Seven States Join the DOJ's Suit to Stop the At&T Merger: Some Observations by Bert Foer

Sep 23 2011

In mid-September, the original complaint filed by the Department of Justice aimed at stopping ATT’s proposed $39 billion acquisition of T-Mobile USA in the mobile wireless telecommunications market was amended by adding seven new plaintiffs, the states of New York, Washington, California, Illinois, Massachusetts, Ohio and Pennsylvania (representing nearly a third of the nation). To those who ask, so what? I offer the following observations.

The states typically have their own antitrust laws that are similar to the federal laws, and they have played an active role in antitrust enforcement for many years. Most often, the states, acting through their elected attorneys general, pursue antitrust claims that only or primarily affect their own citizens. But federal legislation permits the states to bring cases under the federal antitrust laws to protect their citizens and in the 1980’s the Supreme Court recognized the authority of the states to act against anticompetitive mergers, even if the federal government also takes a position. Thus, the states are an integral part of merger enforcement and the intervention of the seven states has a substantial tradition behind it. Indeed, the federal enforcers and the states have well-established protocols for cooperating and avoiding duplication of effort and divergence in enforcement positions.

Over the years, the states have tended to be bipartisan in their antitrust efforts. For example, in the current ATT case, Pennsylvania, Ohio, and Washington have Republican Attorneys General, while New York, California, Illinois, and Massachusetts are under Democratic control. These seven states are among the largest in the country and tend to devote the most resources to antitrust enforcement. With states generally strapped for resources, signing onto a complaint in a salient national case requires a realistic commitment of lawyers, economists, and money that few states are in a position to make. The plaintiff states will all participate in preparation for trial and are expected to play an active role. I understand that a few additional states participated in the coordinated investigation leading up to the complaint, but declined to become plaintiffs for resource reasons and because one group of attorneys general had already sent letters to the FCC supporting the merger early on, without benefit of the states’ joint investigation.

Why would states want to intervene, since the U.S. is already carrying the ball? This gives them a seat at the table, an ability to help shape the investigatory and trial strategy, to provide their considerable expertise in utility regulation matters and to expound on local effects of the merger, to expand the opposition to a vigorous and well-represented ATT in a landmark case that has already become a political as well as judicial battle, and, perhaps most importantly, to play a role in any negotiations that might occur during the course of or at the conclusion of the case. With the Justice Department budget also constrained, the states can add their resources to make sure the public interest will be well-served.

The wireless market is important and growing. If the merger goes through, it will bring the number of national providers from four to three, and, according to a private complaint filed recently by Sprint-Nextel, will most likely lead to only two surviving companies, ATT and Verizon. Not only the residents of the plaintiff states but the states themselves as purchasers will thereby be limited in their choices of services and subjected to likely price increases, providing ample justification for attorneys general to apply their own resources to protect the general welfare and economy of their states. This is merely the latest example of important state-federal cooperation to make sure that the antitrust laws, including the merger control laws, are effectively enforced.