Print 29 comment(s) - last by bah12.. on Sep 2 at 10:04 AM

  (Source: BGR)
Company is stubbornly refusing to back down despite top lawyers saying it has little chance at winning

As Don Schlitz famously wrote:
You got to know when to hold 'em, know when to fold 'em,
Know when to walk away, know when to run.
You never count your money when you're sittin' at the table,
There'll be time enough for countin' when the dealin's done.
In the wake of the U.S. Department of Justice's landmark decision to halt the resurrection of the American Telephone and Telegraph empire, by blocking AT&T, Inc. (T) from swallowing Deutsche Telekom AG's (ETR:DTE) T-Mobile USA, many say the war is lost for AT&T.

I. Legal Experts Say AT&T's Making Matters Worse for Itself

Howard University law professor Andy Gavil, an expert witness who testified before Congress about the deal, states to Reuters, "Having read the complaint, I don't see a basis for a negotiated settlement."

AT&T is refusing to back down and has challenged the DOJ to try to stop the merger in court.  The company is expected to make an "efficiency" oriented defense of the deal, promoting the improved price, quality, research, and potentially jobs that the deal would bring.

But on the price front, AT&T's contractors are already significantly higher priced that T-Mobile's and court filings reveal that job growth would slow from the deal rather than speed up, as T-Mobile would reduce its hiring rate from current projections.

Furthermore, the strategy of defending a potentially anticompetitive merger on the grounds of improved efficiencies is a legally weak one, says University of Baltimore law school professor Robert Lande.  He states, "Very few efficiency defenses work. They make promises that these efficiencies could happen, but showing that in court is very difficult."

Two veteran Washington antitrust attorneys who spoke to Reuters, but declined to be named because of their firms involvement in the pending case said the situation was looking bleak for AT&T.  They say it will likely either lose in court or be forced to walk away from the merger.

II. A Compulsive Gamble?

It's easy to see why AT&T wouldn't want to walk away (or run away, perhaps) from the deal -- if the merger falls through AT&T still owes T-Mobile $3B USD in cash, $2B USD in spectrum, and $1B in roaming coverage.  However, the question becomes whether AT&T is gambling with its financial fortunes, and how long Deutsche Telekom will be willing to wait for a sale.

Whoever loses the case would likely appeal, which could stretch the court decision out over a long period.  AT&T has filed for an expedited case, but there's no guarantees its request will be accepted.

States Maury Mechanick, a telecommunications attorney at law firm White & Case, "You could have a situation here where the combined litigation and regulatory process could extend for several months or years. From a business practicality perspective, is that a delay that AT&T and T-Mobile can tolerate? That's ultimately a judgment that they will have to make."

In that regard the nightmare for AT&T may have just begun.  The verdict seems relatively unanimous -- AT&T is making a relatively bad situation worse by refusing to swallow its pride and cut its losses.

Of course some think AT&T is merely playing a game of chicken and will sagely back down at the last minute.

David Smutny, an antitrust lawyer with Orrick, Herrington & Sutcliffe offers, "A preliminary question is whether AT&T will go to court. It's certainly not uncommon for companies to look at this and decide that the game isn't worth the gamble."

III.  Judge Appointed in Case Blocked Another Past Merger During Bush Era
The case "USA v. AT&T Inc et al, U.S. District Court for the District of Columbia, No. 11-cv-1560" will likely be a circus show -- should AT&T persist in its bid to push the merger -- according to experts.  They predict that both sides will bring in workers, consumers, economists, expert witnesses, competitors, and/or state regulators.

Professor Lande says the case is an important business decision for the Obama administration, commenting, "This will be the Obama administration's line in the sand. This will be their signature antitrust event."

But lest one associate the action with the Democratic party, legal experts point out that of the two other major telecommunications actions to prevent mergers in recent years, one was brought by the Republican President George W. Bush's Justice Department, while the other was brought by Democratic President Bill Clinton's DOJ.

The 1999 Clinton-era case saw an attempt by Verizon Communications, Inc. (VZ) subsidiary MCI, Inc. to purchase Sprint Nextel Corp. (S) (at the time Sprint) blocked.  The 2001 Bush-era case saw EchoStar Communications Corp's (SATS) deal to buy Hughes Electronic Corp's DirecTV was blocked (though in 2011 EchoStar did buy part of Hughes Electronics, sans the DirectTV holdings, under the Obama administration's watch).

The AT&T deal has detractors on both sides of the political aisle.  It also has both Democratic and Republican supporters in the House and Senate -- primarily federal politicians whose campaigns it donated to.

The 2001 Echostar case's judge, U.S. District Judge Ellen Segal Huvelle, will preside over the new case.  If her early statements are any indication, that's bad news for AT&T -- she already blasted AT&T and T-Mobile for a "sluggish" response to the government request for information.

As we said, for AT&T, the nightmare be just beginning.

Comments     Threshold

This article is over a month old, voting and posting comments is disabled

Glad to Hear This
By The Insolent One on 9/1/2011 2:22:43 PM , Rating: 4
I'm really glad that AT&T is finally being told that they've lost their mind.

Is there any unbiased person in America that believes that bigger uber-companies are better for us, the consumer?

btw...EchoStar doesn't own or control DirecTV (that's Liberty Media).

RE: Glad to Hear This
By theapparition on 9/1/2011 4:23:51 PM , Rating: 4
Is there any unbiased person in America that believes that bigger uber-companies are better for us, the consumer?

Unfortunately, yes. Most people do indeed hold this view, and even worse, actively support it with vigor.

When I was younger, there were many department stores. Now, there are basically a few as the larger ones (read Wal-Mart) used pricing to force many others out of business. This also forced many local shops to close as well. Despite what everyone claims, people love Wal-Mart and support them in droves.

Hardware/Home Improvement stores are the same thing. I could name 10 chain stores in my local area. Now they are all gone, replaced by Home Depot and Lowes. Almost all mom-and-pop type hardware stores are gone.

Face it, Americans love duopolies. They support them. While this does have a tendancy to reduce prices due to the buying power two mega companies have, it also limits selection. Companies can be made or broke based on if Wal-Mart (for example) carries your product. If not, then you may not have an avenue for sale.

That's what's great about the internet now. It adds another level of competitiveness to these companies.

RE: Glad to Hear This
By Ringold on 9/1/2011 5:03:36 PM , Rating: 2
While this does have a tendancy to reduce prices due to the buying power two mega companies have

That depends -- big time.

WalMart does have Target, dollar stores and other regional competitors that all keep each other on their toes because if one firm had higher prices, there's very little stopping the others to expand and conquer market share.

On the other hand, wireless companies have a massive barrier to entry; spectrum. So when WalMart jacks up prices, someone opens a store across the street and undercuts them. When AT&T, Sprint and Verizon do, companies look on with envy and say "Damn, wish I could get in that market.. If only I had a few billion to drop on spectrum.."

That's what's great about the internet now.

On a related note, it's also whats incredibly awful about the internet.. or at least ISPs. We American's have two pipes in to the home, each one with crappy monopolies feeding them, and Clearwire overloaded coming in OTA. :\

RE: Glad to Hear This
By tayb on 9/1/2011 7:37:32 PM , Rating: 2
Horrible horrible example.

Walmart drove the competition out of the market with purchasing power and low prices. Other competitors couldn't compete because they couldn't match the LOW Walmart prices. Walmart was not buying out cheaper competition nor did they need to buy out cheaper competition. They were the cheaper competition.

AT&T is significantly more expensive than T-Mobile and they compete with the same cellular technology. Most people wouldn't complain if T-Mobile was shutting its doors because they couldn't compete with AT&T's cheap prices but that is definitely not the case here.

Americans will tolerate monopolies or duopolies so long as it benefits them. When companies abuse their market power and buy out competition to make more money we get pissed. AT&T falls in the latter.

RE: Glad to Hear This
By Samus on 9/2/2011 4:23:59 AM , Rating: 1
AT&T makes it so easy to hate AT&T.

RE: Glad to Hear This
By bah12 on 9/2/2011 10:04:48 AM , Rating: 2
Agreed. I would remind everyone that a monopoly is not illegal, rather anti-competitive use of that monopoly is. Is it illegal or even bad for Wal-mart to have a simple mission statement of providing the lowest price for its customers, and using its buying power to meet that clear goal? I say no. They aren't buying Mom & Pop they are forcing them to sell the product cheaper. Now it is true that wal-mart may be able to get a better deal on the goods so their retail price is actually below cost for mom & pop, however is that a bad thing? From a consumer/competitive perspective, no it isn't.

RE: Glad to Hear This
By renosablast on 9/1/2011 7:03:57 PM , Rating: 2
In my area, AT&T a couple of years ago started charging customers on their land line accounts for NOT having a long distance plan -- even if you have no need for one whatsoever due to unlimited long distance on another cell phone account. Now they just announced another 'fee' if you do not make long distance calls with them. To avoid the fee, simply make enough long distance calls (with them) to offset the fee. In other words, you might as well use us as we are going to charge you anyway. What a blatant money-grab.
And the bought-and-paid-for "regulators" sit on their hands and let them get away with it. Like it says in the above article, the only congressmen who seem to be 'supporting' the merger are those who have received campaign funds from AT&T. What a blatant conflict of interest.

Not only should this mereger be blocked, they should be forced back to their previous level after the break-up of their monopoly the first time years ago.

They have now proven twice in a row that they are unethical and anti-consumer.

RE: Glad to Hear This
By bill4 on 9/2/2011 12:04:12 AM , Rating: 2
It's funny these liberals bashing "mega corporations" when they support growing a government that dwarfs every corporation on earth combined, literally. And is far more abusive and has far more power under Obama. But the thing Americans bitch the most about is the cell phone companies.

That's Americans for you.

So sorry to hear it
By bug77 on 9/1/2011 3:26:38 PM , Rating: 2
If I were a judge and AT&T came to me explaining how a merger will result in 96k more jobs, I would rule against them on the spot. On the grounds of "you're doing it wrong".

RE: So sorry to hear it
By FITCamaro on 9/1/11, Rating: -1
RE: So sorry to hear it
By FITCamaro on 9/1/2011 4:44:59 PM , Rating: 1
Bear in mind by the way that I hate AT&T.

RE: So sorry to hear it
By Shig on 9/1/2011 4:51:08 PM , Rating: 2
Any intelligent economist will tell you that access to cheap bandwidth will be the economic driver of the 21st century, as oil was to the 20th century.

The greatest driver of growth for our country would be to block this, because it would 100% guarentee higher prices and less infrastructure.

A judge working in a broken patent system ruled by corporations has to read deeper these days imo, it is a tricky spot. I mean these judge rulings are shaping trillion dollar economies and multi-billion dollar businesses, talk about power.

RE: So sorry to hear it
By Shig on 9/1/2011 4:52:48 PM , Rating: 2

Google is creating another silicon valley in Kansas City, gigabit fiber. Almost every piece of fiber has already been bid on.

RE: So sorry to hear it
By bug77 on 9/1/2011 6:00:30 PM , Rating: 5
Is there competition in the market?

When you're dealing with an oligopoly, the answer to the above is actually "no".

All I can say is....
By Cheesew1z69 on 9/1/2011 1:48:57 PM , Rating: 1

RE: All I can say is....
By quiksilvr on 9/1/2011 2:30:41 PM , Rating: 2
Indeed. We simply cannot have a GSM monopoly in America.

RE: All I can say is....
By DanNeely on 9/1/2011 2:42:38 PM , Rating: 2
With ATT, VZW, Sprint(rumored), and the larger second tier carriers all converging on LTE as the 4g standard (and LTEs ability to carry voice data) we need a better argument than this because it's only a matter of time until GSM vs CDMA won't matter because the competing 2/3g networks will be shut down to increase the bandwidth for 4g services.

RE: All I can say is....
By Ringold on 9/1/2011 3:21:43 PM , Rating: 2
Another argument? Okay, ignore the technical details of the technologies the various carriers use, and stick to the wireless phone service anti-trust market aspect. It's already an oligopoly, with a handful of top players. This would see it shrink even further, by one of the most expensive actors taking one of the least expensive out of the game.

Even ATT's own documents show reduced net investment. (Whats the point of taking over another company if not to reap such efficiencies?) That's what monopolists do, relative to more competitive markets; price is set where marginal cost equals marginal revenue, instead of more competitive markets, which get priced closer to marginal cost. So you get higher prices, with less/inferior service. Which is why they're generally illegal in the first place.

That should be all the argument any sane person needs, but of course sanity doesn't sway politicians, money does.

RE: All I can say is....
By Uncle on 9/1/2011 2:35:03 PM , Rating: 2
"AT&T is refusing to back down and has challenged the DOJ to try to stop the merger in court." Being number 1 or wanting to,goes to your head.

Sick of all the errors.
By arsenik on 9/1/2011 3:53:46 PM , Rating: 2
It seems every article written by Jason Mick is the equivalent of a 14-year old's writing capability. I'm sick of having to read all of the grammatical errors. How does " The company is expect to make an "efficiency" oriented defense" pass as acceptable?

I never post on comments, but this is something that happens over and over with his stories. Is there any way to just simply block the stories he writes from showing up in my web browser?

RE: Sick of all the errors.
By cjohnson2136 on 9/1/2011 4:14:55 PM , Rating: 2
How about you just go to another tech website. Problem solved.

RE: Sick of all the errors.
By tayb on 9/1/2011 7:43:12 PM , Rating: 3
And the erosion of proper grammar and coherent sentences continues. I don't make a living as a journalist but I proofread emails I send to co-workers or family members more than the authors of some of these articles do. Simple reading the article aloud to yourself before posting would eliminate 50% of the errors I see.

It really does look unprofessional and invites a whole slew of questions about journalistic credibility. If you do not care enough to proofread your public article am I supposed to believe you thoroughly researched the topic and/or sources as well? Doubtful.

I'll read what you've written but if it is full of grammar mistakes I'll take your "facts" with a grain of salt and ignore your opinions.

I like how Mick references ATT"s high fees
By bill4 on 9/1/2011 11:57:34 PM , Rating: 2
Despite that like everybody in the media, he's a Verizon fanboy. The company who's fees dwarf ATT's. Example: Dual core Atrix on ATT: $29, single core old phones on Verizon: As much as 299. That's 10X as much Verizon fees.

And Verizon doesnt offer a lower priced data plan as ATT does either. Funny how Mick can figure out that ATT removed it's lower priced texting plans, but ignores that Verizon charges 30 for it's cheapest smartphone data plan while ATT=15.

By nocturne_81 on 9/2/2011 3:41:07 AM , Rating: 2
Actually, he typically rails along on the side of Sprint lately, as they just seem the last to implement the new draconian contract standards (which the FCC should be keeping a closer eye on).

By mcnabney on 9/2/2011 9:52:54 AM , Rating: 2
You are comparing a year+ old phone on AT&T with a device that hasn't even been launched yet?

AT&T didn't help themselves by lying to regulators.
By danjw1 on 9/1/2011 6:35:51 PM , Rating: 2
AT&T said that this merger would speed up the rollout of LTE on their network. But, then it was leaked that they were actually slowing the rollout as an excuse for acquirement T-Mobile. They also lied about the creation of additional jobs. They aren't really going to keep T-Mobile running as a subsidiary, they are going to eat their customers and move them to their own network. Thus they get efficiencies of scale, but they will not be creating jobs, they will be cutting them. The truth is that consumers will be hurt by the merger.

Sprint says that if this goes through, they will not be able to compete. So we will be down to two national carriers that both have higher pricing then either of the two other competitors in the market.

By mcnabney on 9/2/2011 9:57:41 AM , Rating: 2
We already have two 'premium' carriers - AT&T + Verizon

I understand paying 'a bit' more for Verizon coverage, but since the Apple monopoly on AT&T ended I don't see a reason to pay more for them.

Then you have Sprint, which is almost as good as AT&T, but a lot cheaper. They are also still offering unlimited data (it won't last), which is a plus.

Last comes T-Mobile which is just cheap. Their network isn't huge, but they did a good job with HSPA+ (LTE will be a long time coming for them). Losing them in the market WILL NOT help with the pricing and overall competitiveness.

That, and their spokegirl is a lot cuter than Alltel's Chad.

By nocturne_81 on 9/2/2011 3:38:51 AM , Rating: 2
This is really getting annoying, especially from this specific author.. don't you guys have a standard print-production process, with an editor at the very least..?

"AT&T is refusing to back down and has challenged the DOJ to try to stop the merger in court."

The wording exclaims the opposite of the obvious facts. Instead, it should read:

"AT&T is refusing to back down, and has challenged the DOJ on it's efforts to try to stop the merger in court."

Keep in mind that many idiots read your articles every day, and take your poorly conceived and mistyped notions as fact.

RE: Grammar!!!
By joex444 on 9/2/2011 10:02:57 AM , Rating: 2
Agreed, that is written poorly and would be better the way you put it.

Similarly, "The company is expected to make an 'efficiency' oriented defense of the deal, promoting the improved price, quality, research, and potentially jobs that the deal would bring." Seems to me that "potentially" is not separated from the actual object (jobs) in the correct way. That is, with a quick read one could decide that "potentially job" is a kind of thing they will bring to market. We don't want "potentially jobs," we want actual jobs.

Regardless, I believe Jason Mick is Anandtech's psuedonym for the team of semi-intelligent monkeys bashing at typewriters.

"This is from the It's a science website." -- Rush Limbaugh

Copyright 2016 DailyTech LLC. - RSS Feed | Advertise | About Us | Ethics | FAQ | Terms, Conditions & Privacy Information | Kristopher Kubicki