Antitrust-Law Senator Asks FCC, Justice Department to Block AT&T/T-Mobile Merger

U.S. regulators should block AT&Ts $39 billion acquisition of T-Mobile USA, a leading antitrust law senator said Wednesday in a letter to Federal Communications Commission Chairman Julius Genachowski and Attorney General Eric Holder.

I have concluded that this acquisition, if permitted to proceed, would likely cause substantial harm to competition and consumers, would be contrary to antitrust law, and not in the public interest, and therefore should be blocked by your agencies,” wrote Herb Kohl (D.-Wis.), chairman of the Senate Judiciary Committees Subcommittee on Antitrust, Competition Policy and Consumer Rights.

A separate letter written by three Democrats in the House Edward Markey (D.-Mass.), John Conyers (D.-Mich.) and Anna Eshoo (D-Calif.) also raised concerns about the merger.

We believe that AT&Ts acquisition of T-Mobile would be a troubling backward step in federal public policy a retrenchment from nearly two decades of promoting competition and open markets to acceptance of a duopoly in the wireless marketplace,” the Representatives stated.

But Mike Lee (R-Utah), a ranking member on Kohls Senate antitrust subcommittee, defended the merger today in a statement.

In my view, the merger has the potential to provide significant network efficiencies that may help alleviate capacity constraints, enable enhanced service quality, and facilitate expansion of a 4G LTE nationwide network, which would in turn create opportunities for handset innovation and continued development of data-rich applications,” Lee said.

The letters could influence public opinion for or against a merger that the U.S. Department of Justice and Federal Communications Commission are currently reviewing pursuant to antitrust law and other federal law.

We believe the opposition of Sen. Kohl is of some significance, given that he is the chairman of the Senate Judiciary Committees antitrust subcommittee, and while he is retiring after this Congress, he does have some influence,” wrote Stifel Nicolaus analyst Rebecca Arbogast in a research note. He also could be something of a barometer for mainstream Democratic antitrust thinking, and if nothing else, provide some political cover for opponents in the face of the strong AT&T lobbying campaign.”

Kohl asserted the merger would enable AT&T and Verizon Wireless to control 80 percent of the cell phone market and reduce the number of national providers from four to three in a market that is already highly concentrated. 

The deal will likely tend to substantially lesson competition, lead to consumers paying high prices with fewer choices, as well as lessen the innovation that has been the keystone of this industry in the last decade,” wrote the senator, who argued that no merger conditions could remedy the harm to competition that the deal would cause.

An AT&T spokesman responded to Kohls letter.

We respect Senator Kohl. However, we feel his view is inconsistent with antitrust law, is shared by few others, and ignores the many positive benefits and numerous supporters of the transaction,” he said. This is a decision that will be made by the Department of Justice and the FCC under applicable law and after a full and fair examination of the facts. We continue to believe those reviews will result in approval of this transaction.”

Earlier this month in a blog, AT&Ts vice president of Federal Regulatory, Joan Marsh, noted that 72 Democrats in Congress urged the FCC and the Department of Justice to give important consideration to the increased broadband wireless coverage that will be made possible by AT&Ts acquisition of T-Mobile.”

The merger also has garnered support from 26 governors and others, including Facebook, Microsoft, Oracle and Yahoo.

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