Pressure from States’ Suit to Block T-Mobile, Sprint Merger

and on Bloomberg dot com slash podcasts. New York is leading a group of states that are set to sue to block Timoa's proposed point five billion dollar takeover of Sprint on antitrust grounds, putting pressure on the Justice Department as it nears a final decision on the merger of the two wireless carriers. Joining me is Bloomberg Intelligent Senior litigation analyst Jennifer ree So, Jenna, why are the state

ags suing? Well, they're basically suing because on the basis that they believe this deal is more harmful than it is hopeful, and that the remedy that's already been decided by the FCC and looks like it will be adopted

by the FCC isn't good enough according to the states. Now, they don't know what the Department of Justice is going to do, but obviously they believe that even if the Department of just this imposes more remedy or additional measures on the companies and clears it that that isn't going

to be good enough. And they basically say, look, this is a market of four mobile providers to three, that the competition that's posed by an entity like let's say a Comcast that might piggyback on the infrastructure of one of these isn't good enough, and that not only nationally, but also in certain regions, the market shares exceed the thresholds that are considered not to be harmful under the anti dress guidelines, and that this creates a concentrated market

that's likely to have harm. But why not wait until justice makes the decision? Perhaps they'll block the deal. I think that's the question that we're all wondering about. Now.

Let me just say I believe this likely suggests that the States believe the d o J won't block the deal because they are in communication and even if they don't understand what the d OJ's ultimate decision is, I think if they were very assured that the d o J was actually going to suit a block, they would have waited and they would have joined that complaint because that's what's typically done. So this suggests to me it in their communications with the Department of Justice and aligning

with them on the investigation here. They believe that the d o J may be getting ready to go ahead and clear this deal with the remedy. The deal has always seemed tenuous to me. It's clear as one roadblock and then it faces another. So, as you mentioned last month, the f c C announced support for the deal. Does that play at all into the Justice Department's decision whether to support the deal or not? You know, it doesn't. It doesn't. They'll want to look at the rationale for

the f CC's decision. But the FCC has a different standard than the Department of Justice, So it is conceivable that there could be a situation where one of the agency's finds that the deal should go through with the

remedy and the other finds that it's anti competitive. Because the FCC has a little bit of a broader standard, it can ask whether this is in the public interest, and they can look at these issues like the five G and development of five G and bringing it to all these rural communities, whereas the d o J really has to take that and balance that decide whether it's

merger specific. And you know whether they can do it with or without the merger, and then if it they do believe that they really need the merger in order to do what they say they can do with five G whether that exceeds the harm that might be caused from going down to three mobile operators. Does the suit by the States put pressure on Makon Delraheem, who is the head of Justice Department's antitrust division, to block the

deal or get better remedies. You know, I think to some extent it does, because I think that if the States go ahead with this and that the companies decided to litigate, and then the States win, what will be

on the table in court will be whatever remedy. So let's just say the d o J clears with the remedy, Well, they will have to prove the States in court why that remedy is insufficient, and if they do, if they win this, it makes the d o J look a little bit foolish and the FCC because the States have now brought the evidence to a judge, a fact finder, and they have proven to this judge that even with the remedy, this is going to cause harm to consumers.

And it does make the DJ look like it's a lax antitrust enforcer, which of course has been and something that has been a concern to many, you know, in many industries. Did the States have any new information or did they analyze the information that was already there in a different way. They would have the same information because usually these investigations are aligned, so any documents or data the companies turn over to the d o J, it's the same documents and data that the States will get.

They have analyzed this. We don't know yet whether the analysis is different than the d o J is because the d o J hasn't spoken yet. But what we do know is that the States have decided that there isn't an appropriate remedy that can fix this. They don't believe the FCC's remedy fixes the harm, and apparently they don't believe a remedy that the do o J might be able to agree with what the companies would remedy the harm, because if they did, they would wait and

see what that is. So the analysis is essentially the same, but there's a balancing act that has to happen here. In antitrust, it's a very gray area and there's no black or white, or yes or no. You have to ask what the harm is, and then you have to ask what the benefit is, and then you have to balance those two against each other. And really, when you think about it, that is somewhat subjective. So it's not unreasonable that two different entities could come up with two

different decisions in that. Now, there have been several rumors about what d o J might be trying to forge as a remedy, including creating another network right when they're trying to merge to become one. What do you know about some of the remedies that have been floating around. Well,

first of all, that is the standard. So if the DJ is determined that this deal is likely to cause harm and likely to violate the antitrust laws, the remedy is to recreate the competition, restore the competition that's going to be lost by virtue of the deal. So that means creating another network, having four networks instead of three. So you ask yourself, well, does that make any sense

for these these companies. It makes sense if their arguments are not pretextual, Because if their arguments are not pretextable, they're saying what they can do together is far better than what they can do individually, and that means what they can do together, even if a fourth network is created,

is still better than what they can do now. So it generally to me, would make sense if they really believe they need to come together to be a viable competitor in five G to Verizon and a T and T. What kind of challenges will these companies face if the deal doesn't go through. Well, you know, Sprint has said if the deal doesn't go through, obviously that they're in

difficult financial position. My colleague John Butler has done a lot of analysis on this because he does believe T Mobile will actually be in a fine position going it alone. They'll continue to develop five G, they'll continue to innovate and put capital into their innovation in R and D, that Sprint may be in a worse position without getting some injection of capital. We have talked about how antitrust is just a legal area that keeps on giving what's

the latest. Well, obviously the latest is what's happening with big tech. And you know the fact that it looks like the FTC and d o J may be investigating were ready to investigate any of Google, Facebook, Apple, and Amazon, So you know that's a big deal because an investigation can turn into nothing, but it can also turn into

a lawsuit and actions taken. And we also have UM House Judiciary Committee hearings that started today and they're going to be looking at these issues with the mind of legislating. So that's something else down the road that that could happen, a new antitrust legislation or privacy legislation, or something completely separate from both. I don't think you can go on

vacation this. I don't think so either. That's Bloomberg Intelligence Senior Litigation analyst Jennifer Rey and for more of our analysis going to be I go on the Bloomberg Terminal. Thanks for listening to the Bloomberg Law Podcast. You can subscribe and listen to the show on Apple Podcasts, SoundCloud, and on Bloomberg dot com slash podcast. I'm June Brolso this is Bloomberg