Justice Department Lawsuit Could Kill ATandT, T-Mobile Merger

The filing of an antitrust lawsuit against AT&T and Deutsche Telekom isn’t shocking in the fact that it happened so much as in its timing. Most observers didn’t expect the antitrust action to happen so soon. But the U.S. Department of Justice did file a lawsuit Aug. 31, charging that the merger would be bad for consumers, would raise prices, limit choice, and reduce competition and innovation as the Department explained in a statement immediately after a press conference to announce the suit.

In a separate statement explaining the antitrust lawsuit, Deputy Attorney General James Cole said, “In order to ensure that competition remains and that everyone—including consumers, businesses and the government—continues to receive high quality, competitively priced mobile wireless products and services, the Department of Justice today filed an antitrust lawsuit in U.S. District Court in Washington, D.C., to block AT&T’s acquisition of T-Mobile.”

Cole said the combination of AT&T and T-Mobile would result in tens of millions of consumers in the United States facing higher prices, fewer choices and lower quality products for their mobile wireless services. “We are seeking to block this deal in order to maintain a vibrant and competitive marketplace that allows everyone to benefit from lower prices and better quality and innovative products,” Cole said.

Acting Assistant Attorney General Sharis Pozen expanded on Cole’s comments adding, “It is important to move expeditiously to preserve the lower prices and innovation resulting from T-Mobile’s competitive presence in this market. That’s why we filed a lawsuit to block this transaction; our goal is to preserve price competition and innovation in this important industry.”

Predictably, there were plenty of other opinions. AT&T, in a statement that echoes back to the Justice Department antitrust lawsuit that broke the company into pieces in 1982, said, through its lawyer Wayne Watts, “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.”

Apparently, AT&T is upset that the DOJ wouldn’t share its plans. Watts also added that he expected the department to be swayed by its thoughts on the merger. “We plan to ask for an expedited hearing so the enormous benefits of this merger can be fully reviewed,” Watts said in his prepared statement. “The DOJ has the burden of proving alleged anti-competitive effects, and we intend to vigorously contest this matter in court.”

Deutsche Telekom—marching in lockstep with AT&T, as has been the case on the public relations front in the merger war—said through spokesman Philipp Schindera, “Deutsche Telekom is very disappointed by the DOJ's action, and will join AT&T in defending the contemplated merger against the complaint in court. DOJ failed to acknowledge the robust competition in the U.S. wireless telecommunications industry and the tremendous efficiencies associated with the proposed transaction, which would lead to significant customer, shareholder and public benefits.”

Of course, the DOJ statement makes clear that the Department did indeed consider the efficiencies to which Schindera refers, and found them wanting.

Sprint, meanwhile, expressed its delight in a corporate sort of way. Senior Vice President Vonya McCann, calling the antitrust suit a decisive victory for consumers and competition and the country, 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.”

Next: Where Does This Leave the Merger? >>