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From Antitrust Law Daily, February 13, 2019

House panel hears from Sprint, T-Mobile CEOs on merger

By Jeffrey May, J.D.

Additional hearings in House on significant mergers likely.

Today, the House Energy and Commerce Committee's Subcommittee on Communications and Technology held a hearing entitled "Protecting Consumers and Competition: An Examination of the T-Mobile and Sprint Merger." John Legere, Chief Executive Officer and President of T-Mobile US, and Marcelo Claure, Sprint Executive Chairman, were on hand to defend the companies’ renewed plan to unite. A prior attempt to merge was abandoned in 2014 in the face of regulatory hurdles.

Five years later, the companies now say that their transaction is needed to ensure U.S. leadership in 5G technology. They also contend that a combined T-Mobile and Sprint will be in a better position to compete with the duopoly that is AT&T and Verizon.

The hearing marked the first time in eight years that the committee had met to evaluate the consequences of any merger, said House Energy and Commerce Committee Chairman Frank Pallone Jr. (D., N.J.). In his opening statement, Pallone suggested that the committee, as well as other House committees, would resume the practice of reviewing major acquisitions. "For the last eight years major industry consolidation occurred without any oversight, and the consequences of that negligence have been borne by consumers and hardworking Americans," Pallone noted.

Rep. Bob Latta (R., Ohio) pointed out that the final decision as to whether the transaction was in the public interest was up to the Federal Communications Commission. He suggested that the role of the panel was to provide policies to advance the telecommunications market.

The panel heard from the Communications Workers of AmericaRural Wireless Association, Inc., and Public Knowledge. Each of these groups spoke out against the merger.

Doug Brake, Director of Broadband and Spectrum Policy at the Information Technology and Innovation Foundation, offered support for the transaction. Brake took the position that focusing on preserving four operators in the market is mistaken. "This four-to-three lens also ignores the rapidly differentiating business models in and adjacent to wireless services," he said.

While the hearing heard from Republicans in support of the deal, Rep. Anna Eshoo (D., Cal.) was one of the few Democratic committee members to speak up for the merger. Eshoo suggested that Sprint can't make the kind of investments needed to compete with the top two carriers.

Sprint’s Claure acknowledged that Sprint faces some significant challenges. Among other things, he noted that the carrier struggles to attract new customers.

Opposition from Senators. Sens. Richard Blumenthal (D., Conn), Amy Klobuchar (D., Minn.), Tom Udall (D., N.M.), Sherrod Brown (D., Ohio), Kirsten Gillibrand (D., N.Y.), Elizabeth Warren (D., Mass.), Bernie Sanders (I., Vt.), Cory Booker (D., N.J.), and Ed Markey (D., Mass.) wrote the FCC and the Department of Justice, urging them to reject the deal. They argued at the acquisition would result in higher prices for consumers, hurt competition, and harm workers.

American Antitrust Institute objections. Also yesterday, the American Antitrust Institute put out a statement, voicing opposition to the merger. "The reality of a Sprint-T-Mobile merger is the elimination of the two ‘disruptive’ competitors that have kept the big guys, AT&T and Verizon, on their toes, AAI President Diana Moss said. "Worse, it would leave U.S. consumers with a cozy trio of national wireless carriers with strong incentives to collude rather than compete. The deal would virtually guarantee higher prices, less quality, and slower innovation for wireless services for millions of U.S. consumers."

"A government move to block the Sprint-T-Mobile merger would signal a willingness to return to first principles and to enforce the U.S. antitrust laws to defend our markets and protect competition and consumers," the statement concluded.

House Judiciary Committee hearing. The House Judiciary Committee had scheduled a hearing for February 14 to consider the merger. That hearing has now been postponed.

Companies: Sprint Corp.; T-Mobile US, Inc.

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