The U.S. Justice Department filed a lawsuit blocking the merger of AT&T with T-Mobile. AT&T offered $39 billion for the takeover of T-Mobile, but the Justice Department’s lawsuit has put the mega-deal on hold.
The combination would reduce wireless communication competition in the U.S., driving prices higher, lowering the quality of services and offering fewer products for U.S. consumers, according to a statement released Aug. 31 by the Justice Department.
The Justice Department believed AT&T did not effectively show that the proposed transaction’s benefits would be sufficient to counteract the potential problems for the market and buyers.
“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,” according to the Justice Department’s statement.
TCU economics professor Laura Bucila said that when it comes to mergers, the government’s general fear is that the company will have too much market power. There will be less control within that market, which means AT&T may end up charging higher prices.
“They should guarantee that the prices will not increase above what they are now,” Bucila said. “Consumers.. will benefit because AT&T consumers will be able to talk for free with T-Mobile.”
AT&T defended the merger by claiming the deal would let AT&T spread the cost of running a nationwide network over more customers, lowering its costs and further improving its margins. If regulators approved the deal, the company said it planned to build an expansive 4G network that would deliver high-speed access to 95 percent of Americans.
According to the Bloomberg website, AT&T’s main competitor was Verizon Wireless. If the merger did take place, AT&T would outrank Verizon Wireless as the number one U.S. wireless carrier.
AT&T and Verizon Wireless held a combined 80 percent of wireless market profits, according to the annual wireless report published by the FCC in June.
Philip Spencer, a sophomore accounting major, said he was against the merger of AT&T and T-Mobile.
“I think that T-Mobile should stay by themselves and continue to market their products; they have been successful so far.” Spencer said.
He said he did not know if the merger will necessarily raise prices, but it could be bad for cell phone innovation and hinder creativity.
The lawsuit blocking the merger of the two companies will be presided over in the District of Columbia by U.S. District Court by Judge Ellen S. Huvelle .
Huvelle previously ruled against the government in a similar antitrust case.
In an Aug. 31 interview, Huvelle would not comment on the merger case but indicated that she was unconcerned with the politics involved.
Many cases have “a lot of noise around them,” Huvelle said. “But I think my job is to look at the law and the facts.”
