FAIR PLAY: Sprint and T-Mobile’s Age-Old Sell

FAIR PLAY

Antitrust deciphered

When Sprint Corp. and T-Mobile US Inc. show up at the doors of the Justice Department’s antitrust division to pitch their upcoming merger, it’s all but certain they’ll test an argument regulators have heard before.

Two smaller companies just can’t keep up with the big guys, they’ll likely say. In this case it’s AT&T Inc. and Verizon Communications Inc., the number one and two players in the wireless carrier industry. Sprint and T-Mobile have lagged behind those two dominant companies, and they’re trying to position themselves as a team that can more effectively compete with the top dogs. How the DOJ’s antitrust division ultimately assesses that argument will further set its boundaries.

This “woe is me” cry isn’t new for the antitrust division or Federal Trade Commission. It’s almost always offered by companies as justification for a merger, and sometimes it works. The DOJ let General Electric Co. and Baker Hughes Inc. merge their oil and gas businesses, which allowed it to take on rival Schlumberger Ltd. The new company bypassed Halliburton Co. to become the world’s second largest oilfield service provider and equipment maker.

But the argument isn’t foolproof. Electrolux AB aimed to buy GE’s appliances business in 2014 to grab the scale it thought it needed to compete with Whirlpool Corp. That didn’t fly with the Justice Department, which sued to block the deal. The merger fell apart under pressure near the end of the government’s antitrust trial in 2015.

Antitrust precedent evolves inch by inch, and Sprint and T-Mobile look like they’re trying to move it a mile. The Justice Department balked at an AT&T and T-Mobile tie-up a few years ago, saying customers couldn’t afford to lose the innovation of T-Mobile if it was allowed to be scooped up by a competitor. The government now is wed to a standard that the wireless carrier industry needs four players, not just three.

But Sprint and T-Mobile could have better luck than AT&T and T-Mobile. The market facts are different, that that matters. If the deal clears, the merge-to-grow line is a winning story for future transactions, and three competitors may actually be seen as enough to keep a market healthy.

What’s Happening This Week

Acting Director of the FTC’s Bureau of Competition Bruce Hoffman will discuss antitrust in disruptive industries on Tuesday at the annual ACC in-house counsel gathering.

Quote of the Week

“Given the impact Google has on small business, the flow of information, and that Google controls an outsize portion of the market for online search and online advertising, the public has a right to know what the Federal Trade Commission found in its investigation into Google,” Rep. Keith Ellison (D-Minn.), in a letter asking acting FTC Chairman Maureen Ohlhausen to release the agency’s findings and analysis in the 2013 investigation of the search giant’s business practices.

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