Archives For merger guidelines

Why Is Sprint’s Stock Surging Upon the Announcement of the DOJ’s Challenge to the Proposed AT&T / T-Mobile Merger?

Josh Wright —  31 August 2011

Basic economic theory underlies the conventional antitrust wisdom that if a merger makes the merging party a more effective competitorby lowering its costs, rivals facing this more effective competitor post-merger are made worse off, but consumers benefit.  On the other hand, if a merger is likely to result in collusion or a unilateral price increase, the rival firm is made better off while consumers suffer.  In the latter case — the one the DOJ complaint asserts we are experiencing with respect to the proposed AT&T merger — marketwide coordination or reduction of competition resulting in higher prices makes the non-merging rival better off.

Basic economic theory thus generates a set of clear testable implications for the DOJ’s theory of the transaction:

  • (1) events that the merger more likely should have a negative impact upon non-merging rivals’ stock prices when the merger is procompetitive (reflecting the likelihood the firm will face a more efficient, lower-cost rival in the future);
  • (2) events that make a merger less likely should have a positive impact upon non-merging rivals’ stock prices when the merger is procompetitive (reflecting the reduced likelihood that the merger will face the more efficient competitor in the future)
  • (3) by similar economic logic, events that make an anticompetitive merger more likely to occur should result in increase non-merging rivals’ stock prices (who will benefit from higher market prices) while events that make an anticompetitive merger less likely should decrease non-merging rivals’ stock prices.

The DOJ complaint clearly stakes out its position that the merger will be anticompetitive, and result in higher market prices.  Paragraph 36 of the DOJ’s complaint focuses upon potential post-merger coordination:

The substantial increase in concentration that would result from this merger, and the reduction in the number of nationwide providers from four to three, likely will lead to lessened competition due to an enhanced risk of anticompetitive coordination. … Any anti competitive coordination at a national level would result in higher nationwide prices (or other nationwide harm) by the remaining national providers, Verizon, Sprint, and the merged entity. Such harm would affect consumers all across the nation, including those in rural areas with limited T-Mobile presence.

Paragraph 37 of the DOJ complaint turns to unilateral effects:

The proposed merger likely would lessen competition through elimination of head-to-head competition between AT&T and T-Mobile. … The proposed merger would, therefore, likely eliminate important competition between AT&T and T-Mobile.

If the DOJ’s allegations are correct, one would expect the market price for prominent non-merging rivals such as Sprint to fall upon today’s announcement that the DOJ will challenge the merger.   This is because the announcement decreases the likelihood that an anticompetitive merger will occur, and thus deprives the opportunity for non-merging rivals to enjoy the increased market prices and margins that would follow from post-merger collusion or unilateral price increases.

The NY Times Dealbook headline suggests otherwise: “Sprint Shares Surge on AT&T Setback.”  Geoff highlighted several of the DOJ’s claims in the report.  As the case unfolds, I think an important question to ask is how many of those allegations are consistent with the following data showing the market reactions of Sprint and Clearwire stock prices today.   I’ve included Clearwire both because Sprint owns a majority share in it and because of its recent announcement of plans to enter the 4G LTE space.

I’ve not run a full-blown event study here, obviously.   But the positive jump for Sprint (Blue Line) & Clearwire (Green Line) today in response to the announcement is hard to miss.  How many of the statements in the DOJ complaint, press release and analysis are consistent with this market reaction?    If the post-merger market would be less competitive than the status quo, as the DOJ complaint hypothesizes, why would the market reward Sprint and Clearwire for an increased likelihood of facing greater competition in the future?  The simplest alternative hypothesis is that the merger is likely procompetitive and rivals are enjoying a premium for the increased likelihood that they will avoid more intense competition in the future.  Is there a reason here to reject that simple hypothesis?   Will the market reaction induce the DOJ to revisit its priors?

In antitrust, doj, economics, federal communications commission, merger guidelines, mergers & acquisitions, technology, wireless
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A couple of quick thoughts on the DOJ’s filing to block AT&T/T-Mobile

Geoffrey Manne —  31 August 2011

As Josh noted, the DOJ filed a complaint today to block the merger.  I’m sure we’ll have much, much more to say on the topic, but here are a few things that jump out at me from perusing the complaint:

  • The DOJ distinguishes between the business (“Enterprise”) market and the consumer market.  This is actually a good play on their part, on the one hand, because it is more sensible to claim a national market for business customers who may be purchasing plans for widely-geographically-dispersed employees.  I would question how common this actually is, however, given that, I’m sure, most businesses that buy group cell plans are not IBM but are instead pretty small and pretty local, but still, it’s a good ploy.
  • But it has one significant problem:  The DOJ also seems to be stressing a coordinated effects story, making T-Mobile out to be a disruptive maverick disciplining the bigger carriers.  But–and this is, of course an empirical matter I will have to look in to–I highly doubt that T-Mobile plays anything like this role in the Enterprise market, at least for those enterprises that fit the DOJ’s overly-broad description.  In fact, the DOJ admits as much in para. 43 of its Complaint.  Of course, the DOJ claims this was all about to change, but that’s not a very convincing story coupled with the fact that DT, T-Mobile’s parent, was reducing its investment in the company anyway.  The reality is that Enterprise was not a key part of T-Mobile’s business model–if it occupied any cognizable part of it at all– and it can hardly be considered a maverick in a market in which it doesn’t actually operate.
  • On coordinated effects, I think the claim that T-Mobile is a maverick is pretty easily refuted, and not only in the Enterprise realm.  As Josh has pointed out in his Congressional testimony, a maverick is a term of art in antitrust, and it’s just not enough that a firm may be offering products at a lower price–there is nothing “maverick-y” about a firm that offers a different, less valuable product at a lower price.  I have seen no evidence to suggest that T-Mobile offered the kind of pricing constraint on AT&T that would be required to make it out to be a maverick.
  • Meanwhile, I know this is just a complaint and even post-Twombly pleading standards are lower than standards of proof, but the DOJ does seem t make a lot out of its HHI numbers.  In part this is a function of its adoption of a national relevant geographic market.  But (as noted above even for most Enterprise customers) this is just absurd.  As the FCC itself has noted, consumers buy cell service where they “live, work and travel.”  For most everyone, this is local.
  • Meanwhile, even on a national level, the blithe dismissal of a whole range of competitors is untenable.  MetroPCS, Cell South and many other companies have broad regional coverage (MetroPCS even has next-gen LTE service in something like 17 cities) and roaming agreements with each other and with the larger carriers that give them national coverage.  Why they should be excluded from consideration is baffling.  Moreover, Dish has just announced plans to build a national 4G network (take that, DOJ claim that entry is just impossible here!).  And perhaps most important the real competition here is not for mobile telephone service.  The merger is about broadband.  Mobile is one way of getting broadband.  So is cable and DSL and WiMax, etc.  That market includes such insignificant competitors as Time Warner, Comcast and Cox.  Calling this a 4 to 3 merger strains credulity, particularly under the new merger guidelines.
  • Moreover, the DOJ already said as much!  In its letter to the FCC on the FCC’s National Broadband Plan the DOJ says:

Ultimately what matters for any given consumer is the set of broadband offerings available to that consumer, including their technical characteristics and the commercial terms and conditions on which they are offered.  Competitive conditions vary considerably for consumers in different geographic locales.

  • The DOJ also said this, in the same letter:

[W]ith differentiated products subject to large economies of scale (relative to the size of the market), the Department does not expect to see a large number of suppliers. . . . [Rather, the DOJ cautions the FCC agains] striving for broadband markets that look like textbook markets of perfect competition, with many price-taking firms.  That market structure is unsuitable for the provision of broadband services.

Quite the different tune, now that it’s the DOJ’s turn to spring into action rather than simply admonish the antitrust activities of a sister agency!

I’m sure there is lots more, but I must say I’m really surprised and disappointed by this filing.  Effective, efficient provision of mobile broadband service is a complicated business.  It is severely hampered by constraints of the government’s own doing — both in terms of the government’s failure to make available spectrum to enable companies to build out large-scale broadband networks, and in local governments’ continued intransigence in permitting new cell towers and even co-location of cell sites on existing towers that would relieve some of the infuriating congestion we now experience.

This decision by the DOJ is an ill-conceived assault on innovation and progress in what may be the one shining segment of our bedraggled economy.

In antitrust, business, doj, error costs, merger guidelines, mergers & acquisitions, technology, telecommunications , , ,
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DOJ Files Suit to Block AT&T / T-Mobile Merger

Josh Wright —  31 August 2011

More on this later.  For now, here is the complaint and the press release:

WASHINGTON – The Department of Justice today filed a civil antitrust lawsuit to block AT&T Inc.’s proposed acquisition of T-Mobile USA Inc.   The department said that the proposed $39 billion transaction would substantially lessen competition for mobile wireless telecommunications services across the United States, resulting in higher prices, poorer quality services, fewer choices and fewer innovative products for the millions of American consumers who rely on mobile wireless services in their everyday lives.

The department’s lawsuit, filed in U.S. District Court for the District of Columbia, seeks to prevent AT&T from acquiring T-Mobile from Deutsche Telekom AG.

“The combination of AT&T and T-Mobile would result in tens of millions of consumers all across the United States facing higher prices, fewer choices and lower quality products for mobile wireless services,” said Deputy Attorney General James M. Cole.   “Consumers across the country, including those in rural areas and those with lower incomes, benefit from competition among the nation’s wireless carriers, particularly the four remaining national carriers.   This lawsuit seeks to ensure that everyone can continue to receive the benefits of that competition.”

“T-Mobile has been an important source of competition among the national carriers, including through innovation and quality enhancements such as the roll-out of the first nationwide high-speed data network,” said Sharis A. Pozen, Acting Assistant Attorney General in charge of the Department of Justice’s Antitrust Division.   “Unless this merger is blocked, competition and innovation will be reduced, and consumers will suffer.”

Mobile wireless telecommunications services play a critical role in the way Americans live and work, with more than 300 million feature phones, smart phones, data cards, tablets and other mobile wireless devices in service today.   Four nationwide providers of these services – AT&T, T-Mobile, Sprint and Verizon – account for more than 90 percent of mobile wireless connections.   The proposed acquisition would combine two of those four, eliminating from the market T-Mobile, a firm that historically has been a value provider, offering particularly aggressive pricing.

According to the complaint, AT&T and T-Mobile compete head to head nationwide, including in 97 of the nation’s largest 100 cellular marketing areas.   They also compete nationwide to attract business and government customers.  AT&T’s acquisition of T-Mobile would eliminate a company that has been a disruptive force through low pricing and innovation by competing aggressively in the mobile wireless telecommunications services marketplace.

The complaint cites a T-Mobile document in which T-Mobile explains that it has been responsible for a number of significant “firsts” in the U.S. mobile wireless industry, including the first handset using the Android operating system, Blackberry wireless email, the Sidekick, national Wi-Fi “hotspot” access, and a variety of unlimited service plans.   T-Mobile was also the first company to roll out a nationwide high-speed data network based on advanced HSPA+ (High-Speed Packet Access) technology.  The complaint states that by January 2011, an AT&T employee was observing that “[T-Mobile] was first to have HSPA+ devices in their portfolio…we added them in reaction to potential loss of speed claims.”

The complaint details other ways that AT&T felt competitive pressure from T-Mobile.   The complaint quotes T-Mobile documents describing the company’s important role in the market:

  • T-Mobile sees itself as “the No. 1 value challenger of the established big guys in the market and as well positioned in a consolidated 4-player national market”; and
  • T-Mobile’s strategy is to “attack incumbents and find innovative ways to overcome scale disadvantages.   [T-Mobile] will be faster, more agile, and scrappy, with diligence on decisions and costs both big and small.   Our approach to market will not be conventional, and we will push to the boundaries where possible. . . . [T-Mobile] will champion the customer and break down industry barriers with innovations. . . .”

The complaint also states that regional providers face significant competitive limitations, largely stemming from their lack of national networks, and are therefore limited in their ability to compete with the four national carriers.   And, the department said that any potential entry from a new mobile wireless telecommunications services provider would be unable to offset the transaction’s anticompetitive effects because it would be difficult, time-consuming and expensive, requiring spectrum licenses and the construction of a network.

The department said that it gave serious consideration to the efficiencies that the merging parties claim would result from the transaction.   The department concluded AT&T had not demonstrated that the proposed transaction promised any efficiencies that would be sufficient to outweigh the transaction’s substantial adverse impact on competition and consumers.   Moreover, the department said that AT&T could obtain substantially the same network enhancements that it claims will come from the transaction if it simply invested in its own network without eliminating a close competitor.

AT&T is a Delaware corporation headquartered in Dallas.   AT&T is one of the world’s largest providers of communications services, and is the second largest mobile wireless telecommunications services provider in the United States as measured by subscribers.   It serves approximately 98.6 million connections to wireless devices.   In 2010, AT&T earned mobile wireless telecommunications services revenues of $53.5 billion, and its total revenues were in excess of $124 billion.

T-Mobile, is a Delaware corporation headquartered in Bellevue, Wash.   T-Mobile is the fourth-largest mobile wireless telecommunications services provider in the United States as measured by subscribers, and serves approximately 33.6 million wireless connections to wireless devices.   In 2010, T-Mobile earned mobile wireless telecommunications services revenues of $18.7 billion.   T-Mobile is a wholly-owned subsidiary of Deutsche Telekom AG.

Deutsche Telekom AG is a German corporation headquartered in Bonn, Germany.   It is the largest telecommunications operator in Europe with wireline and wireless interests in numerous countries and total annual revenues in 2010 of €62.4 billion.

 

In antitrust, business, economics, federal communications commission, merger guidelines, mergers & acquisitions, technology, telecommunications, wireless
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Eighth Circuit Affirms District Court Against FTC in Lundbeck

Josh Wright —  19 August 2011

Here’s the decision; here is my prior post concerning the district court decision.  I suspect the FTC was fairly confident it would succeed in persuading the panel to reverse.  The appeal turns on whether the district court was clearly erroneous in ruling that the FTC had failed to properly define a relevant market, and in turn, whether evidence of switching between the two drugs (Indocin IV and NeoProfen) by neonatologists (and/or hospitals) supported the a product market that encompassed both drugs.  The Eighth Circuit concluded the district court’s findings were not clearly erroneous, and thus, affirmed its judgment.

Here, I think, is the key paragraph on the FTC’s argument about behavior of marginal consumers and market definition:

Further attacking the district court’s reliance on consumer preference, the FTC argues that the court ignored the ability of marginal customers to constrain prices.  Whether there are enough marginal consumers to constrain prices is a factual question
that requires analyzing consumer-demand and profit-margins. See Tenet Health Care Corp., 186 F.3d at 1050-51, 1054 (marginal consumer substitution and profit-margins must be supported with more than “common sense.” This court pointed to the “compelling and essentially unrefuted [critical loss analysis] evidence that the switch to another [product] by a small percentage of [consumers] would constrain a price increase” as evidence of marginal consumer’s ability to constrain prices in a broader geographic market); see also United States v. Engelhard Corp., 126 F.3d 1302, 1306 (11th Cir. 1997) (requiring evidence in order to evaluate the possibility that losing marginal customers responsible for high-margin purchases may constrain prices). The FTC offered testimony of one expert explaining that “marginal customers”–neonatologists who are ambivalent between prescribing Indocin IV or NeoProfen–may constrain prices on either drug. Although not addressing this testimony in its fact-findings, the district court did state that it generally found the FTC expert unpersuasive. See Fox v. Dannenberg, 906 F.2d 1253, 1256 (8th Cir. 1990) (“The question of the expert’s credibility and the weight to be accorded the expert testimony are ultimately for the trier of fact to determine.”). Critically, the
district court did credit Lundbeck’s expert who stated that the number of neonatologists willing to switch between the drugs based on price was insufficient to exercise price constraint. See Pioneer Hi-Bred Int’l v. Holden Found. Seeds, Inc., 35 F.3d 1226, 1238 (8th Cir. 1994) (“[This court] will not disturb the district court’s decision to credit the reasonable testimony of one of two competing experts.”).
Lundbeck’s expert was clear that even those neonatologists who might be willing to switch in response to a price difference would do so only if there was a very significant price decrease, indicating that the level of cross-elasticity was low.

The Eighth Circuit panel also quickly dismissed the Commission’s arguments based upon internal documents and apparent functional similarity between the drugs.   On the internal documents, here is the relevant portion of the opinion:

According to Lundbeck’s internal documents, it anticipated that a dramatic price increase of Indocin IV would draw generic competitors into the market. As a result, it ceased promoting Indocin IV, focusing instead on increasing the market share of NeoProfen–as a superior PDA treatment. The FTC argues that this business strategy–to market NeoProfen as better than Indocin IV–means that Lundbeck viewed NeoProfen as a direct competitor to Indocin IV, and thus the drugs must be in the same product market. However, Lundbeck’s strategy to discontinue promoting Indocin IV in favor of NeoProfen can also be interpreted to mean that while Indocin IV was vulnerable to generics, NeoProfen was not, and thus the products are not interchangeable. If there are two permissible views of evidence, the factfinder’s choice between them is not clearly erroneous. Anderson, 470 U.S. at 574.

Judge Kopf offers up an interesting and reluctant concurrence, which appears here in full:

When defining the product market, and considering the issue of cross-elasticity of demand, the district court relied heavily upon the testimony of doctors that they would use Indocin or NeoProfen without regard to price. Admittedly, those doctors had no responsibility to pay for the drugs or otherwise concern themselves with cost. Thus, the doctors had scant incentive to conserve the scarce resources that would be devoted to paying for the medication. Why the able and experienced trial judge relied upon the doctors’ testimony so heavily is perplexing. In an antitrust case, it seems odd to define a product market based upon the actions of actors who eschew rational economic considerations. See, e.g., F.T.C. v. Tenet Health Care Corp., 186 F.3d 1045, 1054 & n.14 (8th Cir. 1999) (observing that “market participants are not always in the best position to assess the market long term” and that is particularly so where their testimony is “contrary to the payers’ economic interests and thus is suspect”).  That oddity seems especially strange where, as here, there is no real dispute that (1) both drugs are effective when used to treat the illness about which the doctors testified
and (2) internal records from the defendant raise an odor of predation. The foregoing having been said, the standard of review carries the day in this case as it does in so many others. As a result, I fully concur in Judge Benton’s excellent opinion.

It will be interesting to see whether the Commission press release on this doubles down on its earlier assertion that “Ovation’s profiteering on the backs of critically ill premature babies is not only immoral, it is illegal.”

In antitrust, federal trade commission, merger guidelines, mergers & acquisitions
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Review of Industrial Organization Special Merger Guidelines Issue

Josh Wright —  2 August 2011

The August 2011 issue of Review of Industrial Organization is a special issue on the 2010 Horizontal Merger Guidelines edited by Roger Blair.

The issue is available here, and includes articles from:

  • Herbert Hovenkamp
  • Robert Willig
  • Wayne-Roy Gale, Robert C. Marshall, Leslie M. Marx and Jean-Francois Richard
  • Roger D. Blair and Jessica S. Haynes
  • John F. Lopatka
  • Keith N. Hylton
  • Louis Kaplow
  • Dennis Carlton and Mark Israel
  • Roger Blair and Christina DePasquale
  • Judd E. Stone and Joshua D. Wright
  • Michael A. Salinger

My own contribution, The Sound of One Hand Clapping: The 2010 Merger Guidelines and the Challenge of Judicial Adoption, focuses upon the asymmetric economic updating of the Guidelines on the “competitive effects” side of the ledger without corresponding updates with respect to efficiencies analysis.  We explore whether this asymmetric updating might risk the widespread judicial adoption the Guidelines have thus far enjoyed.

 

In antitrust, economics, merger guidelines, mergers & acquisitions
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Office Superstores, Again?

Josh Wright —  6 July 2011

FTC v. Staples is a seminal case in modern antitrust analysis of horizontal mergers.  Judge Posner has described it as the economic “coming of age” of merger analysis.   It is also a landmark decision in the development of unilateral effects theories.  Despite the fact that Judge Hogan did not explicitly rely upon the econometric evidence presented to demonstrate that a post-merger combination of Staples and Office Depot would be able to increase prices, it is also often discussed as having particular importance for the role of econometrics in antitrust analysis.  As Jonathan Baker observes:

Judge Hogan’s hidden opinion supports the government’s use of econometric evidence, though the court did not trumpet doing so. The opinion never uses the term, presumably in a conscious effort to downplay novelty in order to avoid creating an issue for appeal. Yet Judge Hogan demonstrably relied on econometric evidence in one instance,(14) when he stated that “in this case the defendants have projected a pass through rate of two-thirds of the savings while the evidence shows that, historically, Staples has passed through only 15-17%.”(15) The sole basis in the record for the 15-17% figure is the testimony of the FTC’s econometric expert as to the conclusions of his statistical analysis of the pass-through rate.

The district court was persuaded by the FTC’s pricing evidence, and evidence that entry would not timely, likely and sufficient to counter any price increase.  Part of that entry analysis was rejecting the defendant’s claim that firms like Walmart would discipline any attempt to increase prices.  In any interesting turn of events, nearly 15 years later, it looks like we are heading toward another significant merger between office superstores:

Office Depot Inc. (ODP) and OfficeMax Inc. (OMX) may need to merge after heightened competition for office-supply sales and a 26-year high in the U.S. unemployment rate helped wipe out almost $13 billion of shareholder value.

Office Depot, the second-largest U.S. office-supply chain, has plunged 90 percent to $1.16 billion in the last five years, more than any American retailer that still has a market value greater than $500 million, according to data compiled by Bloomberg. OfficeMax was valued at $664 million yesterday after plummeting 78 percent, the third-steepest drop. Both trade at 10 cents or less per dollar of sales — one-tenth of the industry average and ranking in the bottom five of 126 retailers.

Interestingly, competitive pressure from Wal-Mart and Target, among others, appears to have developed into a significant force in the market.

With businesses spending less on paper and printers as the U.S. jobless rate hovers at 9 percent, combining Office Depot with OfficeMax may reduce costs by almost $500 million, said KeyBanc Capital Markets Inc. Regulatory approval won’t be a hurdle because of more competition from Wal-Mart Stores Inc. (WMT) and Target Corp. (TGT) since Staples Inc. (SPLS) was blocked from buying Office Depot in 1997, said BB&T Capital Markets. Money-losing Office Depot of Boca Raton, Florida, hired interim Chief Executive Officer Neil Austrian in May after a seven-month search.

“Office Depot needs OfficeMax,” said Anthony Chukumba, an analyst with BB&T in New York. “They need to combine so they can scale up to better compete with Staples. For them to bring in a guy who’s been on the board forever and who has been CEO twice before on an interim basis, that just smacked of them saying, ‘We’re going to try to sell the company.’”

Of course, the ex post expansion of Wal-Mart and others into this territory does not mean that the FTC or Judge Hogan were wrong ex ante.  Indeed, the strength of the economic evidence in the case suggested that entry would be difficult — and indeed, perhaps it was.  Nonetheless, a merger of the the second and third largest office superstores is surely to attract some attention at the agencies.  Indeed, it may well be the case that the sale of consumable office supplies through office superstores in no longer a relevant antitrust product market.  However, the markets have changed in ways other than the emergence of significant pricing discipline from Wal-Mart and others.  The story notes that Office Depot’s market value has decreased by over $10,3 billion ($2.3 billion for OfficeMax since June 2006).

Given the growth of Wal-Mart and others, I suspect that even a replay of the Staples-Office Depot transaction of the late 1990s would have a significantly better chance of approval today than it did then.  Those in the industry appear to be expecting a merger announcement, but describe government approval as “certainly not a given.”  In any event, a Office Depot – Office Max merger will provide a good opportunity to go back and look at the predictions of the agencies at the time, to evaluate those predictions against the development of the market, and perhaps to learn something useful about competitive dynamics and entry in the retail sector.

In antitrust, economics, federal trade commission, merger guidelines, mergers & acquisitions
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House Hearing on the AT&T / T-Mobile Merger

Josh Wright —  30 May 2011

As I mentioned previously, I testified at Thursday’s hearing on the AT&T / T-Mobile merger.  My written testimony is available here.  Links to the testimony from other witnesses are available at the link above.  I’ll post transcripts when they become available; same with the video link should one become available (I’m not aware of one — if you are, let me know).

Nothing much to report that is outside the written testimony.  Not surprisingly, most of the Committee’s attention was focused on the left hand side of the witness table.  Certainly, there was plenty of “firm counting” analysis and “what will this do for my constituents?” to go around.  But that one interesting development was that many of the hearing questions — certainly more than I anticipated based upon the Senate hearing — focused on vertical aspects of the merger (e.g. backhaul).

In antitrust, economics, federal communications commission, merger guidelines, mergers & acquisitions, wireless
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House Committee on the Judiciary Hearing on the AT&T / T-Mobile Merger

Josh Wright —  25 May 2011

Tomorrow morning.  I’ll post my written testimony here tomorrow.

Hearing on: “How Will the Proposed Merger Between AT&T and T-Mobile Affect Wireless Telecommunications Competition?”

Thursday 5/26/2011 – 10:30 a.m.

2141 Rayburn House Office Building

Subcommittee on Intellectual Property, Competition and the Internet

Witness List

Mr. Randall Stephenson
Chairman, Chief Executive Office and President
AT&T, Inc.

Mr. Rene Obermann
CEO

Deutsche Telekom AG

Mr. Steven K. Berry
President and CEO
Rural Cellular Association

Ms. Parul P. Desai
Communications Policy Counsel
Consumers Union

Professor Joshua Wright
George Mason University School of Law

Professor Andrew I. Gavil
Howard University School of Law

In antitrust, doj, economics, federal communications commission, merger guidelines, mergers & acquisitions, wireless
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Senate Judiciary Hearing on AT&T / T-Mobile Merger

Josh Wright —  9 May 2011

The hearing is Wednesday morning.  The Witness List suggests that the hearing will primarily serve as an opportunity for the merging parties, rivals, other interested parties, and lets not forget the Senators, to restate their positions “for the record.”  And while I get where the Committee is going with the “Humpty Dumpty” title, “the T-1000 of corporations” is much funnier (see video).

Here is the hearing notice:

The Senate Committee on the Judiciary, Subcommittee on Antitrust, Competition Policy and Consumer Rights, has scheduled a hearing entitled “The AT&T/T-Mobile Merger: Is Humpty Dumpty Being Put Back Together Again?” for Wednesday, May 11, 2011 at 10:15 a.m. in Room 226 of the Dirksen Senate Office Building.

Chairman Kohl to preside.

By order of the Chairman.

Witness List

Hearing before the
Senate Committee on the Judiciary
Subcommittee on Antitrust, Competition Policy and Consumer Rights

On

“The AT&T/T-Mobile Merger: Is Humpty Dumpty Being Put Back Together Again?”

Wednesday, May 11, 2011
Dirksen Senate Office Building, Room 226
10:15 a.m.

Randall L. Stephenson
President & CEO
AT&T
Dallas, TX

Philipp Humm
President & CEO
T-Mobile USA
Bellevue, WA

Daniel R. Hesse
CEO
Sprint Nextel Corporation
Overland Park, KS

Victor H. “Hu” Meena
President & CEO
Cellular South, Inc.
Ridgeland, MS

Gigi Sohn
President & Co-Founder
Public Knowledge
Washington, DC

Larry Cohen
President
Communications Workers of America
Washington, DC

In antitrust, merger guidelines, mergers & acquisitions, technology
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Type I errors in action, Google edition

Geoffrey Manne —  6 April 2011

Does anyone really still believe that the threat of antitrust enforcement doesn’t lead to undesirable caution on the part of potential defendants?

Whatever you may think of the merits of the Google/ITA merger (and obviously I suspect the merits cut in favor of the merger), there can be no doubt that restraining Google’s (and other large companies’) ability to acquire other firms will hurt those other firms (in ITA’s case, for example, they stand to lose $700 million).  There should also be no doubt that this restraint will exceed whatever efficient level is supposed by supporters of aggressive antitrust enforcement.  And the follow-on effect from that will be less venture funding and thus less innovation.  Perhaps we have too much innovation in the economy right now?

Reuters fleshes out the point in an article titled, “Google’s M&A Machine Stuck in Antitrust Limbo.”  That about sums it up.

Here are the most salient bits:

Not long ago, selling to Google offered one of the best alternatives to an initial public offering for up-and-coming technology startups. . . . But Google’s M&A machine looks to be gumming up.

* * *

The problem is antitrust limbo.

* * *

Ironically that may make it less appealing to sell to Google. The company has announced just $200 million of acquisitions in 2011 — the smallest sum since the panic of 2008.

* * *

The ITA acquisition has sent a warning signal to the venture capital and startup communities. Patents may still be available. But no fast-moving entrepreneur wants to get stuck the way ITA has since agreeing to be sold last July 1.

* * *

For a small, growing business the risks are huge.

* * *

That doesn’t exclude Google as an exit option. But the regulatory risk needs to be hedged with a huge breakup fee. . . . With Google’s rising antitrust issues, however, the fee needs to be as big as the purchase price.

In antitrust, business, cost-benefit analysis, google, law and economics, merger guidelines, mergers & acquisitions, technology , , ,
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