AT&T/T-Mobile Back in Court, With AT&T Doubling Down on Litigation
All sides of the AT&T/T-Mobile deal will be back in court Friday, and AT&T appears to have doubled-down on the ongoing litigation to preserve the embattled deal. Two cases, one between the Department of Justice and the other between AT&T and Sprint and C Spire, are set for status hearings in U.S. District Court in D.C. Friday morning. AT&T has spent much of the last two weeks in battles with the FCC over the commission’s decision to release a staff report on the proposed T-Mobile acquisition (CD Dec 2 p5) and the FCC’s spectrum screen standards (CD Dec 6 p1).
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That suggests to many observers that the federal trial is an all-or-nothing matter for AT&T. If AT&T settles its cases or wins at trial, it will have leverage at the FCC because a court of competent jurisdiction will have signed off on the T-Mobile buy, telecom observers told us. That means that AT&T has less to lose by fighting publicly with the FCC. “It’s crystal clear that AT&T will continue to fight the lawsuits brought by DOJ, Sprint and C Spire,” said Jim Chen, dean of the University of Louisville law school. There’s also the possibility of a more favorable regulatory environment after the election, so AT&T might “play the waiting game,” he said. If that seems far-fetched, Chen said, remember that former FCC Chairman Reed Hundt once called the proposed SBC/AT&T merger “unthinkable.” The merger was approved in 2005 under then-FCC Chairman Kevin Martin, Chen said.
AT&T’s foes have argued in court that by withdrawing its T-Mobile application at the commission, it has dropped the proposed deal in court (CD Dec 8 p12). Their argument seizes a Nov. 29 blog post by AT&T’s top lobbyist, Jim Cicconi, who said: “There are essentially two reasons why an applicant would withdraw a merger application -- either it intends to abandon the transaction altogether, or it plans to submit a new application reflecting changes to the transaction or materially changed circumstances.” Sprint and Justice have suggested in court that since AT&T has admitted that it will at least alter its proposed acquisition, the acquisition being discussed in court is moot.
Mootness is likely to become a critical issue at court, Howard University law professor Andrew Gavil told us. If AT&T’s FCC withdrawal is viewed by the court as “an abandonment of the deal as now constructed,” the court could conclude that the government case is moot, he said. However, AT&T is likely to respond that it remains contractually committed to purchase T-Mobile and that it retains the discretion to pursue regulatory review in its own way, he said. Meanwhile, trial is scheduled for February and will take some time, he noted. The judge would then need additional time to draft her opinion, so it may be summer before a decision is reached, he said. And, if the judge concludes that the merger should be enjoined, AT&T could appeal, he said.
"It is in theory possible that a decision from the court of appeals would take us past the fall election,” Gavil added. However, if AT&T were to prevail either before the district court or the court of appeals, it would be in a better position to re-open the FCC proceeding, “regardless of who is in the White House,” he said. That appears to be AT&T’s primary litigation strategy, he said. “But I suspect it will drop or seek to substantially restructure the deal before then, given the seemingly minimal chance that it can prevail in the courts.”
Some disagree with AT&T’s apparent strategy, though. Professor Eleanor Fox with New York University School of Law doubts that potential personnel changes in the administration would result in favorable regulatory environment. The deal appears to be “one of the most anticompetitive mergers of decades,” she said. The more realistic option is for AT&T to try to settle the case, said Maurice Stucke, a law professor with University of Tennessee.