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States' Support for DoJ Suit Could Tilt Scale Against AT&T

States' Support for DoJ Suit Could Tilt Scale Against AT&T

Attorneys general from seven states have taken sides with the U.S. Department of Justice's move to block AT&T's proposed buyout of T-Mobile on antitrust grounds. While those AGs have demonstrated an agreement with critics that the purchase would hinder competition, officials in other states believe the merger would improve services and create jobs.

By Rachelle Dragani E-Commerce Times ECT News Network
09/19/11 10:45 AM PT

The U.S. Department of Justice received the support of seven state attorneys general Friday in its opposition to the proposed merger between AT&T and T-Mobile.

The merger, announced in March and now facing an antitrust lawsuit from the DoJ, would combine the second and fourth largest wireless providers in the nation. It's a move that AT&T claims would increase capacity to expand its 4G LTE technology and create jobs.

Opponents such as consumer advocacy groups and other wireless providers like Sprint, however, are vehemently opposed to the merger, claiming it would stifle competition and lead to poorer service. Sprint has questioned AT&T's claims that jobs would be created. A leaked AT&T memo also cast doubt on claims that AT&T needed T-Mobile's infrastructure to expand its service, suggesting that AT&T was going after T-Mobile simply to keep it out of the hands of Sprint, a company with which T-Mobile was also in acquisition talks.

Now, the US$39 billion merger faces a lawsuit from the DOJ on antitrust claims, and a bipartisan crew of seven states has joined the fight. Attorneys general from New York, Washington, California, Illinois, Massachusetts, Ohio and Pennsylvania are joining the claim that the merger is anticompetitive and would kill innovation.

The DoJ did not respond to the E-Commerce Times' requests for further comment on the suit.

Vested Interest for States

It's not uncommon for state attorneys general to join federal antitrust suits.

"States like New York have a vested public interest on the effect the merger would have on wireless competition, economic growth and technological innovation within the state," Craig Delsack, lawyer specializing in business, technology and media, told the E-Commerce Times.

State governments want to see competition and innovation flourish, so it's natural that a lawsuit with antitrust concerns would spark the interest of attorneys generals hoping to keep their states consumer- and business-friendly.

California State Attorney General Kamala D. Harris said the merger would hinder consumer choice, contrary to California's goal of creating a "vibrant technology sector."

In a troubled economy crippled with unemployment, however, other states believe AT&T's promise that the merger would create jobs and have offered public support to the acquisition.

"It is not unusual for state attorneys general to participate in DoJ merger review proceedings or court filings. At the same time, we appreciate that 11 state attorneys general and hundreds of other local, state and federal officials are publicly supportive of our merger," an AT&T spokesperson told the E-Commerce Times in a statement provided by company spokesperson Saman Asheer.

The spokesperson noted that other public and federal officials offered public support for the merger, including attorneys general from Alabama, Arkansas, Georgia, Kentucky, Michigan, Mississippi, North Dakota, South Dakota, Utah, West Virginia and Wyoming.

Arkansas Attorney General Dustin McDaniel said the bipartisan group argued for the merger because of its economic benefits and to provide AT&T with the spectrum capacity it claims it needs for higher quality, speedier service and the economic benefits, including job creation.

A group of Democratic members of Congress -- many of whom received campaign contributions from AT&T -- similarly wrote President Obama last week in support of the merger on the grounds it would almost immediately create jobs. Their letter reminded the president of his speech to Congress asking to pass his recently proposed jobs bill, stating this merger could create just the type of employment he desires.

States Support Mostly Symbolic

Plenty of lawmakers and policy advisers have weighed in on the merger, and public opinions from high-profile leaders give certain arguments more weight and could lead to either side giving up more in a settlement.

"The states don't have the power to block an approved DoJ deal -- it is more that their arguments can hopefully persuade the federal regulators and get better concessions from AT&T in their attempt to close a merger deal.

Of course, a state could file its own antitrust lawsuit or come up with an argument that that the DoJ didn't put together, but since antitrust suits are common, that is unlikely.

"The states joining might have an impact on AT&T's defense if a state proposes a rational argument that the DOJ didn't think of. But this merger is not de-novo, there is a plethora of anti-competitive arguments [and] challenges that AT&T would have to overcome," said Delsack.

A court date is still not set for the trial. AT&T is pushing for a date in January, while the U.S. is hoping to hold off until March. On Sept. 21, a hearing will be held to discuss settlement options.


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