DOJ Staffers Think T-Mobile's Merger Benefit Claims Are Nonsense

Deals

from the merge-ALL-the-things! dept

While the FCC announced this week it would unsurprisingly be a rubber stamp for Sprint and T-Mobile’s proposed $26 billion merger, the DOJ still isn’t buying the companies’ claims that further consolidation of the wireless sector will be wonderful for competition and American consumers. Reports this week surfaced that DOJ staffers were still recommending that the agency block the $26 billion merger, based on fears that the deal would reduce market competition and likely result in higher prices overall:

“The U.S. Justice Department?s antitrust division staff has recommended the agency file a lawsuit to block T-Mobile US?s $26 billion acquisition of smaller rival Sprint, according to two sources familiar with the matter. The final decision on whether to allow two of the four nationwide wireless carriers to merge now lies with political appointees at the department, headed by antitrust division chief Makan Delrahim.”

History and antitrust data is pretty clear on this point: when you reduce the overall number of major competitors in telecom, the end result is almost always higher prices, fewer jobs, and worse service. Growth for growth’s sake may be wonderful for investors and executives over the short term, but over the longer term it’s immensely harmful. You need only look at the US Telecom sector; one of the most despised, uncompetitive, and aggressively terrible sectors in all of American industry. That we refuse to learn that mindless consolidation is harmful directly reflects our refusal to learn from history.

Time and time again, telecom companies promise that somehow this merger will finally fix the universe of problems caused by… mindless merger mania. And time and time again, these telecom giants fail utterly to follow through on their promises, using the reduction in competition (and regulatory apathy) to jack up prices and lag on innovation and network expansion.

The fact that T-Mobile CEO John Legere plays a hip Millennial on Periscope and sometimes says “fuck” on Twitter doesn’t change this equation. A major reason T-Mobile was so competitive and disruptive is (and “government is incapable of ever doing good” folks like to ignore this bit of history) that the DOJ blocked AT&T’s attempted 2011 acquisition of the company, a decision based not only on the evidence that such consolidation would hurt consumers, but because the companies involved made a wide variety of merger benefit claims that were downright preposterous.

The DOJ did the same thing in 2014 when Sprint and T-Mobile tried to merge, again pointing to data in numerous international markets showing such consolidation raises prices and harms competition. The only reason we find ourselves once again in the same position is because T-Mobile and Sprint executives want to take advantage of the Trump administration’s almost mindless belief that letting industry do whatever the fuck it wants somehow results in near-mystical outcomes (the exact kind of thinking that gave us Comcast in the first place).

While DOJ staffers are advising blocking the deal, that doesn’t mean Delrahim will actually listen to them (especially if Trump applies pressure), or will do a good job in court defending consumers from mindless merger mania should the DOJ decide to sue.

Delrahim has been an odd duck to nail down in terms of antitrust enforcement. It’s true that his DOJ sued to stop the AT&T Time Warner merger, but only after Rupert Murdoch (for his own competitive reasons) heavily pressured Trump to demand it. And while his antitrust enforcers’ efforts to outline the obvious perils of that deal were hamstrung by ever-narrowing US antitrust guidelines and a ridiculously myopic ruling by U.S. District Court Judge Richard Leon, many of Delrahim’s wounds were self-inflicted (like failing to mention net neutrality as essential competitive context at any point during the trial or appeal).

If the FCC and DOJ both wind up approving the deal, numerous State AGs have said they’ll sue to prevent it from succeeding. That said, it’s still pretty abundantly clear that America has no intention of learning from history and experience. We collectively hate Comcast, but there’s still a sizeable segment that hasn’t realized telecom’s monopoly problems (and resulting price hikes, atrocious customer service, and patchy availability) are thanks to two things: our collective gullibility when it comes to merger mania and empty merger promises, and regulators and lawmakers that are either too timid or politically compromised to do the right thing and defend healthy markets, competition, and American consumers.

Filed Under: antitrust, competition, doj, fcc, merger
Companies: sprint, t-mobile