Today, the U.S. Department of Justice (DOJ) allowed the merger of wireless carriers Sprint and T-Mobile to proceed. DOJ’s proposed remedy patches together the divestiture of limited wireless assets and access conditions in the hope that Dish Network, a satellite TV company, will fully restore the competition lost by the merger. The DOJ’s settlement follows after the Federal Communication Commission gave the nod to the merger with similar conditions and promises by the companies to cap wireless prices.
AAI President Diana Moss stated, “The most effective remedy for this presumptively illegal merger was for the government to block it. Instead, the DOJ has allowed the wireless industry to consolidate to three players.” A June 2018 AAI commentary, Why Sprint-T-Mobile Should be DOA at the DOJ, highlighted that a 4-3 merger is a setup for collusion that will harm consumers through higher prices, lower quality, and little to no innovation.
Under DOJ guidelines, an effective remedy should fully restore competition lost by a merger. In many cases, a merger is too big and harmful to fix through divestitures and other remedies. The Sprint T-Mobile merger fits into this category. “DOJ has failed to make the basic and required showing. The remedy most certainly will not fully restore competition,” Moss said.
Dish Network, a company with no track record in wireless telecommunications, will have the near-impossible task of hitting the ground running to re-inject and maintain the competitive discipline lost by the elimination of a major national market player. But the bar will be higher in an even more concentrated wireless market.
Merger remedies have been the subject of significant scrutiny in the last several years as key sectors have become more concentrated. Pre-Trump era enforcers litigated anticompetitive mergers instead of accepting ineffectual remedies, and they prevailed in blocking those deals in court. Early in its tenure, the Trump Administration’s DOJ heralded the importance of strong remedies in moving to block AT&T-Time Warner.
“We have seen the DOJ slip significantly in its willingness to be a strong enforcer of the U.S. antitrust laws,” explained Moss. In CVS-Aetna, the Division’s remedy to divest Aetna’s Medicare Part D Prescription Drug Plans to WellCare Health was criticized by AAI and others as ineffective. That remedy is currently the subject of a Tunney Act proceeding in federal district court. “Consumers will suffer dearly for these DOJ decisions,” Moss added.
DOJ’s capitulation in Sprint-T-Mobile comes despite strong evidence from past enforcement actions and other countries’ experience in wireless. This evidence reinforces the anticompetitive and anti-consumer effects of highly concentrative 4-3 mergers.
Moss said, “We said it a year ago, and we’ll say it again: the Sprint-T-Mobile merger is presumptively illegal. We look forward to the judicial review of this settlement, which assuredly is not in the public interest, and we renew our gratitude to State enforcers who are willing to stand up for consumers and fill the void created by the federal government,” she concluded.