ABA Panelists Disagree on Net Effect of Sprint Challenge to AT&T/T-Mobile Case

Much of last week’s preliminary hearing before Huvelle focused on whether Sprint would be allowed to join the case (CD Sept 22 p1). Huvelle scheduled oral argument for Oct. 24 on the issue, well ahead of the Feb. 13 start date of a trial.

"It’s going to educate the judge,” Grunes said of Sprint’s complaint. “It’s a very detailed complaint. It’s a compelling story and the judge is going to hear it now.” Also, he asked: “If Sprint wins on the motion to dismiss what happens next? ... To me it’s a sign of weakness. It’s saying we need to keep Sprint out of this courtroom and I think that’s a mistake.”

Glenn Manishin of Duane Morris said Sprint’s effect on DOJ’s case against AT&T is hard to predict. “There’s a little bit of emperor’s new clothes [dynamic] going on,” he said. “Sprint points out some of the holes in the analysis, things that Justice could have pursued. ... On the other hand it’s very clear that if this case proceeds to judgment Sprint’s not going to be anything other than a potential witness. Its credibility is on the line and could be impeached fairly easily because it’s going to stand to benefit competitively if the merger goes down."

Patrick Pascarella, head of Tucker Ellis’s antitrust practice, said Sprint’s involvement won’t help DOJ. “Sprint knows that Justice’s biggest problem is Sprint -- this behemoth in the market gaining share and getting customers,” Pascarella said. Sprint’s involvement also could mean the case will drag out over a longer period of time, he said. “I also think Sprint’s involvement could make it, possibly, more difficult to settle this case.” Pascarella, a former AT&T executive, said asking for dismissal was not an error on the company’s part. “I think a motion to dismiss is always a good idea when the complaint you're looking at is very weak,” he said.

Sprint also “potentially adds some firepower to DOJ,” Grunes said. “Between AT&T/T-Mobile’s economists and Sprint’s economists you have the rock stars of antitrust economists.” Grunes said Sprint’s industry experience could be useful to the court where the central issue is likely to be merger efficiencies. Sprint’s complaint is largely consistent with DOJ’s arguments, he said. “Sprint also alleges higher prices as a result of this merger, but it alleges that it, Sprint, is not better off by higher prices because it’s being excluded from key inputs -- it'll have its costs raised and it will lose market share."

"Sprint’s complaint is full of novel, interesting stuff but I don’t think it goes anywhere,” said Geoffrey Manne, lecturer at Lewis & Clark Law School. “It highlights how sort of thin DOJ’s complaint is.”

Panelists agreed that a key question will be whether the deal creates the efficiencies projected by AT&T and T-Mobile and how those savings will benefit consumers. Rick Brunell, director of legal advocacy for the American Antitrust Institute, said the question doesn’t offer any easy answers. “If you look at the filings at the FCC and the engineering stuff that’s going back and forth, it’s somewhat impenetrable to non-engineers,” Brunell said. AT&T argues “this is sort of one plus one equals three in terms of spectrum, but there’s a huge debate over whether that’s three or whether it’s 2.1, and whether there are diseconomies to some extent."

"This is going to be a technically complicated, economically complicated story,” Grunes said.

Manishin said AT&T’s arguments in the lower court could set the groundwork for a challenge in the U.S. Court of Appeals for the D.C. Circuit. “I would not want to fight this at the court of appeals if I were Justice,” he said. “It’s so easy as a plaintiff to get reversed by the D.C. Circuit on grounds that you may have thought of but hadn’t articulated ... precisely.” An appeal could become a landmark case in merger law, however decided, he said. “It’s a clash of world views,” Manishin said. “The established law is in DOJ’s favor, but the law to come may favor the defendant, and who knows what the law is going to be."

House Republicans urged a settlement on the AT&T/T-Mobile deal, in letters dated Sept. 22. Attorney General Eric Holder and FCC Chairman Julius Genachowski were written by Rep. John Shimkus, R-Ill., and five other Commerce Committee Republicans, who said hard economic times means “we need to be especially thoughtful in our approach to private sector investments and potential job growth as we can ill afford to lose valuable opportunities when they arise.” Any conditions on the AT&T/T-Mobile deal “should only impact the parties to the transaction and be narrowly tailored to address any specific harm directly attributable to the transaction,” they added. Rep. Todd Young, R-Ind., had similar sentiments in a separate letter to Holder and Genachowski. He asked why the Justice Department decided to block the deal “before giving AT&T and T-Mobile USA the opportunity to discuss the merger and address the DOJ’s concerns."

Meanwhile nine state commissioners of agriculture asked the FCC to approve the AT&T/T-Mobile deal in separate filings that stressed the importance of broadband buildout to rural America. “Farming today is reliant on modern technology more than ever. From advanced tools in the field to detailed business plans that effectively distribute products, farming has truly become a high-demand field for technology,” said Julius Johnson, commissioner of the Tennessee Department of Agriculture (http://xrl.us/bmem3s). “However, wireless coverage and mobile broadband availability are still lacking for many of our rural farmers. This lack of access limits growth for farmers who would otherwise benefit from advanced wireless technology.” Officials from South Carolina, Georgia, Alabama, Florida, Arkansas, Texas, Iowa and South Dakota also sent letters to the commission.