Globe Editorial

Justice makes a strong case against AT&T, T-Mobile deal

September 2, 2011

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RARELY HAS a big corporate merger of the type that defined high-tech, banking, telecom, and other economic sectors over the past decade hit consumers as directly as AT&T’s proposed takeover of T-Mobile would. Cellphones and wireless Internet are what landlines and mail service were a few decades ago, and most consumers can quote their monthly rates and terms of coverage by heart. Those consumers also know, from watching this industry grow up, that competition has been the driver of innovation. Better plans and phones automatically appeared as new companies entered the market.

That’s why AT&T’s proposed $39 billion takeover of T-Mobile was so hard for consumers to accept and, ultimately, for the US Justice Department to approve. The Obama administration’s decision this week to sue to stop the deal on antitrust grounds struck a welcome blow for consumers, and perhaps will establish a new, more skeptical attitude on the part of regulators reviewing corporate mergers.

The Justice Department’s decision was spurred by the thousands of T-Mobile customers who insisted that a merger would be bad for their pocketbooks - and by T-Mobile’s own documents outlining the ways in which its products expanded access for consumers and provided cheaper alternatives to AT&T and to fellow competitors Verizon Wireless and Sprint. It’s hard to imagine a similar grass-roots mobilization against, say, last spring’s proposed takeover of NYSE Euronext by Nasdaq OMX Group.

The Justice Department’s decision to challenge the merger doesn’t necessarily stop it, but it clearly sets the terms of the debate. Already, AT&T has been forced to defend the move in terms of advantages for consumers - better coverage via combined equipment, greater broadband access in rural areas - and not for its effect on profits. But AT&T’s claims have been a trifle insistent, and its tactics - including soliciting letters of support from wholly unrelated groups such as the Gay & Lesbian Alliance Against Defamation, which received AT&T corporate support - have done more to raise doubts about the deal than to further it.

The purpose of antitrust law isn’t strictly to provide the best prices for consumers. It’s to preserve open competition in the marketplace - competition that not only acts as a check on prices, but also encourages greater innovation that in turn leads to new products that expand an industry. If it chooses to fight, AT&T will have more chances to make its case. But so far, it hasn’t persuaded nearly enough people that this deal is good for the economy. The Justice Department deserves credit for acknowledging both the weight of the evidence and the will of the people.