Wireless Mergers Will Draw Scrutiny, Antitrust Chief Says

WASHINGTON â€" The nation’s leading antitrust enforcer said this week that it would be difficult for the Justice Department to approve a merger among any of the top four wireless phone companies, casting doubt on recent speculation that T-Mobile and Sprint might consummate a deal in coming months.

William J. Baer, assistant attorney general for the antitrust division, said in an interview that further consolidation among the top wireless carriers would face intense scrutiny because consumers have enjoyed “much more favorable competitive conditions” since the division blocked a proposed merger between AT&T and T-Mobile in 2011.

“It’s going to be hard for someone to make a persuasive case that reducing four firms to three is actually going to improve competition for the benefit of American consumers,” he said, without referring to any specific merger proposal. “Any proposed transaction would get a very hard look from the antitrust division.”

Mr. Baer said that the division would similarly scrutinize any proposed merger among cable television companies. Analysts say that the cable market has evolved in recent years from a largely local market to a national one, where advertising, programming and sometimes subscription rates are set nationally.

This month, Charter Communications offered $37.8 billion to acquire Time Warner Cable, the country’s second-largest cable operator. Time Warner rejected the offer as inadequate.

Since then, Comcast has been reported to be interested in buying some of Time Warner Cable’s markets from Charter if the deal goes through.

That kind of merger and divestiture proposal has been common in recent years, including most recently in the settlement of the government’s antitrust case that sought to block US Airways’ merger with American Airlines. There, the two airlines agreed that the combined carrier would give up a certain number of gates as well as takeoff and landing slots at certain busy airports, including Washington’s Reagan National, La Guardia in New York and O’Hare in Chicag..

But Mr. Baer is expected to warn a group of antitrust lawyers on Thursday that the antitrust department too often sees merger proposals that include little more than token efforts to deal with competitive issues.

Those fig leaf offers are often an attempt to disguise what is essentially an effort to eliminate a big market participant, Mr. Baer is expected to say, while giving up something to a tiny competitor that, in truth, does not play a significant role in industry competition.

Those types of efforts are unlikely to succeed, Mr. Baer is expected to say Thursday evening at a meeting of the New York State Bar Association.

Mr. Baer is also expected to make a forceful argument that the Justice Department’s antitrust actions over the last five years have upheld the promises made by Barack Obama in the 2008 campaign.

The division filed 339 criminal antitrust cases over the last five years, an increase of more than 60 percent over the previous five-year period. Those cases elicited $4.2 billion in criminal fines, according to Justice Department statistics.

In its recent antitrust lawsuit involving e-books, the antitrust division said in court papers that after Apple made an agreement with publishers on e-book prices, the price of e-book best-sellers rose to at least $12.99 from $9.99.

Since it began an action against Apple and the publishers, the Justice Department contends, the average price of the best-selling e-books has dropped to about $6.

Similar benefits have been seen in the wireless phone business, Mr. Baer is expected to say. Since the AT&T-T-Mobile deal was abandoned, T-Mobile has rebounded thanks to aggressive investment in its network and new pricing plans that reduce handset prices and offer cheaper subscriptions.

In the third quarter of 2013 alone, T-Mobile signed up nearly 650,000 new subscribers. Other wireless companies have responded to T-Mobile’s offers with aggressive pricing of their own.

“We’ve looked long and hard at the wireless industry,” Mr. Baer said in the interview. “We’ve seen the benefits over the last two and a half years of four-firm competition. Experience teaches us that the market is thriving and consumers are benefiting from the current competitive dynamic.”

Two of Mr. Baer’s deputies gave speeches last week at a conference focused on antitrust and intellectual property.

One, Renata B. Hesse, deputy assistant attorney general for the antitrust division, told an audience in Silicon Valley that the division has often found “compelling evidence” in internal company documents that indicates anticompetitive behavior among companies proposing to merge.

Often, company executives have written in emails and other documents about how the previous rivalry between companies “was an important driver of innovation,” Ms. Hesse said. “We are concerned by evidence that shows that a firm being acquired has been a particularly innovative or disruptive competitor.”