Wednesday, August 31, 2011

Not so fast on AT&T merger with T-mobile

The US Department of Justice has filed a lawsuit to block the proposed merger between the nations 2nd and 4th largest wireless carriers.  The Feds say the merger will result in reduced competition, meaning higher prices and less innovation.  AT&T and T-Mobile obviously disagree and the burden of proof will be on the DoJ. 

It will be interesting to see the proof.  Deputy Attorney General James Cole makes two unconventional arguments for an antitrust case: (1) that the merger would adversely affect those with low incomes and those living in rural areas and (2) T-Mobile would expand and create jobs whereas the merged firm would eliminate jobs.  Antitrust laws in the US have traditionally focused on maintaining competitive conditions.  One will search in vain to find language regarding citizens in rural areas, low income citizens, or job creation in the Sherman Act, Clayton Act or FTC Act.  In fact NYT notes that T-Mobile's parent company Deutsche Telekom is looking to exit the US market.

As MBA 505 students learn, there is a crucial difference between protecting competition in the marketplace and protecting individual competitors in that marketplace.  As long as Verizon sticks around, AT&T is likely to have all the competition it can handle. 

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