Neither side in the battle over whether AT&T can merge with T-Mobile USA has a slam dunk case, legal experts said Wednesday.
The Justice Department will have little difficulty making its case that the nation’s four major wireless companies compete at the national level – and not just at the local level as AT&T has argued, American Antitrust Institute’s Director of Legal Advocacy Richard Brunell said in a briefing about the case.
Some of the smaller, regional players like Metro PCS and Leap Wireless are in no position to provide an adequate check on competition despite AT&T's claims to the contrary, Brunell added during a forum hosted by the American Bar Association’s antitrust section.
Last week, U.S. District Court Judge Ellen Huvelle set a Feb. 13 trial date for the Justice Department’s lawsuit. She said she also will consider at an Oct. 24 hearing a motion by AT&T to dismiss a separate lawsuit filed by Sprint to block the deal.
Brunell said AT&T will have difficulty disputing that the smaller players, most of which are focused on offering prepaid wireless service, only make up 7 percent of the national wireless market combined and must rely on the larger carriers to roam nationwide.
“It’s going to be critical for DOJ to establish that competition does occur on a national level and that local and regional carriers like Metro and Leap do not provide the same kind of competitive constraint that T-Mobile and the other big four national carriers provide one another. And on those issues I do think that DOJ is not going to have much difficulty,” Brunell said.
But Patrick Pascarella, a partner with Tucker Ellis & West in Cleveland and a former Clinton administration antitrust official whose firm works for AT&T, argued that the Justice Department’s challenge will be to try to portray T-Mobile as a significant force in the wireless market.
Pascarella said that T-Mobile’s declining market share makes this a stretch. At the same time, he and others noted that AT&T has a strong case in arguing in favor of the efficiencies that will be gained from combining its operations and spectrum holdings with those of T-Mobile, particularly when it comes to improving service in more concentrated markets.
“Justice has its work cut out for it. It will have to make T-Mobile into a more important player than it actually is, while at the same time diminishing the competitive significance of the other players in this highly competitive industry,” Pascarella said. “If they succeed at that, which I think is unlikely, they’re also going to have to minimize what is really a bar-setting merger specific synergy that AT&T will bring to this trial.”
The panel also discussed whether Sprint’s lawsuit to block the merger may end up helping or hurting the Justice Department’s case.
“Sprint potentially adds some firepower to the Justice Department," said Allen Grunes, a partner with Brownstein Hyatt Farber Schreck who is representing one of the merger’s critics, Dish Network.
During an appearance on C-Span’s “The Communicators” program earlier this month, Sprint Senior Vice President for Government Affairs Vonya McCann said she said believes Justice has a strong case and that Sprint filed its lawsuit in order to provide the expertise of a market player to the case.