Seven States Join DOJ Suit to Block AT&T/T-Mobile Merger

Published October 7, 2011

California and New York have joined five other states in supporting a suit by the U.S. Department of Justice to block the $39 billion acquisition of T-Mobile by AT&T.

Although it is unclear whether this will affect the eventual outcome of the deal, the Wall Street Journal reported on September 17 the states’ actions will make it more difficult for AT&T to negotiate a timely and advantageous settlement.

“State’s joining the federal suit against the AT&T/T-Mobile merger is a strictly political and symbolic move,” said Jim Lakely, communications director co-director of the Center for the Digital Economy at The Heartland Institute, which also publishes Infotech & Telecom News. “This case is already firmly in federal hands. The bureaucracies in those states want to appear pro-active and get on the ‘populist’ and ‘progressive’ side of an issue that animates the digital left. And, with a federal judge already talking settlement, these states might be taking a long-shot at a money grab.”

The acquisition is scheduled for trial in U.S. District Court beginning on March 19, 2012, unless Judge Ellen S. Huvelle approves a motion from AT&T to begin the trial on January 16.

States ‘Piling On’
Free-market advocates have widely voiced their approval of the merger of AT&T and T-Mobile, which would combine the number two and number four national wireless providers past current number one provider Verizon. Opponents of the deal include number three provider Sprint-Nextel and such anti-business advocacy groups as Public Knowledge and Free Press.

Randolph May, president of The Free State Foundation, a Maryland-based think tank, argues the states’ joining the DOJ suit won’t much difference. “I don’t think the piling on of the seven state attorneys general will have a material impact on the outcome of the DOJ’s lawsuit or the merger’s prospects,” May said. “They are just riding on top of DOJ as interveners, and not making different claims,” he said.

“It is possible a state public utility commission (PUC), acting independently, could impact the merger process by denying authority to combine the two companies’ assets in one state, or the PUC conceivably could slow-roll approval,” May continued. “But at most the impact would be limited to that one state, and thus far no PUC has acted negatively on the merger.”

Sheldon Richman, editor of The Freeman, a magazine published by the Foundation for Economic Education, a New York-based pro-market think tank, says the DOJ and states’ attorneys general lawsuits represent another unnecessary government intervention in the business world with recognizable negative impacts on consumers.

“The telecommunications industry has long been badly distorted by government policy, so the last thing consumers need is more distortion with this antitrust action against AT&T,” Richman said.

“Antitrust law is based on static economics and a presumption that government can define the relevant market, which is nonsense,” Richman said. “If the authorities are concerned about monopoly power, let them do a wholesale review of the myriad ways government erects barriers to entry in this and all other industries.”

Lakely added: “Bottom line: If any industry represents interstate commerce, it’s telecommunications. A state bureaucracy should have as much influence over the merger of two national wireless carriers as they do over the weather – which is to say, zero.”

Bruce Edward Walker ([email protected]) is managing editor of Infotech & Telecom News.