Question;

Review the following article:

Moritz, S. (2011, December 19). At&t pulls $39 billionT-Mobile bid after U.S. opposition. Bloomberg BusinessWeek, Bloomberg LP. Retrieved May 7, 2014 from http://www.businessweek.com/news/2011-12-19/at-t-pulls-39-billion-t-mobile-bid-after-u-s-opposition.html

In 2011, AT&T attempted a merger with T-Mobile. The Justice Department sued under the act, claiming that the merger would constitute a violation of the antitrust laws. In 2012, AT&T dropped its attempt at the acquisition.

Make sure you:

  1. Discuss whether or not that if AT&T had merged with T-Mobile, would the merger have violated antitrust laws? Why or why not?
  2. Remember not to be unduly influenced by the Justice Department’s stance on the issue. Use your own analysis to reach a conclusion.

Here are a few articles that talk about the AT&T proposed merger with T-Mobile. There are dozens of articles online. Make sure that the ones you use are not blogs and not Wikipedia. These are just to give you an overview and get you started!

Reardon, M. (2011, December 19). AT&T ditches T-Mobile merger: So what’s it mean for you? CBS Interactive Inc. Retrieved May 7, 2014, from http://news.cnet.com/8301-30686_3-57345380-266/at-t-ditches-t-mobile-merger-so-whats-it-mean-for-you/

Daw, D. & Sullivan, M. (2011, December 19). AT&T, T-Mobile merger collapse a victory for consumers. PC World. Retrieved May 7, 2014, from http://www.pcworld.com/article/246636/atandt_t_mobile_merger_collapse_a_victory_for_consumers.html

Goldman, D. (2011, December 19). AT&T kills $39 billion bid for T-Mobile. CNNMoneyTech. Cable News Network. Retrieved May 7, 2014, from http://money.cnn.com/2011/12/19/technology/att_tmobile_dead/index.htm

Here are a couple of youtube videos on the proposed merger:

How will consumers fare in T-Mobile, AT&T merger? (2011, March 22). PBS NewsHour. Retrieved May 7, 2014, from http://www.youtube.com/watch?v=-9nXwi0VWTw (this is about 9 minutes in length)

AT&T’s merger with T-Mobile may cost tower operators. (2012, March 23). Bloomberg News. Retrieved May 7, 2014, from http://www.youtube.com/watch?v=re1B3Uy4ZqA

Here is a recent report on another possible merger. Keep this one on your radar!

Nightly Business Report: AT&T & DirecTV merger? (2014, May 2). Nightly Business Report, CNBC. Retrieved May 7, 2014, from http://www.youtube.com/watch?v=UgPucb7F1V4

Answer;

Case Review

On August 2011, the Justice Department declined to approve the move of the AT&T to acquire T-Mobile. The AT&T was willing $39 billion takeover with an intention of establishing the largest cell phone service provider in the United States. The company wished to acquire cellular airwaves of the T-Mobile to offer faster data and decongest network for iPhone devices. The company put frantic effort in to win the regulatory approval. The concession involved disposing more than 25 percent of its spectrum and customers of T-Mobile to Leap Wireless. The deal also included establishing agreements to share-network. However, the Federal Communication Commission portrayed its strong intention of opposing the deal that prompted AT&T to withdraw its intention to seek approval from the agency.

The company sought a possible delay for of the lawsuit by the Justice Department. Further Both the Federal Communications Commission and the Justice Department invoked the antitrust invoked the antitrust law to block the deal. The acting assistant attorney general of the Justice Department for the antitrust stated that the take over deal would have reduced innovation and invoked higher prices to wireless consumers.

A further review of the deal revealed that the company would have a established a duopoly with Verizon that would have helped the company to acquire three quarters of the market. The terms of merger included a deal where the AT&T the T-Mobile $ 4 billion as a break-up fee. Additionally, AT&T assorted lawmakers, local partners, and corporate customer to promote exclusive merger benefits (Merced, 2011).

Overview of Antitrust law

The United States lawmaker considered to hold the deal arguing that it would be a disaster in terms of competition if two wireless giants would merge. The government held its position to oppose the deal. However, the AT&T became aggressive by becoming openly hostile towards the F.C.C. The concerning question regarding the case is whether the merger would have violate anti trust laws.

In essence, the antitrust law includes the enacted Sherman Act and the Clayton Act. The Congress enacted the antitrust law to protect consumers from exploitation of unfair competition. Therefore, the law provides that a market should possess strong business incentives, maintain quality, and maintaining low price to protect consumers. Overall, the law was invoked to establish consumer benefits and promote fair competition. The enactment of the Clayton Act in 1914 filled a gap left void by the Sherman Act.

The Sherman Act placed cartels and monopolies forgetting that some merger creates one business entity. Section 7 of the Clayton Act provides that mergers and acquisition are illegal where they intend to lessen completion substantially or intend to create monopoly. The top priority of antitrust is to prohibit preventing horizontal merger. According to the Hart-Scott Rodino Act gives the antitrust agencies rights to examine the proposed mergers. The Act aims at preventing possible formation of anticompetitive merger (Areeda & Hovenkamp, 2011).

The case involving AT&T take over, reveals that the F.C.C. reveals that the merger would have violated the antitrust laws. The deal would have possibly formed a monopoly in the United States since it was termed as the biggest acquisition ever in wireless sector. Reviewing the details, the two companies are regarded as the market leaders in the wireless market. The AT&T Inc. is the second largest mobile service operator in the United States. Additionally, it is regarded as the 21st company around the globe in terms of market value. It also ranks among the 20 biggest telecom operator around the globe serving over 250 million customers (AT&T, 2014).

A review on T-Mobile reveals that the company is an international company serving n the European, North America, and Latin America. The company has recorded exclusive market success since it is regarded as the tenth-largest mobile phone operator in the world. It has posed significant competition to world mobile operators giants such as the Airtel, Voadafone, and Telefionca (T-MOBILE USA, INC, 2014).

In the United States, the company has established exclusive success where it serving over 45 million customers. Therefore, these two large companies have a capacity of attaining substantial market share on their own. A take over by the AT&T would then make the process of grabbing a potential market share in the United States much more easily. The reviews prove that the two companies are one of the leading wireless service providers in the United States. Therefore, there is high probability that the AT&T was planning a larger merger with an intention of lessening completion in the wireless industry. Despite the fact that the company informed the F.C.C. on its intention to enter into the merger deal, it is a fact that the established big company would have substantially grabbed a big market share in the wireless industry.

The companies have already grabbed substantial number of wireless customer in the domestic market implying that the established company would have attracted many more customers. Consequently, smaller wireless companies would face a stiff competition against the market leader that has grabbed a big percentage of the market. AT&T and T-Mobile are direct competitors implying that the merger would have been horizontal as it was the case with in essence, the commission proved that that the merger would create anti-competitive effect in the end. There is also a high probability that the established company would have developed in to a marker power. The federal government stipulates that establishing a market power as provided by the Hart- Scott Rodino Antitrust Acts (Areeda & Hovenkamp, 2011).

As it was the case with United States V, Philadelphia National Bank, 374 U.S. 321 (1963), the U.S. Supreme Court declined to approve the appeal of a state bank and a national bank against the government of United States for failing to approve the merger deal. The national bank was the second largest commercial bank in the Philadelphia. The state bank was the third largest in Philadelphia. Therefore, among the 42 banks in the metropolitan area of Philadelphia, the two banks had established a substantial market share.

The board of governors of the banks agreed to merge their entities. the attorney general, the federal Deposit Insurance Corporation, and the Federal Reserve System observed that the take over would have lessened competition in Philadelphia. The United States government declined to approve the consolidation proposal on the ground that the deal would have violated section 7 of the Claytons Act (Schlossberg & American Bar Association, 2008).

The case resembles the AT&T take over case. It is apparent that both consolidations would lessen competition towards the affected market. There is credible evidence that when two leading companies merge there is a high probability that the market leader will be knocked off. it would even imply that companies acquiring smaller market share would face serious challenges in meeting. If the federal agency establishes that a merger deal intends to establish unfair competition, then it has the rights to oppose such a proposal

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