Canadian COMPETITION LAW

In an interesting Washington Post article, Cecilia Kang and Jia Lynn Yang write about why the U.S. Federal Communications Commission (FCC) opposed AT&T’s acquisition of T-Mobile (see: How AT&T Fumbled its $39 Billion Bid to Acquire T-Mobile).

While the Department of Justice sued to block the merger in August (see: Justice Department Files Antitrust Lawsuit to Block AT&T’s Acquisition of T-Mobile) the FCC issued a report on November 29^th which concluded that the transaction raised “significant competitive concerns” in the mobile market, and “’substantial and material’ questions about [the transaction’s] competitive effects on roaming, wholesale, and resale services, backhaul, and handsets” (see: Commissioner Copps on the Staff Report on the ATT/T-Mobile Merger).  The FCC also concluded that the “parties’ claim that [the transaction] would lead to lower prices is flawed and over-estimates the benefits that would be passed on to consumers.”

According to the authors of the Post article, the “king of Washington lobbyists” and a “bare-knuckled brawler that spares no expense to win any fight”, may have used undue lobbying pressure on Washington regulators that resulted in its failure to acquire T-Mobile.

Interestingly, and in contrast to the usual Canadian approach to regulators, typically a much more sedate approach limited to transaction counsel, the authors describe the fact that AT&T injected an estimated $40 million into an advertising campaign, hiring seven former congressional lawmakers to help lobby for the deal.  The Post also describes AT&T bringing in 18 outside firms to assist in its “all-out” lobbying effort to acquire T-Mobile.

Despite arguments made by T-Mobile that the transaction, if cleared, would create jobs, bring the Internet to isolated areas of the U.S. and help Americans get online and more effectively compete internationally, some of the key issues appear to include no obvious support from broadband users, a post-merger share of approximately 80% in the wireless market and the removal of a market innovator (T-Mobile) in an already consolidated market.

For example, in its public documents issued in connection with opposing the transaction, the U.S. Department of Justice took the position that the deal, if completed, would result in “higher prices, poorer quality services, fewer choices and fewer innovative products for the millions of American consumers who rely on mobile wireless services …”  The DoJ also indicated that the four existing U.S. wireless providers (AT&T, T-Mobile, Sprint and Verizon) account for about 90% of mobile wireless connections, the deal would have resulted in the market shrinking from four to three and that T-Mobile was something of a maverick and innovator:

“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 … Unless this merger is blocked, competition and innovation will be reduced, and consumers will suffer. … According to the complaint, AT&T and T-Mobile compete head to head nationwide, including in 97 of the nation’s largest 100 cellular marketing areas.  They also compete nationwide to attract business and government customers.  AT&T’s acquisition of T-Mobile would eliminate a company that has been a disruptive force through low pricing and innovation by competing aggressively in the mobile wireless telecommunications services marketplace.”

The DoJ was also unwilling to accept that there were any sufficient efficiencies to outweigh what, in its view, was the “transaction’s substantial adverse impact on competition and consumers.”

For the Washington Post article see:

How AT&T Fumbled its $39 Billion Bid to Acquire T-Mobile

For the U.S. FCC report see:

Commissioner Copps on the Staff Report on the ATT/T-Mobile Merger

For the U.S. DoJ news release blocking the transaction see:

Justice Department Files Antitrust Lawsuit to Block AT&T’s Acquisition of T-Mobile

____________________

For more information about our regulatory law services contact us: contact

For more regulatory law updates follow us on Twitter: @CanadaAttorney

Comments are closed.