Antitrust suit spurs widespread reaction

“Any way you look at this transaction, it is anticompetitive,” said Sharis A. Pozen, acting U.S. assistant attorney general in charge of antitrust, on Wednesday after filing suit to stop AT&T’s acquisition of T-Mobile in U.S. District Court for the District of Columbia.

“We know this industry well — inside and out,” she said in a statement released by the Department of Justice. “It is important to move expeditiously to preserve the lower prices and innovation resulting from T-Mobile’s competitive presence in this market. That’s why we filed a lawsuit to block this transaction-our goal is to preserve price competition and innovation in this important industry.”

As far back as March, New York Attorney General Eric Schneiderman expressed concern that the long proposed deal would stifle mobile wireless telecommunications service provider competition in Rochester, which has fewer wireless providers than larger urban areas such as New York City, according to a 2010 Federal Communications Commission report.

New York AG Antitrust Bureau Chief Richard L. Scwartz said his office would review the DOJ’s district court complaint to determine what “the best course forward,” is by the AG on behalf of New York consumers and businesses.

“We have conducted numerous interviews of business enterprise customers throughout New York state and throughout the country to assess whether the merger would result in harm to competition to the business enterprise market and closely analyzed the parties’ claims that the merger would lower costs and improve service to consumers.”

As Harris Beach PLLC Antitrust Attorney Paul L. Braunsdorf explained, an efficiency defense is common “in most any merger the DOJ challenges” and AT&T will have lined up its efficiency arguments in support of the acquisition.

“Essentially an efficiency defense is a pro-competition justification by the merging parties,” Braunsdorf said. “Basically, it presents the idea that in combining the two entities it will create a meaner, leaner more efficient operation and create savings they couldn’t achieve on their own that tend to lower costs for consumers.”

But Pozen said T-Mobile has been good for the industry in keeping costs down and an important source of competition that can’t be lost.

“Unless this merger is blocked, competition and innovation in the mobile wireless market, in the form of low prices and innovative wireless handsets, operating systems, and calling plans, will be diminished-and consumers will suffer,” she said.

Braunsdorf said if the parties want to examine possibilities for a settlement agreement, one thing the Justice Department has allowed in the past in airline mergers is allowing the merger to go ahead but only in certain markets where the effect on competition isn’t so great.

But that probably wouldn’t include western New York, where Schneiderman said the merger would almost certainly result in higher prices for wireless phone service.

Some of Rochester’s other notable antitrust attorneys could not comment because of potential conflicts between their firms and the parties involved in the litigation.

Consumer groups hailed the DOJ’s action.

“This announcement is something for consumers to celebrate,” said Parul P. Desai, policy counsel for Consumers Union, publisher of Consumer Reports. “We have consistently warned that eliminating T-Mobile as a low-cost option will raise prices, lower choices, and turn the cellular market into a duopoly controlled by AT&T and Verizon.”

A Consumers Union study of the voice and data plans available from AT&T and T-Mobile concluded that T-Mobile wireless plans typically cost $15 to $50 less per month than comparable plans from AT&T (www.consumersunion.org). In addition, a recent cell-phone satisfaction survey by the Consumer Reports National Research Center revealed that AT&T got lower marks than T-Mobile in almost every category of consumer satisfaction.

“We are surprised and disappointed by today’s action, particularly since we have met repeatedly with the Department of Justice and there was no indication from the DOJ that this action was being contemplated,” said AT&T Senior Executive Vice President and General Counsel Wayne Watts.

“We plan to ask for an expedited hearing so the enormous benefits of this merger can be fully reviewed. The DOJ has the burden of proving alleged anti-competitive affects and we intend to vigorously contest this matter in court.”

Watts said the merger would create tens of thousands of jobs and billions of investment dollars at a time when the nation needs it most.