Department of Justice Takes Steps to Block AT&T T-Mobile Merger

This morning, in a rare press conference and press release for the Department of Justice, the regulatory arm of the department has announced that it has filed siut against AT&T Mobility in order to block its proposed purchase and merger of Deutsche Telekom’s T-Mobile. Citing the Clayton-Sherman Antitrust Act, the DoJ is staunchly opposed to the merger on the grounds that it would reduce competition to monopolistic levels and increase prices.

 “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. Consumers across the country, including those in rural areas and those with lower incomes, benefit from competition among the nation’s wireless carriers, particularly the four remaining national carriers. This lawsuit seeks to ensure that everyone can continue to receive the benefits of that competition.”

The Department filed its lawsuit because we believe 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 their mobile wireless services. As can be seen in the Department’s complaint, AT&T felt competitive pressure from T-Mobile. One example cites an AT&T employee observing that “[T-Mobile] was first to have HSPA+ devices in their portfolio…we added them in reaction to potential loss of speed claims.”

So as you can see, a merged AT&T and T-Mobile would combine two of the four largest competitors in the marketplace, and would eliminate T-Mobile, an aggressive competitor, from the market. [T-Mobile] compete[s] on price, plan structure, network coverage, quality, speed, devices, and operating systems. A combination of AT&T and T-Mobile would eliminate this price competition and innovation.

Since the announcement of the merger in May, consumer activist groups and even Sprint have made a concerted effort to block the purchase and merger from being completed in the name of preserving a semblance of competition in the current marketplace, which has been subject to consolidation in recent years mostly through AT&T’s attempts to actively compete with its next closest competitor Verizon Wireless. Now with the Department of Justice becoming more actively involved, the chances of the purchase and merger going through have been drastically reduced to the point where AT&T may have to invoke its $3 billion penalty clause due to non-completion of the purchase and merger caused by regulator intervention.

For its part, AT&T has tried to deflect the news of the decision by continuing to parrot the job creating benefits of the merger, stating that it would create 5,000 new US call center jobs, while conveniently obscuring the fact that the merger would cause double that amount in jobs lost due to redundant infrastructure.

“At a time when many Americans are struggling and our economy faces significant challenges, we’re pleased that the T-Mobile merger allows us to bring 5,000 jobs back to the United States and significantly increase our investment here.”

Nothing is stopping AT&T from creating that same amount of call center jobs at the moment, and to use the merger as the catalyst speaks to the callousness of AT&T’s attempts to actively reduce competition in order to please its shareholders at the expense of its customer base.  With the news of the suit, AT&T’s stock has dropped as low as 5% on the initial news while the biggest gainer today has been Sprint, with a sharp 9% increase since the market opening this morning on the same news. The FCC has also commented positively on the move:

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. 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.

AT&T has further responded, calling the move disappointing:

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. 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. We remain confident that this merger is in the best interest of consumers and our country, and the facts will prevail in court.