In determining if the AT&T and T-Mobile merger would have violated antitrust laws
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In determining if the AT&T and T-Mobile merger would have violated antitrust laws or not, it is important to first recognize what the antitrust laws are regarding mergers of corporations. According to Section 7 of the Clayton Act, an acquisition is prohibited if it is for the purpose of creating a monopoly and eliminating competition. Acquisitions are allowed if the purpose of the acquisition is not to lessen the competition and create a monopoly. Now with that being said, the real question to ask is what was the real purpose behind the acquisition of T-Mobile by AT&T? Was it to eliminate competition? Or was there a bigger, more pressing reason that was driving the merger?
At first glance, one may jump to an assumption that AT&T must have wanted to acquire T-Mobile to eliminate competition because they would gain customers and have one less competitor with lower rates than them to compete against in the market. This would make it easier for AT&T to keep their prices higher. In fact, many believed this would be exactly what would happen if the merger occurred. “Had AT&T acquired T-Mobile, consumers in the wireless marketplace would have faced higher prices and reduced innovation” (Merced, 2011, para. 11). However, this may not have been the case. “In an effort to sell the deal to regulators and the public, AT&T vowed to honor the T-Mobile service plan prices after the merger” (Moritz, 2011, para. 12). If AT&T was interested only in eliminating competition in order to create and monopoly to keep prices high, why would they agree to keep the T-Mobile prices for their customers after the acquisition? It does not appear that this deal was about the prices or eliminating competition at all. It appears that AT&T was really interested in acquiring T-Mobile for their airwaves. “The company wanted T-Mobile’s cellular airwaves, or spectrum, to relieve its congested network and offer faster service for data-hungry devices like the iPhone” (Merced, 2011, para 2).
After analyzing this situation, I believe that since AT&T was not trying to eliminate competition or create a monopoly as their reason behind the acquisition of T-Mobile, they were not in violation of antitrust laws. I cannot say that down the road this merger would not have eventually had an impact on the competition in the cellular network business at some point, however as far as antitrust laws go, I do not believe that AT&T and T-Mobile were in violation in this merger.
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Antitrust laws are federal regulations placed on businesses to ensure that the U.S. economy remains fluid and free of monopolies (Seaquist, 2012). If At&T had merged with T-Mobil, the merger would have not violated the antitrust laws due to the merger would have continued to oligopoly market structure that cell phone carriers currently operate in, not create a monopoly. “Generally prohibits the acquisition of one company’s stock by another company when ‘the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly’” (Seaquist, 2012). The merger would have been a huge change to the way cell companies due to business, due to both phone carriers being dominant in the market. At&T’s CEO believed that with the merger it would help the improvement of service being offered, ad at the same time it would speed up investment in faster networks and drive wireless expansion in rural areas. The merger would have added T-Mobil’s 33.7 million customers to At&t’s 100.7 million customers, in comparison to 107.7 Verizon Wireless’s million customers.
It’s understandable why the Justice Department sued to stop this merger, I believe that the merger would both had been a positive and a negative one. With these two well-known companies merging together would allow for higher competition and would allow investors to want to invest, due to having a solid corporation. On the other hand, T-Mobil wireless plans are $15 to $50 cheaper than comparable AT&T plans, according to an analysis by Consumer Reports, making many of their customers’ looking somewhere else for a more economical plan.