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DealBook Briefing: U.S. Sues to Block AT&T-Time Warner

The Justice Department plans to file a lawsuit aimed at blocking AT&T’s $85.4 billion bid for Time Warner.Credit...Mark Lennihan/Associated Press

Good Monday. We’re watching the latest developments in the Justice Department plans to sue to block AT&T’s $85.4 billion bid for Time Warner. (Want this in your own email inbox each morning? Here’s the sign-up.)

• Tencent’s market value cracks $500 billion.

• The world’s largest banks get bigger.

• Is bitcoin in a bubble?

• Susan Collins may oppose the Senate tax bill.

• One ex-C.E.O.’s thoughts on what a lower tax rate would (and wouldn’t) mean for businesses.

The Justice Department has filed a lawsuit aimed at blocking AT&T’s $85.4 billion bid for Time Warner Monday, setting up a showdown over the first blockbuster acquisition to come before the Trump administration.

By challenging the deal, the Justice Department is signaling that its approach to antitrust enforcement is starkly different from the course of action followed during the Obama presidency. In 2011, for instance, the department approved a similar deal — Comcast’s acquisition of NBCUniversal — after imposing numerous conditions on the transaction.

In response, AT&T’s general counsel David R. McAtee II said in a statement:

“Today’s DOJ lawsuit is a radical and inexplicable departure from decades of antitrustprecedent. Vertical mergers like this one are routinely approved because they benefitconsumers without removing any competitor from the market. We see no legitimatereason for our merger to be treated differently.

“Fortunately, the Department of Justice doesn’t havethe final say in this matter. Rather, it bears the burden of proving to the U.S. DistrictCourt that the transaction violates the law. We are confident that the Court will rejectthe Government’s claims and permit this merger under longstanding legal precedent.”

The Chinese technology company’s market value crossed above $500 billion, just three months after it topped $400 billion for the first time ever. Tencent joins Apple, Google-parent Alphabet, Microsoft, Amazon and Facebook as the only companies valued at more than $500 billion. Alibaba Holdings is right behind the six with a market capitalization of more than $480 billion.

As the New York Times pointed out in August:

“The Alibaba Group and Tencent Holdings, Chinese companies that dominate their home market, have rocketed this year to become global investor darlings...While American technology giants dominate people’s online lives in Western countries, Tencent and Alibaba have soared by essentially carving up China, the world’s single-largest internet market with more than 700 million online users.”

“Their rise is emblematic of a rebalancing of global technological influence. In recent years, places from Paris to Seoul have claimed the mantle of the next Silicon Valley. Yet the cluster of fast-growing start-ups and internet behemoths coming out of China has emerged as the one true rival in scale, value and technology to the West Coast homes of the American technology renaissance.”

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Credit...S. & P. Global Market Intelligence

The world’s largest banks have become better capitalized since financial crisis. They have raised more than $1.5 trillion in capital, according to the Financial Stability Board. That provides the banks with “buffers as much as 10x higher than a decade,” writes S&P Global.

But these financial instutions have also gotten much larger since the financial crisis.

In the United States, for example, JPMorgan Chase has nearly doubled in size since the end of 2006. Bank of America has increased its asset by more than 50 percent, and Wells Fargo’s assets are up more than 300 percent from their pre-crisis levels, according to S&P Global.

Much of those increases are a result of deals struck during the heights of the crisis. JPMorgan bought Bear Stearns and Washington Mutual; Bank of America acquired CountryWide and Merrill Lynch and Wells Fargo purchased Wachovia.

Still the size of these banks is noteworthy. The ‘too big to fail’ distinction has drawn scrutiny from the Trump administration this year. A report from the Treasury Department last month “discussed the need to eliminate regulation ‘that fosters the creation or cements the market position of too-big-to-fail institutions’ in order to prevent taxpayer-funded bailouts.”

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Bitcoin smashed through the $8,000 level for the first time over the weekend. A surprising percentage of respondents to a DataTrek survey think the cryptocurrency isn’t in a bubble.Credit...Dado Ruvic/Reuters

A surprising percentage of respondents to DataTrek Research’s bitcoin/cryptocurrency survey don’t think so.

• Just 39.4 percent of respondents said they believe bitcoin was in a bubble. “We were ready to see +70% responses indicating bitcoin’s price is unsustainable. Less than 40% is, well, remarkable,” writes DataTrek’s co-founder Nicholas Colas.

• Slightly more than 27 percent expect bitcoin to rise but at much slower pace. Just 16% think the value of bitcoin will double in the next six months.

• “A sizeable minority of respondents (39 – 40 percent) see bitcoin as a potential analog to physical gold, both as a safe haven and a hedge against mistakes in central bank monetary policy,” Mr. Colas writrs. Nearly 41 percent consider bitcoin a safe haven similar to gold, and 39 percent view bitcoin as a hedge against monetary policy.

Update on bitcoin’s price: It was recently trading as high as $8,197.81 on the Luxembourg-based Bitstamp exchange after smashing through the $8,000 level for the first time over the weekend. The cryptocurrency is up almost 50 percent in just eight days.

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Credit...Al Drago for The New York Times

Would the Republican from Maine end up working to defeat the Senate’s tax overhaul, as she did with attempts to repeal the Affordable Care Act? Or would she simply lobby for changes to make it more acceptable?

Ms. Collins said on Sunday that the bill “needs work,” according to Bloomberg. Among her objections: including a repeal of the individual insurance mandate, and lowering the corporate tax rate to 20 percent. She wouldn’t say whether she would vote against the Senate bill in its current form.

Repealing the individual mandate, a key part of the A.C.A., had gained popularity as a way to help save money to pay for the Senate’s proposed tax cuts. But the Congressional Budget Office thinks that the savings would be smaller than expected.

Also in the “might oppose” column: Lisa Murkowski of Alaska, Bob Corker of Tennessee and John McCain and Jeff Flake of Arizona. At the least, they have indicated reservations about the legislation in its current form.

The White House may be open to compromise: Mick Mulvaney, the head of the Office of Management and Budget, said the administration would be “O.K.” with excluding the individual mandate if that would help Congress pass the tax legislation.

Extra credit: Ron Johnson of Wisconsin became the first Republican senator to publicly oppose his party’s tax change plans because he wanted more favorable treatment of small businesses, according to the NYT.

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David Mendels, who until a few months ago was the C.E.O. of the video company Brightcove, wrote a LinkedIn post this month that has become the talk of the business world. Here are some of his main points:

• “It is a simple but true concept, customers drive business growth, not tax rates, not mythical ‘job creators.’ Tax rates impact profitability, but are only very indirectly tied to hiring.”

• “Labor markets determine salaries, not tax rates.”

• “As a C.E.O. and member of the board of directors at a public company, I can tell you that if we had an increase in profitability we would have been delighted but it would not lead in and of itself to more hiring or an increase in wages.”

Other executives responded with their experiences and opinions.

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Credit...Odd Andersen/Agence France-Presse — Getty Images

The euro has recovered from its initial decline after the news that Germans might have to go to the polls. But that hasn’t eased the anxiousness of some market commentators.

Here’s what Tilmann Galler, a global market strategist at JPMorgan Chase, told the FT:

“Angela Merkel’s position seems to be significantly weakened. This could leave Europe’s largest economy politically paralyzed for the time being, reducing the chances for any breakthrough in the E.U. reform agenda or the Brexit negotiations.”

But Hartmut Issel, head of equity and credit for Asia Pacific at UBS Wealth Management, told Bloomberg:

“Even if there are re-elections, that is very unlikely to be populist. That’s why it’s going to be a limited down reaction.”

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A growing number of start-ups are attracting plenty of money without the need for an initial public offering. (That includes letting shareholders sell their stakes to other investors in the private markets, a practice that’s growing more popular, as the WSJ points out.) But something doesn’t add up.

Barrons looks at how private companies have started to face questions about their workplace cultures, valuations and business models. Could the lesson be that public markets remain the best place to achieve long-term corporate success?

Extra credit: Uber’s Dara Khosrowshahi said at our conference this month that the ride-hailing giant has all the downside of being a public company, but none of the upside.

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Philip Baker. “I’m a criminal,” he said recently.Credit...Aaron Vincent Elkaim for The New York Times

After the financial crisis, the federal government was expected to aggressively pursue criminal cases against top financiers. Prosecutions were rare, except with obscure, or relatively junior, industry players against whom it was easy to build cases, because prosecutors were under pressure to move quickly and win cases.

Philip Baker became one of those targets.

He was not a big fish. But the desire to resolve the case swiftly led a powerful United States attorney to insert a transfer-to-Canada clause into an otherwise airtight plea agreement.

David Enrich of the NYT recounts Mr. Baker’s efforts to leave the United States while serving a 20-year sentence for fraud.

The Weinstein Company has a surprise bidder: Maria Contreras-Sweet, who led the Small Business Administration under President Barack Obama, wants to name women to a majority of the studio’s board seats, according to the WSJ. She also wants to set up a fund for women who said they were victims of Harvey Weinstein, as well as a mediation process to reach settlements with them.

The auction for Rolling Stone is down to a handful of bidders: According to Peter Kafka at Recode, they include Jay Penske of Penske Media; Bryan Goldberg, the co-founder of Bleacher Report and now the founder and C.E.O. of Bustle; and Irving Azoff, the longtime music industry executive.

Former F.C.C. commissioner recommends blocking the AT&T-Time Warner deal: Michael Copps, who served on the commission from 2001 to 2011, writes in a USA Today op-ed:

In 2011, the government allowed Comcast to absorb NBCUniversal in another “harmless” vertical merger (a deal that I opposed). Afterwards, Comcast was caught discriminating against rival cable channels and slowing down rival online video services. All the while, America tumbled down global broadband rankings. So much for “synergies.”

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Credit...Erika P. Rodriguez for The New York Times

This time it’s Jack Lew, who is joining the firm Lindsay Goldberg as a partner. His predecessor, Tim Geithner, previously joined Warburg Pincus as president.

Unlike Mr. Geithner, however, Mr. Lew already had a background in finance, having worked at Citigroup. The current Treasury secretary, Steven Mnuchin, was a partner at Goldman Sachs and a hedge fund founder before joining the Trump administration.

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Apple Park, the company’s new headquarters in Cupertino, Calif.Credit...Peter Bittner for The New York Times

The iPhone maker’s vice president of diversity and inclusion, Denise Young Smith, is leaving after only six months in the role — and after she made controversial remarks about how she thinks of diversity extending beyond race and gender.

Speaking at a Quartz event in Bogotá, Colombia in October, Ms. Young Smith said: “There can be 12 white, blue-eyed, blond men in a room and they’re going to be diverse too because they’re going to bring a different life experience and life perspective to the conversation.” She later apologized for the remarks.

But according to TechCrunch, citing an unidentified person, Ms. Young Smith apparently began talking with Tim Cook about changing her role before the Bogotá conference. And a search for her replacement began months ago.

Extra credit: The news of her departure came just days after Apple released its latest diversity report: 32 percent of its employees were women, up 2 percentage points from 2014, while 56 percent of its work force was nonwhite, little changed from three years ago.

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Credit...Jacquelyn Martin/Associated Press

“I should take that as a compliment that I look like a villain in a great, successful James Bond movie.”

— Steven Mnuchin, on that now-famous photo, to Chris Wallace of Fox News Sunday.

Each weekday, DealBook reporters in New York and London offer commentary and analysis on the day’s most important business news. Want this in your own email inbox? Here’s the sign-up.

You can find live updates of DealBook coverage throughout the day at nytimes.com/dealbook.

Follow Andrew Ross Sorkin @andrewrsorkin, Michael J. de la Merced @m_delamerced and Amie Tsang @amietsang on Twitter.

We’d love your feedback as we experiment with the writing, format and design of this briefing. Please email thoughts and suggestions to bizday@nytimes.com.

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