The Justice Department’s announcement Wednesday that it is suing to block the proposed merger of AT&T and T-Mobile caught a lot of people by surprise.
AT&T officials said they were shocked by DOJ’s decision to file the suit at all.
“We are surprised and disappointed by today’s action, particularly since 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 senior vice president and general counsel, said in a statement.
Opponents of the merger say they weren’t surprised by the decision. But they did profess dismay at the relatively quick decision, coming less than six months after the deal was proposed. ”The only thing that might have been surprising was the speed,” said Richard Brunell, director of legal advocacy at the American Antitrust Institute, a think tank with a consumer focus.
David Balto, a senior fellow at the Center for American Progress, agreed. “I think in an investigation like this, you would expect it to take a longer period of time,” said Balto, a former DOJ antitrust attorney and former policy director of the Bureau of Competition at the Federal Trade Commission.
Justice officials said Wednesday that they were suing to block the merger of the nation’s second and fourth largest wireless telephone companies. In announcing the suit to block the $39 billion deal, DOJ officials said the merger would result in decreased competition, which, in turn would result in decreased quality and choices for customers. The suit is the most visible antitrust action by the Obama administration - and it comes, ironically, just after the departure of Obama’s Antitrust Division chief.
Last month Assistant Attorney General Christine Varney announced she would leave the department’s Antitrust Division for the law firm Cravath, Swaine & Moore LLP. Attorney General Eric Holder announced that rather than nominating a permanent replacement, Sharis Pozen, a key Varney deputy, would replace her boss in an acting capacity. Deputy Attorney General James Cole headlined the official announcement of the lawsuit to block the merger.
Varney’s departure will have little impact on the suit, Brunell and Balto said. “The litigators are in charge,” Brunell said.
President Barack Obama campaigned on a promise of reinvigorated antitrust enforcement, but many consumer groups had been waiting for strong evidence of such an effort. Under Varney’s leadership, the administration extracted restrictions on several major mergers but did not block them, including those that combined Ticketmaster and Live Nation, and Comcast and NBC, as well as a suit to block an H&R Block acquisition and action which resulted in Nasdaq and NYSE to drop a merger plan.
The suit filed Wednesday may have been the type of big move consumer groups had anticipated when Obama took office. “This announcement is something for consumers to celebrate,” Parul Desai, policy counsel for Consumers Union said, in a statement. “We have consistently warned that eliminating T-Mobile as a low-cost option will raise prices, lower choices, and turn the cellular market into a duopoly controlled by AT&T and Verizon.”
“It’s a ‘Joe Friday’ case,” said Balto, referring to the detective from the television series and movie, “Dragnet.” “Just the facts.”
The two agreed that DOJ officials have been insulated from one of the major issues surrounding the merger-jobs. The Obama administration has announced the president intends to give a speech on job creation before a joint session of Congress on Sept. 7 and jobs have become a primary focus for the administration.
AT&T and labor unions supporting the deal have argued that the merger would create jobs. And hours before Justice officials announced the lawsuit, AT&T said if the deal were approved, the company would bring back 5,000 wireless call center jobs to the U.S. that had been outsourced to other nations.
Such issues would have no impact on DOJ decisions, Brunell said. “I think they make the call straight up” based on the law, he said, adding that the jobs issue would not have come into play.
The two experts differed on how the merger battle will end up. Brunell said he believes that Justice Department officials have left themselves very little room for a deal that would result in a merger with conditions. However, Balto said the administration has been “particularly innovative in coming up with creative” ways to structure a deal.
