Justice Department to argue that a vertical merger of two companies that aren't direct competitors would limit competition, but the effect that the merger will have on the telecoms and entertainment industry is significant.
AT&T has said it needs to buy Time Warner to compete with the likes of Amazon, Netflix and Google in the shape-shifting streaming-TV environment. CNBC is reporting that Comcast will try to buy Twenty-First Century Fox if AT&T buys Time Warner.
In making that ruling, Leon reaffirmed the judiciary's traditional tolerance for "vertical integration" - the technical term for mergers between companies that operate related, but distinct, businesses. Comcast, for instance, owns NBCUniversal, and Verizon owns websites including Yahoo and HuffPost.
The government's case hinged on an economic model produced by Carl Shapiro, an economist at the University of California at Berkeley, who predicted an annual price increase to consumers of at least $285 million. And Leon's decision is likely to trigger a wave of new mergers, as many executives were waiting to for the outcome of AT&T's bid before pushing forward with their desired deals.
Initially AT&T and Time Warner planned to use a "selective enforcement" defense, alleging that the administration was blocking the deal because of Trump's dislike of CNN.
David McAtee, AT&T's general counsel, said AT&T expected to close the deal by June 20.