Why is the AT&T-T-Mobile merger different?
Leaders in the telecom industry are sworn in during a hearing to examine if the proposed merger between AT&T and T-Mobile may affect wireless telecommunications competition on Capitol Hill in Washington, DC earlier this year.
Jeremy Hobson: Mow, to the Justice Department's decision to block the proposed $39 billion merger of cell phone carriers AT&T and T-Mobile. It's been a while since we've had a big anti-trust case in this country, and this one is expected to take months and cost millions of dollars.
For more, let's bring in anti-trust expert Dan Crane. He's a law professor at the University of Michigan, and he joins us from Ann Arbor. Good morning.
Dan Crane: Good morning.
Hobson: Well once the Justice Department steps in like they did yesterday and opposes a big merger, how likely is it that the merger will eventually go through?
Crane: Well, it does depend upon the facts of the case, obviously. In this case, on paper, the Justice Department's case looks very strong. They have alleged, at least, that AT&T and T-Mobile would lead to a very strong increase in concentration in many local and the national market for wireless services.
Hobson: And why do you think that this case raised the red flags for Justice when, for instance, Google's acquisition of the travel site ITA didn't? Or the Comcast acquisition of NBC Universal?
Crane: Well this is a horizontal merger -- meaning it's a merger between competitors -- unlike those other mergers you just mentioned, which were primarily vertical mergers -- which means that the firms were not competitors. And this is a case involving a merger between the second and fourth largest firms in the market with a market that has a total of four firms. So it's really a four to three merger, which traditionally would raise anti-trust scrutiny.
Hobson: So this is sort of a no-brainer?
Crane: Well it's a no-brainer to bring the case. Obviously there are nuances in the case. AT&T will have a theory that competition is primarily on a local market basis, and that if you look local market by local market, it's not so bad.
Hobson: Do you think that this is a shift for the Obama administration, that they're now going to be tougher on big mergers and acquisitions?
Crane: They haven't challenged many mergers so far. There haven't been so many large horizontal mergers of this kind, though. So in my view, this is really business as usual for the anti-trust agencies.
Hobson: Dan Crane, law professor at the University of Michigan. Thanks so much for joining us.
Crane: My pleasure.