Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

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Tuesday, November 8, 2011

AT&T/T-Mobile: Does Efficiency Really Count?

Posted by D. Daniel Sokol

Howard Chang, David S. Evans, & Richard Schmalensee (Global Economics Group) ask AT&T/T-Mobile: Does Efficiency Really Count?

ABSTRACT: AT&T's proposed $39 billion acquisition of T-Mobile faces two major court challenges: the Justice Department's suit to block the deal and Sprint's private suit. The Federal Communications Commission ("FCC"), which has overlapping jurisdiction in reviewing the transaction, has also expressed concerns. Addressing the Justice Department's concerns, either via a settlement or in court, will likely be the biggest hurdle for AT&T. In its suit, filed at the end of August, the Justice Department argues the deal would harm consumers by eliminating T-Mobile as a competitor in the mobile wireless business, particularly given high concentration levels and T-Mobile's importance as an aggressive competitor. AT&T's core counter argument is that output will go up (to the benefit of consumers) as a result of substantial and demonstrable efficiencies from the transaction. Therefore, this will be a deal in which the assessment of efficiencies is likely to be front and center, and the outcome will provide a test of the power of efficiency arguments in merger cases.

http://lawprofessors.typepad.com/antitrustprof_blog/2011/11/attt-mobile-does-efficiency-really-count.html

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