AT&T Abandons Planned Acquisition of T-Mobile

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter, and John W. Arden.

Facing an antitrust challenge from the Department of Justice and regulatory hurdles raised by the Federal Communications Commission (FCC), AT&T Inc. on December 19 abandoned its planned acquisition of T-Mobile USA Inc. from Deutsche Telekom AG. AT&T said that it decided to call off the acquisition “after a thorough review of options”

The Justice Department Antitrust Division, seven states, and the Commonwealth of Puerto Rico alleged in a complaint filed in the federal district court in Washington, D.C. that the combination of two of the four largest providers of mobile wireless telecommunications services would violate the antitrust laws. (See “Department of Justice Seeks to Block AT&T’s Acquisition of T-Mobile," Trade Regulation Talk, August 31, 2011.)

The FCC staff had reviewed the transaction and found a number of public interest harms. The staff found that the deal would substantially lessen competition in ways that no conditions would appear to remedy. The staff concluded that removing T-Mobile as a competitor would create the incentives for AT&T and other competitors to raise prices.

Government Response

“Consumers won today,” Sharis Pozen, Acting Assistant Attorney General in charge of the Antitrust Division, said in a written announcement. “Had AT&T acquired T-Mobile, consumers in the wireless marketplace would have faced higher prices and reduced innovation. We sued to protect consumers who rely on competition in this important industry. With the parties’ abandonment, we achieved that result.”

The Federal Communications Commission agreed. “The FCC is committed to ensuring a competitive mobile marketplace that drives innovation and investment, creates jobs and benefits Consumers,” FCC Chairman Julius Genachowski said in a brief statement. “This deal would have done the opposite.”

AT&T Statement

In a December 19 press release, AT&T said that it agreed with Deutsche Telecom AG “to end its bid to acquire T-Mobile USA, which began in March of this year.” However, the actions of the Department of Justice and FCC to block the transaction do not change the realities of the U.S. wireless industry, according to the company. “It is one of the most fiercely competitive industries in the world, with a mounting need for more spectrum that has not diminished and must be addressed immediately. The AT&T and T-Mobile USA combination would have offered an interim solution to this spectrum shortage. In the absence of such steps, customers will be harmed and needed investment will be stifled.”

AT&T Chairman and CEO Randall Stephenson reaffirmed the company’s commitment to "lead the mobile Internet revolution."

“To meet the needs of our customers, we will continue to invest. However, adding capacity to meet these needs will require policymakers to do two things. First, in the near term, they should allow the free markets to work so that additional spectrum is available to meet the needs of the U.S. wireless industry, including expeditiously approving our acquisition of unused Qualcomm spectrum currently pending before the FCC. Second, policymakers should enact legislation to meet our nation’s long-term spectrum needs.”

Other Voices

The American Antitrust Institute congratulated the U.S Department of Justice Antitrust Division and the FCC for “bringing to a swift end AT&T’s adventurous test of U.S. merger controls.” Companies planning highly-concentrating horizontal mergers will have to think twice “no matter how much political clout they think they can bring to the table.” Preventing this merger saved many jobs, according to the AAI. “It is an important victory for antitrust and American consumers.”

Government Suit to Block AT&T Acquisition of T-Mobile Stayed

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

The federal district court in Washington, D.C. on December 12 stayed further proceedings in a federal/state enforcement action seeking to block AT&T Corporation’s proposed acquisition of T-Mobile USA Inc. from Deutsche Telekom.

The stay came at the request of the Justice Department and AT&T. The parties must inform the court by January 12, 2012, of the status of the proposed transaction.

The Justice Department, seven states, and the Commonwealth of Puerto Rico allege in the suit that the combination of two of the four largest providers of mobile wireless telecommunications services would violate the antitrust laws. (See “Department of Justice Seeks to Block AT&T’s Acquisition of T-Mobile,” Trade Regulation Talk, August 31, 2011).

AT&T and Deutsche Telekom are “actively considering whether and how to revise our current transaction to achieve the necessary regulatory approvals,” according to a December 12 AT&T statement.

The stay order in U.S. v. AT&T Inc. appears here on the Department of Justice Antitrust Division website.

Acting Antitrust Chief Defends U.S. Challenge to AT&T/T-Mobile Merger

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

Sharis Arnold Pozen, Acting Assistant Attorney General in charge of the Department of Justice Antitrust Division, discussed civil antitrust enforcement efforts at the 38th annual Fordham Competition Law Institute’s international antitrust law and policy conference on September 7.

In what panel moderator A. Paul Victor called her “maiden speech” as newly appointed acting antitrust chief, Pozen talked about how civil non-merger enforcement was "alive and well" at the Antitrust Division.

Pozen had intended to focus her comments on non-merger enforcement, saying that she had said a lot about mergers recently. A week earlier, Pozen had delivered remarks at a press conference on the filing of the U.S. suit challenging AT&T Corporation’s proposed acquisition of T-Mobile USA Inc. Moreover, a trial had just begun in the Justice Department’s action to halt H&R Block Inc.’s proposed acquisition of 2SS Holdings, Inc., the maker of TaxACT do-it-yourself tax preparation software.

Horizontal Merger Guidelines

The official took issue with the suggestion that the Justice Department’s complaint in the AT&T/T-Mobile case did not reflect recent changes to the joint FTC/Justice Department Horizontal Merger Guidelines. Commentators have suggested that the Justice Department’s complaint in the case relies too heavily on market share analysis and structural presumptions.

In her remarks at Fordham, Pozen said that the complaint in the AT&T/T-Mobile case does in fact represent the approach taken in the Horizontal Merger Guidelines and current Antitrust Division practice. She reiterated that the combination is a four-to-three merger that takes out an innovator.

The Horizontal Merger Guidelines (CCH Trade Regulation Reporter ¶13,100), which were revised in August 2010, recognize the continuing need for market definition in merger analysis; however, the focus is on the competitive effects of a transaction. The analysis need not start with market definition, according to the revised guidelines.

There has also been speculation that Sprint Nextel’s private suit challenging the AT&T/T-Mobile transaction could represent an effort by Sprint to bolster a weak Justice Department case. Pozen refused to comment on the Sprint suit other than to say that Sprint’s case was also before Judge Ellen Huvelle. Pozen did not know whether the suits would be combined.

Further information about the Justice Department’s lawsuit to block the AT&T/T-Moble deal appears here in an August 31 posting on Trade Regulation Talk.

Non-Merger Enforcement

With respect to civil, non-merger enforcement, Pozen discussed a number of recently-filed cases in sectors that “affect consumers’ pocketbooks.” In the health care industry, she explained that the Antitrust Division filed its first lawsuit since 1999 challenging a monopolist with engaging in traditional anticompetitive unilateral conduct. United Regional Health Care System of Wichita Falls—the largest hospital in Wichita Falls—agreed to settle allegations that it unlawfully used contracts with commercial health insurers to maintain its monopoly for hospital services in violation of Section 2 of the Sherman Act.

Another action noted in the health care area was the Antitrust Division’s ongoing lawsuit against Blue Cross Blue Shield of Michigan, challenging the health insurer’s use of most favored nation (MFN) clauses in its provider agreements with various hospitals. The insurer has appealed a federal district court’s denial of its motion to dismiss (2011-2 Trade Cases ¶77,568), and the Justice Department has asked for dismissal of the appeal.

In another “key industry for consumers,” the Justice Department is pursuing claims against American Express, challenging payment card rules that allegedly restrict price competition at the point of sale. MasterCard and Visa have agreed to settle similar civil charges (2011-1 Trade Cases ¶77,529).

Pozen noted that the Antitrust Division is “vigilantly watching for signs of anticompetitive conduct across the economy.” She also pointed out that the Antitrust Division was willing to litigate to judgment if necessary. This point is reflected in the ongoing litigation against Blue Cross Blue Shield of Michigan and American Express.

International Cooperation, Coordination

The acting antitrust chief said that she worked closely with her predecessor, Christine Varney, setting antitrust priorities. Among these priorities is a commitment to international cooperation, which she intends to carry forward.

The recent Memorandum of Understanding between the Antitrust Division and FTC and China’s three antitrust agencies (CCH Trade Regulation Reporter ¶13,512) is a first step towards an enduring relationship, said Pozen. She noted that the federal antitrust agencies were pursuing a similar agreement with India, as that country develops its competition regime.

Pozen reminded practitioners that antitrust agencies around the globe are talking to each other. She noted that many parties recognize the benefits of international coordination in investigations and suggested that permitting the agencies to share information can be beneficial to all who are involved.

Sprint Files Own Antitrust Suit to Block AT&T/T-Mobile Combination

This posting was written by John W. Arden.

In the wake of the Department of Justice’s filing of an antitrust lawsuit to block AT&T Corp.’s proposed acquisition of T-Mobile USA Inc. on August 31, mobile wireless carrier Sprint Nextel brought its own antitrust action today, seeking to prohibit the acquisition as a violation of Section 7 of the Clayton Act.

Sprint filed the lawsuit against AT&T Corp., AT&T Mobility, T-Mobile USA Inc., and Deutsche Telekom (T-Mobile’s parent) in the federal district court in the District of Columbia as a related case to the Department of Justice’s lawsuit.

The suit alleged that the proposed $39 billion acquisition would harm consumers and competition in the market for mobile wireless services. Specifically, Sprint claimed that completion of the transaction would:

• Harm retail consumers and corporate customers by causing higher prices and less innovation.

• Entrench “duopoly control” by “Ma Bell” descendants AT&T and Verizon of the almost quarter of a trillion dollar wireless market.

• Injure Sprint and other independent wireless carriers.

According to Sprint, a combined AT&T and T-Mobile would control more than three-quarters of the wireless market and 90 percent of the profits. The combined companies would be able to use its control over backhaul, roaming, and spectrum and its increased market position to exclude competitors, raise their costs, restrict their access to handsets, damage their businesses, and ultimately less competition, Sprint charged.

According to last week’s Department of Justice complaint, the four nationwide providers of mobile wireless service—Verizon, AT&T, Sprint, and T-Mobile—account for more than 90 percent of the national market. T-Mobile, the smallest of the four, has historically challenged the top three competitors by providing value, innovation, and aggressive pricing.

The elimination of T-Mobile as an independent, low-priced alternative rival would therefore “remove a significant competitive force from the market” and “substantially reduce competition,” the Justice Department claimed.

On August 31, Sprint issued a statement supporting the Department of Justice lawsuit, but did not hint that it was considering filing an action of its own.

“The DOJ today delivered a decisive victory for consumers, competition and our country,” the news release said. “By filing suit to block AT&T’s proposed takeover of T-Mobile, the DOJ has put consumers’ interests first. Sprint applauds the DOJ for conducting a careful and thorough review and for reaching a just decision–one which will ensure that consumers continue to reap the benefits of a competitive U.S. wireless industry. Contrary to AT&T’s assertions, today’s action will preserve American jobs, strengthen the American economy, and encourage innovation.”

A news release on Sprint’s filing of today’s action appears here.

Further information about the Justice Department’s lawsuit appears here in an August 31 posting on Trade Regulation Talk.

Department of Justice Seeks to Block AT&T’s Acquisition of T-Mobile

This posting was written by John W. Arden.

The U.S. Department of Justice filed a civil antitrust lawsuit today to block AT&T’s proposed $39 billion acquisition of T-Mobile USA Inc. from Deutsche Telekom AG.

The deal would combine the second and fourth largest providers of mobile wireless service, substantially lessen competition for wireless telecommunications services across the U.S., and result in higher prices, poorer quality of services, fewer choices, and less innovation for millions of American consumers, according to the Department of Justice news release.

Currently, four nationwide providers of mobile wireless services—Verizon, AT&T, Sprint, and T-Mobile—account for more than 90 percent of the national market. T-Mobile has historically challenged the top three competitors by providing value, innovation, and aggressive pricing, the Justice Department said.

“T-Mobile has been an important source of competition among the national carriers, including through innovation and quality enhancements such as the roll-out of the first nationwide high-speed data network,” said Sharis A. Pozen, Acting Attorney General in charge of the Department of Justice Antitrust Division. “Unless this merger is blocked, competition and innovation will be reduced, and consumers will suffer.”

The complaint, filed in the federal district court in Washington, D.C., alleges that “AT&T’s elimination of T-Mobile as an independent, low-priced rival would remove a significant competitive force from the market” and “substantially reduce competition.”

The relevant product market was alleged as mobile wireless telecommunications services and, alternatively, mobile wireless telecommunications services provided to enterprise and government customers. The relevant geographic market was defined as local areas approximating cellular market areas (CMAs) identified by the Federal Communications Commission to license providers for certain spectrum bands. According to the Justice Department, AT&T and T-Mobile compete in approximately 97 of the nation’s top 100 CMAs. Each of these 97 CMAs was alleged to constitute a relevant geographic market.

The case is U.S. v. AT&T Corp., T-Mobile USA, Inc., and Deutsche Telekom AG, 1:11-cv-01560.

In a statement released today, AT&T expressed surprise at the filing of the lawsuit and declared an intention to ask for an expedited hearing, “so the enormous benefits of this merger can be fully reviewed.” The company plans to “vigorously contest this matter in court.”

Further analysis of this development (“AT&T’s Planned Acquisition of T-Mobile Challenged by Justice Department” by Jeffrey May) appears here on the AntitrustConnect blog.