The lawsuit filed by the Department of Justice (DoJ) last
week to block AT&Ts acquisition of T-Mobile caught
the corporate sector by surprise, but US antitrust attorneys
have warned against presuming the start of tougher merger
They do note that the case against the merger of the
USs second and fourth biggest wireless telecom providers
does touch on new areas of focus in the USs horizontal
merger guidelines released last year.
filed last Wednesday with a federal district court, is
considered a drastic measure for two procedural reasons: it was
filed just five months after the DoJ would have commenced talks
with AT&T over the deal, and before the Federal
Communications Commission (FCC) which must approve the
deal on public interest grounds has finished its
When the DoJ has previously sued (or threatened to sue) to
block a merger, it has done so after a longer period of
discussions, and it typically collaborates with the FCC.
Last weeks swift action coincides with personnel
changes at the top of the DoJs antitrust division. In
August former deputy Sharis Pozen was appointed to acting chief
of the division after Christine Varney departed to join Cravath
Swaine & Moore.
One antitrust partner told IFLR that he did suspect Pozen
would take a slightly more aggressive approach than her
predecessor, but admitted that the AT&T/T-Mobile
acquisition agreement would have been filed for antitrust
clearance shortly after it was signed in March, meaning the
DoJs investigation started under Varneys watch.
I think its a subtle signal that the department
will go to court if it needs to, but its too early in the
Pozen leadership to say it signals the start of a new
approach, he said.
Antitrust lawyers that IFLR spoke with all dismissed
suggestions the DoJ complaint was designed to gain leverage
against AT&T to help the department achieve its ultimate
goal of gaining concessions from the acquirer to improve
competition in the sector.
Pundits in the antitrust community say this is what
they are looking for, but the FCC has plentiful leverage.
Im not sure what the pundits are getting at, one
Another suggested the DoJ might be trying to draw a
line in the sand on technology deals after drawing
criticism recently for not being tough enough in the sector,
including on the
NBC/Comcast deal in January.
But the consensus is that most of these prior tech deals
raised vertical rather than more straightforward horizontal
issues alleged in the AT&T/T-Mobile complaint.
A disruptive maverick
Procedural issues aside, the governments claim against
AT&T brings to the fore the DoJ and Federal Trade
merger review guidelines (Guidelines).
A number of themes emphasised in the new guidelines
are on display in the complaint that the justice department
Stephen Smith, co-chair of Morrison & Foerster's global
antitrust & competition group.
One is the DoJs description of T-Mobile as a disruptive
competitor, or a maverick. The target warrants the label
because of its innovative pricing plans which have placed
increasing competitive pressure on its bigger rivals.
The Guidelines, attorneys said, place a greater
emphasis on direct measures of such competitive effects.
Another is the Guidelines focus on targeted
customers. In its complaint the DoJ defines this to
capture the national market as well as the countrys 100
It was easy for AT&T to prepare for the local
market analysis based on precedent, but the interesting
question is to what extent it credited a national market
argument, said one New York-based corporate partner.
Unless AT&T obtains a stay of proceedings, pursuant to
which it can try for an out-of-court settlement with the DoJ,
FCC, T-Mobile and its owner Deutsche Telekom, the case will
proceed through federal court as a merger trial on the
AT&T and the DoJ are scheduled to appear in court on
September 21 to discuss settlement prospects, and before then
must file a case management timetable.
If the case does proceed to trial, the government can take
little comfort from its past performance in similar cases.
The trend weve seen is that as merger analysis
has become more sophisticated and fact-intensive, the
government has had more difficulty winning cases, said
the antitrust partner.
Sprint: fuel to the fire
Sprints filing of a separate
claim against AT&T on Wednesday caught market observers
This is very unusual as unlike the situation in
Europe, traditionally competitors find it very hard to get
standing [in US antitrust issues], said one antitrust
But the consensus is that the claim filed by Sprint, the
countrys third largest wireless telecoms provider, sets
out very effectively how it would be handicapped by the merger,
making it difficult for AT&T to challenge its standing.
In essence, it alleges that an AT&T/T-Mobile merger
would make Sprint an ineffective competitor, which adds
fuel to the fire here, said the corporate partner.
Sprints claim has been filed in the same court as the
DoJs, making it possible the actions will be
Cleary Gottlieb Steen & Hamilton is representing
Deutsche Telekom, Arnold & Porter is acting for AT&T,
and Skadden Arps Slate Meagher & Flom for Sprint. All three
firms declined to comment on the claims.