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The Sprint and T-Mobile Merger Will Test the Department of Justice’s Mettle – ANITH
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The Sprint and T-Mobile Merger Will Test the Department of Justice’s Mettle

The Sprint and T-Mobile Merger Will Test the Department of Justice’s Mettle


In December of 2016, Donald Trump paraded Masayoshi Son, CEO of Japan’s SoftBank, through the lobby of Trump Tower. The proud president-elect called Son “one of the great men of industry.” Indeed, the two have a lot in common. They’re both big talkers with deep respect for enormous numbers of zeros—Son is the world’s 39th richest man—whose favorite currency is favors. Son promised over a year ago to bring jobs to the US, and, in response, Trump promised to make it easier for Son to do business in America.

Last week, relentless, idiosyncratic, one-man-show dealmaker Son (sound familiar?) began the process of calling in Trump’s promise of deregulation: Sprint will be acquired by T-Mobile, even though the federal government has twice in the past seven years said such a combination would be illegal.

Is our government bound by the rule of law or the rule of President Trump? The Department of Justice’s Antitrust Division must consider this question.

Here’s why. There is a two-part, simple legal standard for deciding whether the proposed combination of Sprint and T-Mobile should be allowed. Would it harm competition in such a way that consumers would suffer? And, even if some competitive harm is likely, will the resulting merged firm be able to operate so much more cheaply—and be forced by competition to pass those savings along to consumers—that consumers will end up paying less?

In the Sprint-T-Mobile case, the answers to these questions are clear: Yes, millions of consumers would have fewer choices if the two companies merged, because the number of national mobile providers would be reduced from four to three—Verizon, AT&T, and a newly giant T-Mobile. Although Sprint and T-Mobile claim that combining forces will allow them to make the capital investments necessary for 5G services, there is little or no chance that any of these futuristic cost savings will be passed on to consumers.

For these reasons, back in 2011, the FCC and the Department of Justice rejected a proposed merger between AT&T and T-Mobile. Similarly, both the FCC and the Department of Justice sent strong messages in 2014 that they would block combinations—because any merger in a pretty stagnant national market would harm consumer welfare. The four companies account for virtually all consumer subscriptions, and wherever a consumer lives, they’ll have fewer choices of nationwide providers if one of them disappears.

Since 2014, this argument has only gotten stronger. We’re lucky that Sprint and T-Mobile have been competing. T-Mobile has thrived, introducing consumer-friendly ways of doing business, like allowing no-contract plans. With just three players, that luck would vanish: in a group of three, collusion can more easily be carried out, particularly in a market that is extraordinarily difficult for upstarts to enter. According to the DOJ’s own merger guidelines, the nationwide mobile wireless market is already “highly concentrated,” meaning that any combination that increased that concentration would be automatically challenged.

The law hasn’t changed since 2011 or 2014. But now we have a different president, one who likes to see deals made regardless of whether they harm consumers. This is the president whose administration has weakened auto emissions rules, has made it easier for predatory lenders to take advantage of vulnerable Americans by effectively dismantling the Consumer Financial Protection Board, and has done all it can to support for-profit colleges, among innumerable other pro-profit-taking moves.

The Sprint and T-Mobile merger will be considered by both the FCC and the DOJ. The FCC uses a squishier “public interest” standard when looking at mergers, and the current FCC chair, Ajit Pai, is likely to buy the companies’ hand-waving arguments that new, shiny 5G technology will be just around the corner for American consumers if, and only if, Sprint and T-Mobile are allowed to combine. Never mind that both companies had already said they were each ready to go it alone with 5G.

But the Department of Justice is different. It’s a law enforcement agency with a proud history of independence going back decades. So even though the FCC and the DOJ are both nominally part of the executive branch, the DOJ (and particularly its Antitrust Division) fights for principle and the rule of law, it honors steadfast integrity.

The current Antitrust Division head, Makan Delrahim, moved to block the $85 billion AT&T-Time Warner combination but the FCC didn’t. Delrahim’s reasoning was that that vertical merger, combining content with transport, would harm consumers by allowing the resulting company to charge more. Applying that same legal standard will (or should) cause the Antitrust Division to block the proposed Sprint and T-Mobile merger; it’s an even easier case than AT&T-Time Warner, if you respect the rule of law.

But the question is whether the Trump administration will permit the DOJ to act. Just watch what’s going on with the Mueller investigation. The president and his henchmen are attacking Ron Rosenstein, the deputy attorney general who hired Mueller as special counsel, for daring to defy sharp presidential dislike of Mueller’s activities. He’s standing up to the pressure, so far.

What matters more: Son’s quid pro quo relationship with President Trump, or the rule of law? We can be confident the Antitrust Division will make the right principled choice. The more troubling question is whether President Trump’s White House will let that choice see the light of day.


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Anith Gopal
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