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Justice Department Settles Antitrust Suit Against AT&T's DirecTV

- By Sydnee Gatewood

The Justice Department announced Thursday it settled with AT&T Inc.'s (NYSE:T) DirecTV over illegal information sharing with competitors.

In November 2016, the department's Antitrust Division filed a suit that alleged DirecTV was partaking in a series of unlawful information exchanges with three of its competitors, Cox Communications Inc., Charter Communications Inc. (CHTR) and AT&T (before being acquired), in regard to SportsNet LA "Dodgers Channel" negotiations.

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Time Warner Cable (TWC), which has since been acquired by Charter Communications, paid the Dodgers for the rights to broadcast the games for 25 years. In turn, it charged a premium for other distributors to carry the channel as well.

According to the department, Daniel York, DirecTV's chief content officer, "unlawfully exchanged competitively sensitive information" with executives at the other three companies while they were each attempting to negotiate for rights to the sports channel, which is owned by the Los Angeles Dodgers. The primary motivation behind the exchange was to prevent any individual company from losing subscribers by not carrying the channel while others did.

Acting Assistant Attorney General Brent Snyder of the department's Antitrust Division argued such practices corrupt the competitive bargaining process and hurt consumers.

"Today's settlement promotes competition among pay-television providers and prevents AT&T and DirecTV from engaging in illegal conduct that thwarts the competitive process," Snyder said.

The settlement ensures neither DirecTV nor AT&T will share competitively sensitive information with rivals when negotiating with all video programming providers, not just SportsNet LA. In addition, the deal forces the two parties to monitor communications between programming executives and rivals and to employ antitrust training and compliance programs.

According to the Wall Street Journal, despite these measures, the settlement will not put Dodgers' games on DirecTV or AT&T's U-Verse. Since SportsNet LA's launch in 2014, a majority of Los Angeles residents have been unable to watch the baseball team's games on TV. Due to its merger with Time Warner, however, Charter has since started carrying the service.

AT&T has a market cap of $256.2 billion; its shares were trading around $41.72 on Friday with a price-earnings (P/E) ratio of 19.8, a price-book (P/B) ratio of 2.1 and a price-sales (P/S) ratio of 1.6.

Barrow, Hanley, Mewhinney and Strauss is the company's largest guru investor with 0.3% of outstanding shares. In total, 20 gurus hold the stock.

Disclosure: I do not own any stocks mentioned in the article.

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This article first appeared on GuruFocus.