The Urge to Merge

MCI and Sprint in 2000. DirecTV and Dish Network in 2002. The Google-Yahoo advertising alliance of 2008. All three megadeals were trumpeted with great fanfare … but never happened.

The Justice Department’s Antitrust Division rejected the MCI and satellite television mergers, asserting that they would limit competition. The online ad deal unraveled when Justice threatened to block it. So when officials at AT&T (the country’s second-largest wireless carrier) announced a $39 billion acquisition of T-Mobile (the fourth-largest) last weekend, they had clearly studied history. “The facts show that the U.S. wireless market is one of the most competitive markets in the world,” said Wayne Watts, senior executive vice president and general counsel for AT&T, at a Monday news conference. As far as he is concerned, the Obama administration should not hesitate to approve the transaction, because the cellular business is robust. Trouble is, that’s not for him to say. The newly combined behemoth would surpass Verizon as the nation’s largest wireless carrier, creating what critics say is a duopoly. (In market share, Sprint is a distant third.) Now, regulators will step in. If they foresee higher prices, fewer choices, and limited access to the latest technologies -- because only vigorous competition guarantees those consumer-friendly offerings -- they can kill or modify the deal. But first, the Justice Department has to figure out which prices are too high, how many choices are too few, and what, exactly, makes competition vigorous.