DOJ Files Lawsuit to Block AT&T T-Mobile Merger

August 31, 2011 -

Bloomberg reports that the U.S. Justice Department has filed a lawsuit to block AT&T Inc.’s proposed $39 billion acquisition of rival T-Mobile USA Inc. In its filing today in Federal Court the government said that the deal would "substantially lessen competition" in the wireless market. The government is seeking a declaration that AT&T’s takeover of T-Mobile (owned by Deutsche Telekom AG, or DTE), would violate U.S. antitrust law. The government also asked for a court order blocking implementation of the deal.

"AT&T’s elimination of T-Mobile as an independent, low- priced rival would remove a significant competitive force from the market," the government said in its filing.

"AT&T had not demonstrated that the proposed transaction promised any efficiencies that would be sufficient to outweigh the transaction’s substantial adverse impact on competition and consumers,” said the government in a statement. "AT&T could obtain substantially the same network enhancements that it claims will come from the transaction if it simply invested in its own network without eliminating a close competitor."

Naturally, analysts and supposed experts see this move differently. Bert Foer, head of the American Antitrust Institute in Washington, said that the DOJ has drawn a line in the sand with this move and that he didn't see any room to settle the case.

"If it could be settled, they would still be talking about it," Foer added.

"This isn’t just a negotiating strategy, this isn’t just a placeholder, they do mean to block it,” said Rebecca Arbogast, a Washington-based analyst with Stifel Nicolaus & Co. "There still is some room for negotiating a settlement, but the likelihood seems narrow."

Others disagree with that analysis - including David Balto, a Washington-based antitrust attorney; and New York University law professor Eleanor Fox.

David Balto thinks the lawsuit may be part of a negotiating strategy, adding that the government may have decided that "the best way to have strength in the settlement talks is to file a lawsuit."

"The important point is that the Justice Department has gone ahead and challenged a big merger of competitors, which it just hasn’t done," said Eleanor Fox, a law professor at New York University. "People were getting used to seeing press releases saying the Justice Department has agreed to merger XYZ with a spinoff."

AT&T said it was surprised by the government suit and that it would ask for an expedited hearing.

"We have met repeatedly with the Department of Justice and there was no indication from the DOJ that this action was being contemplated," Wayne Watts, AT&T’s general counsel, said in a statement to Bloomberg. The company plans to fight the litigation.

Bonn-based Deutsche Telekom said in an e-mailed statement to Bloomberg that it would also contest the U.S. government suit.

"[The] DOJ failed to acknowledge the robust competition in the U.S. wireless telecommunications industry and the tremendous efficiencies associated with the proposed transaction," a spokesperson for the company said.

Rejection by regulators would leave AT&T liable to pay Deutsche Telekom $3 billion in cash, to give T-Mobile USA wireless spectrum and to reduce charges for calls into AT&T’s network, a package valued at as much as $7 billion, Deutsche Telekom has said.

"Given the size of the cancelation fee that was negotiated into this agreement, AT&T has the incentive to fight,” said Andrew Gavil, a law professor at Washington-based Howard University. "The fact that the Justice Department is challenging the deal doesn’t mean they won’t negotiate a resolution at some point."

"Any way you look at this transaction, it is anticompetitive," Sharis Pozen, the acting head of the Justice Department’s antitrust division, said at a news conference.

Pozen said the department interviewed dozens of people and examined millions of documents before deciding that suing was the right path to take, but added that the department’s "door is open" to discuss a remedy with AT&T.


Comments

Re: DOJ Files Lawsuit to Block AT&T T-Mobile Merger

Is it bad when I read this I though ok who at DOJ wants a job as lead council for AT&T? I seriously doubt the DOJ has the citiznes best interest in this lawsuit and its just trying to get something out of the merger.

Re: DOJ Files Lawsuit to Block AT&T T-Mobile Merger

dunno why the FCC is still thinking about this even after the 'leaked document'.  damn, they're even more corporate-whipped than i thought when it takes the DoJ to step in.  Naturally, ATT will just keep throwing money at them until they go away.

Re: DOJ Files Lawsuit to Block AT&T T-Mobile Merger

I hope this works.  We left AT&T years ago because of their horrible service (both phone wise and people wise at the time) and have been quite happy with T-Mobile.  This merger would have been the SECOND TIME we had a different company phone and became AT&T via a "merger" (Cingular was good for us at the time...).  

Part of this I think has to do with AT&T's own lawyers posting damming documents online that proved that while AT&T used the argument for acquiring T-Mobile for $39 billion was in order to reach 97% of rural areas to expand their services but the document showed that AT&T knew the whole time they could do it, without takeovers, for just over $3 billion.   What was the other $36 billion for?...basically taking out another competitor and not doing anything to truly expand. 

I hope they deny the HELL out of this. :)

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Re: DOJ Files Lawsuit to Block AT&T T-Mobile Merger

Honestly, it would be a lot better for us if there were fewer regulations on cellular businesses. If it were easier to start a cellular company and expand your network, there would be far more competing businesses.

My wife and I tried one of the smaller cell companies, but their network was so spotty we couldn't use them. We love their prices and their plans, but when you can't use the phone at home or within a 2 mile radius of home, it is kind of pointless. So we ended up back with a major national cell company.

Right now, it takes billions of dollars to get bandwidth from the FCC. Only the largest businesses can get that. So the smaller companies are forced to lease that bandwidth from the mega corporations in order to even begin service.

The system is set up to help big businesses to stay big and keep real competition from springing up.

Re: DOJ Files Lawsuit to Block AT&T T-Mobile Merger

What's this? DOJ defending the little guy against corporate raping?

Jolly good. [/euro]

Re: DOJ Files Lawsuit to Block AT&T T-Mobile Merger

I know, its about time they did something like this.

Re: DOJ Files Lawsuit to Block AT&T T-Mobile Merger

You'd think they would have done this a long time ago.

 
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Neo_DrKefkaToo add what Andrew said about the The Ralph Retort it is no different from what you read at Gawker. I remember reading The Ralph Retort on how Boogie was the bad guy from being on the fence until he jumped to the GamerGate side.11/26/2014 - 12:42pm
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WonderkarpI'm addicted too their deals :P When I find an alternative, I'll drop Kotaku :P. you Tease cause you care though :)11/26/2014 - 11:57am
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