On AT&T, U.S. Chooses Law Over Politics

If breadth of backers was the main criteria, AT&T's $39 billion purchase of T-Mobile USA would have sailed through regulatory review. After all, who could oppose a deal supported by interest groups as varied as the Louisiana Ballooning Foundation and the Association of New Jersey Orchestras? But good corporate citizenry and lobbying expertise aren't the only criteria.

And as the Justice Department's court challenge to the deal demonstrated, the deal was always long on hype for how it would help consumers, and short on robust legal arguments. AT&T's problem is that the legal issues aren't on its side. Antitrust lawyers had said in recent days that the company's chances of winning approval rested on political issues trumping legal concerns. The fact that the government challenged -- months earlier than observers had expected -- demonstrates that the legal issues won the day. On the most basic level, it was evident before the filing, the combination exceeds concentration of market share levels -- as defined by the Herfindahl-Hirschman index -- that the federal government generally finds acceptable. Divestitures could resolve the concentration risk, of course. But AT&T will find it harder to get around the reality that a merger would reduce the number of national wireless firms from four to three -- in the process eliminating a low-priced competitor.