Why Obama Wants to Dismiss the AT&T Antitrust Case

The Justice Department’s challenge to AT&T’s proposed merger with T-Mobile at first blush looked like a gutsy show of force, one that suggested a surge in Obama administration antitrust activism after a modest start. Justice officials portrayed the merger of the second and fourth largest U.S. wireless carriers as a blatant monopolistic move that would sharply reduce competition and hamper innovation. “The combination of AT&T and T-Mobile would result in tens of millions of consumers all across the United States facing higher prices, fewer choices and lower quality products for mobile wireless services,” Deputy Attorney General James M. Cole declared. But for President Obama, the August 31 Justice Department action is beginning to shape up as the antitrust case from hell -- one that he would probably gladly see settled. Beyond the angry backlash from AT&T and T-Mobile, the lawsuit has infuriated Obama’s political base – especially organized labor – just as he is struggling to mend fences with these core supporters. The Communications Workers of America in particular has blasted the Justice Department action. AT&T announced that it would return 5,000 wireless jobs to the United States following the merger and create about 100,000 jobs as it builds high-speed broadband service to 97 percent of the country. “The DOJ's action would put good jobs and workers' rights at the bottom of the government's priorities,” CWA President Larry Cohen said in a statement. “Instead of acting to block this merger, our government should be looking to support companies that create, keep and return good jobs to the United States.” Angering CWA isn’t a good idea because the labor organization has been a top donor to Democratic presidential candidates. Since 1989, the union has contributed over $30 million, 94 percent of which went to Democrats, according to the Center for Responsive Politics. Cohen warned that Democrats would pay a price for the lawsuit. Other labor leaders echo that displeasure with the administration. When pressed about the lawsuit, Thea Lee, AFL-CIO deputy chief of staff, told The Fiscal Times, “We think that it is ill-advised.” She said labor has made its position clear to the White House. “Our goal is to be in communication with the White House at all times. When we like something, we say so. When we don’t like it, we say so.” The lawsuit stunned AT&T officials, who apparently assumed the proposed $39 billion deal would sail through without objections from federal watchdogs. AT&T may have been lulled into complacency because Obama last January picked as his new chief of staff William Daley, the former president of SBC Communications, which merged with AT&T. But the White House insists it steered clear of any involvement in the anti-trust decision – and for good reason. Interfering with a government law suit is risky business. One of the many scandals that plagued President Nixon before he was toppled by Watergate was when he ordered the Justice Department to drop its antitrust case against International Telephone & Telegraph (ITT), which had promised a $400,000 contribution to his reelection campaign. Obama officials already have their hands full trying to tamp down criticism that the Energy Department and White House were guided by political consideration in awarding $535 million in federal loan guarantees to Solyndra, the now-bankrupt solar firm. “The White House did not have a role in making the [antitrust] decision. The Justice Department made the decision,” White House press secretary Jay Carney said last month. “They look at the factors, they make the call.” The Obama White House did not respond to questions from The Fiscal Times to comment on the political fallout from the lawsuit. A Justice Department spokeswoman said, “The department made its decision based on the facts and the law. There was no influence from the White House.” The proposed merger would create the largest wireless company in the country, one that would combine AT&T's 98 million customers with T-Mobile's 34 million users, for a total of 132 million subscribers. AT&T is currently second to Verizon in the number of wireless subscribers, and T-Mobile is fourth. The Justice Department said the merger would lead to a situation in which just two companies -- the AT&T-T-Mobile combination and Verizon Wireless -- would dominate the mobile market. The new AT&T and Verizon would account for more than two-thirds of wireless subscribers and 78 percent of the wireless industry's revenues. The case is now slated to begin early next year—just as the political season heats up and just as Obama will be counting on the vast labor grassroots network to knock on doors, man phone banks and canvass voters. It’s possible, though, that AT&T may spare itself and the White House the agony of a protracted court case by offering concessions to address the government’s concerns that the T-Mobile deal is anti-competitive and could cause the prices of wireless service to rise. But that would require AT&T to sell up to 25 percent of T-Mobile business, including airwaves and customers, to avoid a situation in which just three companies controlled 90 percent of the U.S. wireless market. Even as Obama might fear fallout from the case, consumer activists argue that the lawsuit is a simple recognition that this proposed merger crosses a line the Justice Department simply could not ignore. “If you talk to any independent antitrust person and give them the numbers, their reaction is there is no way that…Justice could allow it to go unchallenged,” said Andrew Schwartzman, senior vice president and policy director of Media Access Project, a public interest law firm. Even as Obama might benefit politically from a speedy resolution of the case, consumer advocates dismiss that possibility. “I don’t see settlement as remotely possible,” Schwartzman said. “Absent some really adverse pretrial ruling by the judge or some unusual event, I regard the prospect of a settlement here as extremely low. If you read the Justice Department’s [sweeping, detailed] complaint—it was not filed as part of [a strategy of] forcing settlement discussions.”