Updated March 26 at 6:25pm

AT&T travails on T-Mobile may show tougher U.S. stance on deals


WASHINGTON - The FCC’s move against AT&T Inc.’s $39 billion purchase of a smaller rival may signal tougher enforcement of corporate mergers by the Obama administration.

AT&T withdrew its application Thursday from the Federal Communications Commission after agency Chairman Julius Genachowski on Nov. 22 asked fellow commissioners to send the proposed purchase of T-Mobile USA Inc. to a hearing, signaling an attempt to block the deal. The Justice Department already has sued to block the deal as anticompetitive, with a U.S. district court trial set to commence in February.

The twin actions on the merger follow the Justice Department’s success in preventing H&R Block Inc. from a deal that would have combined the second- and third-largest providers of tax preparation software. The AT&T transaction would combine the second- and fourth-largest U.S. wireless companies.

“The Obama administration has gotten much more aggressive in antitrust than the Bush administration was,” Jeffrey Jacobovitz, an antitrust litigator with McCarthy, Sweeney & Harkaway PC in Washington, said in an interview. “It’s a new dawn for merger enforcement.”

Under Republican leadership between 2005 and 2008, U.S. regulators cleared two acquisitions by Dallas-based AT&T, two by Verizon Wireless and Sprint Corp.’s purchase of Nextel Communications Inc., according to a summary prepared by the FCC. Under Obama appointee Genachowski, the FCC has increased its scrutiny of wireless carriers, examining unexpected charges on monthly bills and exclusive contracts with handset makers.

‘Public Interest’

The agencies have different mandates, with the Justice Department checking how deals affect competition and the FCC examining competition as well as other factors under the rubric of “public interest,” such as whether a merger would eliminate jobs or change the quality of phone service.

In 2010 Genachowski and Christine Varney, then the top antitrust official at the Justice Department, told U.S. senators in a hearing they would seek to work together in merger reviews.

According to an FCC official who briefed reporters Nov. 22 under ground rules calling for anonymity, agency staff reached a conclusion consistent with the Justice Department’s view: AT&T’s purchase of T-Mobile would significantly diminish competition.

A deal that doesn’t comply with antitrust laws can’t meet the public interest, the official said.

“There’s been a lot of coordination between the FCC and the DOJ,” Paul Glenchur, a Washington-based analyst with Potomac Research Group, said in an interview. “This deal was always going to be a hard sell to either agency.”

AT&T said in a statement yesterday it would bring the deal back before the FCC “as soon as practical.” The company remains in litigation with the Justice Department.

Market Concentration

FCC officials had expressed concern over concentration in the wireless market before AT&T proposed its merger March 20, and “you had to figure this was a tough fight going in,” Glenchur said.

For the past two years, the FCC has refrained from calling the market competitive as it released its annual survey of the wireless marketplace. The 2010 report marked the first time since 2002 that the agency had omitted a finding of “increasing” or “effective” competition, a conclusion that Robert Quinn, AT&T senior vice president of federal regulatory, at the time called “a dramatic break from years of solid precedent.”

The FCC’s move shouldn’t surprise people who have been listening to Genachowski, Gigi Sohn, president of Public Knowledge, a Washington-based policy group that opposes the merger, said in an interview.

“The commission has been saying, even in the absence of this merger, the industry’s been getting overly concentrated,” Sohn said. “They’ve laid the groundwork.”

‘A Little Timid’

The Justice Department lawsuit filed Aug. 31 helped clear the way for the FCC to act, Sohn said.

“‘I think they were feeling a little timid in the first year or two years’’ of the Obama administration, Sohn said.

In 2010 the Justice Department cleared Live Nation Inc.’s merger with Ticketmaster Entertainment Inc., and this year the FCC approved Comcast Corp.’s purchase of NBC Universal.

‘‘They’re really finding their footing and finding their confidence,” Sohn said. “Some people would say it took too long. I’m just happy it’s happening now.”


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