The Justice Department says the proposed merger between AT&T and T-Mobile would reduce competition, raise prices, lower innovation and hurt consumers.
The United States Department of Justice filed an
antitrust lawsuit Aug. 31 that seeks to prevent the merger of AT&T and
T-Mobile USA, a division of Deutsche Telekom. The
proposed $39 billion merger would reduce competition for mobile wireless
across the United States, according to a statement
provided by the Justice Department
statement added that the merger would result in higher prices
quality services, fewer choices and less product innovation. The Justice
Department filed the lawsuit in the U.S. District Court for the District of
Columbia on Wednesday. This is the same court that oversaw the original breakup
Deputy Attorney General James Cole, in a prepared
statement said, "The combination of AT&T
and T-Mobile would result in tens of millions of consumers all across the
United States facing higher prices, fewer choices and lower quality products
for mobile wireless services."
Acting Assistant Attorney
General Sharis Pozen said that AT&T and T-Mobile compete head to head
across the United States, and that T-Mobile has been an important source of
competition among national carriers, especially in its roll-out of high-speed
has been advertising that it has the largest and fastest 4G network
in the United States.
Immediately following the announcement by the Justice
Department, the Federal Communications Commission weighed in with an
announcement by Chairman Julius Genachowski, who provided a prepared statement
noting the FCC's concerns about the merger.
"By filing suit today, the Department of Justice has
concluded that AT&T's acquisition of T-Mobile would substantially lessen
competition in violation of the antitrust laws," Genachowski said in the
statement. "Competition is an essential component of the FCC's statutory
public interest analysis, and although our process is not complete, the record
before this agency also raises serious concerns about the impact of the proposed
transaction on competition. Vibrant competition in wireless services is vital
to innovation, investment, economic growth and job creation, and to drive our
global leadership in mobile. Competition fosters consumer benefits, including
more choices, better service and lower prices."
In its announcement opposing the deal, the Justice Department
quoted a number of T-Mobile documents that note the innovations in which that
carrier led the industry, including Android phones, BlackBerry wireless email,
national WiFi hotspot access, and business innovations such as finding niches
and developing ways to provide access that take advantage of those market
niches. The DOJ also noted T-Mobile's development of HSPA+ data technology.
The DOJ statement said the department's attorneys gave
serious consideration to the claimed efficiencies of the proposed merger, but
that officials concluded that AT&T had not demonstrated that any of those
efficiencies would be sufficient to overcome the transaction's "substantial adverse impact on competition and consumers."
Instead, the DOJ noted that
AT&T could realize all of the efficiencies it promised simply by investing
in its own network.
The action is viewed by many
as a huge blow to AT&T,
which had expressed confidence that it would pass any regulatory hurdles
. Indeed, just before the announcement, AT&T reported
that its deal to buy T-Mobile would create about 5,000 jobs within the United
In AT&T's own statement on the DOJ's actions, Senior
Executive Vice President and General Counsel Wayne Watts wrote that the company
plans to ask for a hearing and will fight for approval of the T-Mobile deal.
"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,"
said Watts. "We plan to ask for an expedited hearing so the enormous
benefits of this merger can be fully reviewed. The DOJ has the burden of
proving alleged anti-competitive affects and we intend to vigorously contest
this matter in court."
Whether this will be a fatal
blow to the merger remains to be seen as the Justice Department makes its next
In addition to the Justice Department and the FCC, the
AT&T and T-Mobile deal faces opposition from the two companies'
competition, especially Sprint. In an Aug. 31 statement, Sprint noted: "The DOJ today delivered a decisive victory for consumers,
competition and our country. By filing suit to block AT&T's proposed
takeover of T-Mobile, the DOJ has put consumers' interests first."