The U.S. government will likely soon begin its review of AT&Ts $39 billion acquisition of T-Mobile USA. AT&T on Friday filed its application for antitrust review at the Department of Justice, according to the Washington Post.
U.S. regulators are expected to closely scrutinize the merger under antitrust law and other federal law.
The Clayton Act, a 97-year-old antitrust law, will likely be a key consideration in the Justice Departments analysis of a merger that would knock out one of the nations largest mobile operators. Passed in 1914 and significantly amended in 1950, the law bars mergers that are likely to weaken competition.
Under the Act, the Government challenges those mergers that a careful analyst shows are likely to increase prices to consumers,” the Justice Department states on its website.
The Federal Communications Commission also will review AT&Ts acquisition of T-Mobile. Although the FCC examines a merger’s impact on competition, its review is based on broader criteria than antitrust law. As the FCC explained in its order earlier this year approving the combination of Comcast and NBC Universal, the agency reviews such mergers to ensure that they are in the public interest, convenience and necessity.”
If, on balance, the benefits associated with the proposed transaction outweigh the remaining harms, the Commission will approve the transfer if it serves the public interest,” the agency explained.
In a blog post on March 17, FCC Chief Economist Jonathan Baker responded to concerns raised by one FCC commissioner, Meredith Attwell Baker, that the agency occasionally “goes too far afield when imposing conditions to assure that mergers serve the public interest.”
The wide range of conditions in the typical merger order is easy to explain: it is the natural and foreseeable result of the statutory public interest charge to the agency,” Baker wrote. In furtherance of that mandate, the FCC takes on competition concerns in the Comcast/NBCU order, two-thirds of the pages on conditions sought to protect or foster competition but it also addresses other public interest issues that Congress has put front and center in the Communications Act, such as diversity of viewpoints, localism, and deployment of advanced telecommunications services.”
Some public interest groups and other commentors contend the merger of AT&T and T-Mobile will create a duopoly in the U.S. wireless market with the concentration of power largely in the hands of two mobile operators: AT&T and Verizon Wireless.
When asked by the Washington Posts editorial board about whether the merger would create a duopoly, AT&Ts executive vice president of external affairs, Jim Cicconi, responded that the combined company would control about 43 percent of the market, but we wont likely keep all of those customers.” Cicconi also told the Post that the Government Accounting Office found that after five major mergers in the industry, prices for consumers have gone down 50 percent adjusted for inflation.”
It would be unusual, but not unprecedented, for the U.S. government to oppose a merger based on antitrust concerns. On Oct. 5, 1999, Sprint Corp. and MCI WorldCom announced a $129 billion merger agreement. The Justice Department sued to block the acquisition, and the companies later called off the planned union. The DOJ said the merger would have significantly reduced competition and resulted in higher prices for millions of consumers and businesses.