The announcement by the Department of Justice on Wednesday challenging AT&T’s takeover of T-Mobile USA came with much of the usual criticism of such deals – that it would lessen competition and hurt consumers.
But the decision was also delivered with a political tinge, with James Cole, the deputy attorney-general, saying: “We see this as a move that will help protect jobs in the economy, not a move that’s going to in any way reduce them.”
He said: “The general experience with mergers is that there is what’s called efficiencies, which is redundancies when the two companies come together, which usually reduces jobs, in our experience.”
Coincidentally or not, such a rationale dovetails perfectly with the agenda of the Obama administration, which is focused on how to create, and protect, jobs, at a time of persistent high unemployment.
The timing took some by surprise, as did the DoJ’s decision not to proceed in concert with the Federal Communications Commission.
“It looked like the process was still midstream in terms of document production at the FCC,” said Andrew Lipman, partner and head of telecoms practice at Bingham McCutchen.
The usual practice in recent antitrust cases has been that the parties discuss potential objections, with the DoJ and FCC offering possible remedies to be met for the deal to go through.
The DoJ under Christine Varney demonstrated a willingness to negotiate substantial and creative agreements as part of waving deals through, including in Ticketmaster’s acquisition of Live Nation and in Comcast’s purchase of NBC Universal.
This approach prompted some critics to accuse the DoJ of being soft on antitrust issues. Ms Varney left the DoJ in early August.
In February 2009, Ticketmaster, the world’s largest ticketing service, looked to acquire Live Nation, the world’s biggest promoter of concerts, a deal approved with provisos.
In January, Comcast’s acquisition of NBC Universal to create a $30bn media business was approved by the DoJ, also with heavy remedies. For example, Comcast’s rivals retained access to NBC Universal’s programming.
Analysts said the DoJ clearly wanted to send an early signal to the market that it was going to fight the AT&T merger. It is unusual in a merger of this size and complexity for the DoJ to move so quickly to block it.
“Maybe this signals the DoJ doesn’t believe in any solutions, or it wanted to get out in front of AT&T and start negotiations with increased leverage,” said Makan Delrahim, former deputy assistant attorney general for the DoJ antitrust division during the George W. Bush administration.
AT&T had tried to sweeten the deal by pitching the extra services it would provide across the country. But the DoJ came to the conclusion that it “could obtain substantially the same network enhancements … if it simply invested in its own network without eliminating a close competitor”.
AT&T is expected to fight the DoJ’s assessment that the merger would create “higher prices, fewer choices and lower-quality products for mobile wireless services”. But a year-long litigation process has the potential to do serious damage to both companies involved in the deal.
Other commentators were more sceptical about the impact of the DoJ’s announcement. “I don’t think this makes a lot of difference,” said David Balto, of the Center for American Progress and an antitrust lawyer. “This just means they are going to resolve the merger issues as part of litigation, it doesn’t change deal dynamics at all.”