Antitrust Law Daily FCC votes along party lines to approve T-Mobile/Sprint tie-up
Thursday, October 17, 2019

FCC votes along party lines to approve T-Mobile/Sprint tie-up

By Lynn Stanton, TR Daily

Both of the FCC’s Democratic commissioners announced yesterday that they voted against the pending order to approve T-Mobile US, Inc.’s acquisition of Sprint Corp.

The Federal Communications Commission (FCC) is set to move forward with an order allowing T-Mobile US, Inc.’s acquisition of Sprint Corp. subject to commitments and divestments now that the agency’s three Republican commissioners on voted earlier this month in favor of approving the deal and the two Democratic commissioners formally voted against approval yesterday.

Completion of the transaction, however, is not set in stone. A settlement announced in July between the companies and the U.S. Department of Justice Antitrust Division and several states, which requires the divestiture of certain assets to Dish Network Corp., remains pending before the U.S. District Court for the District of Columbia, where a number of parties recently filed oppositions to the proposed settlement as part of a Tunney Act review. In addition, the companies face a separate federal lawsuit brought by other state attorneys general seeking to block the transaction.

In a statement explaining her decision to oppose the memorandum opinion and order, declaratory ruling, and order of proposed modification to approve T-Mobile’s acquisition of Sprint, FCC Commissioner Jessica Rosenworcel said: "We’ve all seen what happens when markets become more concentrated after a merger like this one. In the airline industry, it brought us baggage fees and smaller seats. In the pharmaceutical industry, it led to a handful of drug companies raising the prices of lifesaving medications. There’s no reason to think this time will be different. Overwhelming evidence demonstrates that the T-Mobile-Sprint merger will reduce competition, raise prices, lower quality, and slow innovation."

"Moreover, the remedies that are supposed to save consumers from the problems with this merger do little more than camouflage its harm. With 5G on the horizon, our dependence on wireless connectivity is bound to grow. It’s not the time to count on ineffective deployment commitments, higher prices, and less vigorous competition to help the benefit of this new technology reach us all," Rosenworcel continued.

"Finally, the process that got us here is equally troubling. Three of my colleagues agreed to this transaction months ago without having any legal, engineering, or economic analysis from the agency before us. Consumers deserve better from the Washington authorities charged with reviewing this transaction," she added.

In a statement regarding his vote against the item, Commissioner Geoffrey Starks said: "The expert staff of the Commission and the Justice Department have agreed that the merger between T-Mobile and Sprint, as originally submitted, would likely harm competition and raise prices. Rather than denying that merger, however, the majority has turned to the parties for paper-thin commitments that they contend will expand broadband access and the deployment of 5G."

"But these promises cannot mask reality. You don’t need to be an expert to know that going from four wireless carriers to three will hurt competition. This merger takes a bad situation and makes it worse. Higher prices and fewer options across the country will inevitably result. Quite simply, the effects of this ill-conceived merger will hit low-income and rural communities hardest of all," Starks said. "This proceeding also has had unprecedented procedural irregularities. The deal approved today has changed significantly from the one that was originally proposed—twice. I have been clear: where there is a fundamental change in the structure of a proposed merger, it must be set out for public comment. This administration previously adhered to that practice, and our failure to do so here raises legal issues. Moreover, today’s approval comes despite our on-going investigation of Sprint for what appears to be the largest unlawful collection of universal service funds in FCC history. But instead of waiting until we have all the facts, we haphazardly push forward and hope for the best. The rush to judgment here is exemplified by the fact that it was only in response to questions from my office that the draft was amended at the last minute to explicitly preserve liability for these and any other potential violations," he continued.

"The Order concludes that the transaction will likely harm competition and raise prices, but that the parties’ commitments to expand service and divest assets will mitigate these harms. But the analysis of how the benefits outweigh the harms is vague and unconvincing. The obligations imposed on the parties are so loosely drafted that meaningful enforcement will be impossible. The financial penalties for non-compliance will not effectively deter a company with billions of dollars in annual revenue. And the Order characterizes any penalties as tax-deductible ‘voluntary contributions,’ meaning the American taxpayer will be left holding the bag for at least some of any penalties imposed on New T-Mobile," Commissioner Starks said.

"In short, I believe that T-Mobile and Sprint have not proven that their merger will benefit the public interest. Vague promises do not change what was true when this deal was first proposed and what remains true today—the harms from this merger are not overcome by any condition imposed in the majority’s order. While I hope for the sake of consumers that I am wrong, I fear that we will one day look back at this decision and recognize it as a moment that forever changed the U.S. wireless industry, and not for the better," he concluded.

Senate antitrust subcommittee ranking member’s response. In a statement, Sen. Amy Klobuchar (D., Minn.), the ranking member of the Senate Judiciary Committee’s antitrust subcommittee, said: "I have repeatedly raised serious antitrust concerns about the harmful effects of merging T-Mobile and Sprint, two of the four remaining nationwide wireless carriers. Overwhelming evidence shows that approving this merger will almost certainly hurt competition and consumers and lead to higher prices, worse service, and less innovation. I am hopeful that the lawsuit brought by over a dozen state attorneys general to block the merger will be successful."

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

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