Antitrust and High-Tech: A Tale of Two Mergers
Between 2016 and 2019, two proposed mergers captured much of the attention and resources of the Department of Justice, Antitrust Division (DOJ). The first was the vertical merger of AT&T Inc. and Time Warner Inc.—a merger of a communications, media, and content distribution company (AT&T) with a content provider (Time Warner). The second was the horizontal merger of Sprint and T-Mobile—a merger of two mobile telephone companies. In general, vertical mergers are reviewed with greater leniency than horizontal mergers because the latter, by definition, eliminate a competitor in the relevant marketplace, which is not a concern with the former. Moreover, merger-specific efficiencies may be easier to demonstrate when a company merges with another company in its own supply chain. Even so, the DOJ challenged the vertical merger of AT&T and Time Warner but permitted (with conditions) the horizontal merger of Sprint and T-Mobile. As this Article sets forth, these seemingly distinct mergers were destined to be linked.
Even though the DOJ unsuccessfully blocked the AT&T-Time Warner merger, the companies are separating again only a few short years after finalizing their merger. The stated reason for the unwinding is arguably linked to the DOJ’s decision to permit the Sprint-T-Mobile merger. The competitive pressure created by the joined mobile telephone company—T-Mobile—has pressured AT&T to invest further in its own mobile telephone business. In other words, the DOJ’s initial fear, that the merged AT&T could use theoretical market power to anticompetitively charge higher consumer prices and raise rivals’ costs in content distribution, was never realized. In contrast, the DOJ’s humility in assessing potential efficiencies for a merged T-Mobile in the growing 5G mobile telephone market is already paying competitive dividends. The tale of these two mergers, therefore, provides interesting insights into modern merger review policies.