Speaker 1: Welcome to the Bloomberg Law Podcast. I'm June Grosso. Every
Speaker 1: day we bring you insight and analysis into the most
Speaker 1: important legal news of the day. You can find more
Speaker 1: episodes at the Bloomberg Law Podcast, on Apple Podcasts, SoundCloud,
Speaker 1: and on Bloomberg dot com slash podcasts. It's a novel
Speaker 1: trial that will determine the players in the nation's wireless
Speaker 1: market whether that market will have the current four carriers
Speaker 1: or drop to three. Thirteen states, led by New York
Speaker 1: and California, are suing to block the twenty six point
Speaker 1: five billion dollar merger of T Mobile, the third largest carrier,
Speaker 1: and Sprint, the fourth largest, arguing that it will drive
Speaker 1: up prices, reduce the level of service, and violate antitrust laws.
Speaker 1: The Justice Department in the Federal Communications Commission gave their
Speaker 1: blessings to the deal after the companies agreed to make
Speaker 1: some concessions. Joining me as Spencer Waller, a professor at
Speaker 1: Loyola University Law School and director of the Institute of
Speaker 1: Consumer Antitrust Studies, is it on precedented for the states
Speaker 1: to reject a settlement by the Feds and sue to
Speaker 1: block the merger. It's not unprecedented, but it's very very
Speaker 1: rare that the Streame Court for a long time has
Speaker 1: said that the States operate independently from the Feds in
Speaker 1: the antitrust area, and they can challenge things that the
Speaker 1: Feds don't challenge at all, or that they settle in.
Speaker 1: The States believe that they have a have a strong case,
Speaker 1: but it's been few and far between. By and large,
Speaker 1: the States prefer to work with either the FTC or
Speaker 1: the do J and work together in a coalition to
Speaker 1: attack mergers of this kind. How can removing a low
Speaker 1: cost rival from a highly concentrated industry not have a
Speaker 1: negative effect on competition? What T Mobile sprints argument at trial? Well,
Speaker 1: you know, it's tough. T Mobile has played a really
Speaker 1: unprecedented role in the cell phone industry as the maverick,
Speaker 1: as the disruptor, as the one that not only was
Speaker 1: aggressively competing on price and service and some other things,
Speaker 1: but also was the carrier in particular that was keeping
Speaker 1: a T and T and Verizon on their toes and
Speaker 1: forcing them to respond and kind in numerous markets. So
Speaker 1: the theory is strong. It was part of why prior
Speaker 1: acquisitions of the mobile were challenge It was part of
Speaker 1: why this particular murder was of great concern four years
Speaker 1: ago under the Obama administration. The best I can tell
Speaker 1: you is they're positioning this as a merger that would
Speaker 1: create a strong number three and allow them to better
Speaker 1: compete with A T and T and Verizon. That is
Speaker 1: the story that they're pitching in their documents and their
Speaker 1: testimony and trial. When the FEDS gave their blessing to
Speaker 1: the merger, they required certain concessions. What were those concessions
Speaker 1: that led the FEDS to say, Okay, this deal can
Speaker 1: go through. It's not unusual for the FEDS to approve
Speaker 1: a deal subject to restructuring. It is more often. You
Speaker 1: could imagine, let's say, take supermarkets. If there's a merger
Speaker 1: that creates a very highly concentrated local market, you could
Speaker 1: sell off some supermarkets to another national chain and keep
Speaker 1: things roughly the same. What's unusual about this deal is
Speaker 1: that the divestitures are this rickety package of assets, spectrum,
Speaker 1: legal rights, and other things. So basically, the two companies
Speaker 1: are being forced to or agreed to spin off their
Speaker 1: prepaid cellular plans to dish Um, the satellite TV provider
Speaker 1: that does own some spectrum and has some plans to
Speaker 1: enter the cell phone market. In addition, there's some spectrum transfers.
Speaker 1: There is provision of services so that the new dish
Speaker 1: cell phone entity can use the facilities of the two
Speaker 1: merging parties so that all the calls can be completed.
Speaker 1: That's basically the package. And this is really a lot
Speaker 1: differently than just selling off some supermarkets and having a
Speaker 1: new operator. This is getting someone who's not been in
Speaker 1: the business before and will be dependent on the very
Speaker 1: parties who are merging in order to compete with these
Speaker 1: parties and with the two large carriers that are already
Speaker 1: dominating the market. So on Tuesday, the States presented company
Speaker 1: internal and analysis done before reaching the agreement with Sprint,
Speaker 1: showing the deal as a way to reduce competition and
Speaker 1: raise prices. But while on the stand, Deutsche Telecomms chairman
Speaker 1: testified that sell customers will see lower prices if the
Speaker 1: deal goes through. He said, we commit that prices are
Speaker 1: going down in this market. So how does a judge decide, Well,
Speaker 1: just you know, as a former trial lawyer, all I
Speaker 1: can tell you is documents that were written, you know,
Speaker 1: contemporaneously to before litigation and you know by the parties
Speaker 1: in the ordinary course of their business are are just
Speaker 1: you know, it's very traditional evidence, no matter what kind
Speaker 1: of a case. And it's very compelling because no one
Speaker 1: is looking over their shoulder. Uh, They're going about their
Speaker 1: business and they're talking to each other presumably in in
Speaker 1: in candor. And that's very different than um testimony on
Speaker 1: the stand after a complaint has been filed. The judge
Speaker 1: is going to have to weigh that, Uh, this is
Speaker 1: not a jury trial. The judge gets to decide what
Speaker 1: is credible and what is convincing. And I think having
Speaker 1: these documents are are very helpful to the state's case,
Speaker 1: although it is not by itself the end of the case.
Speaker 1: They will need other testimony from the companies, from competitors,
Speaker 1: from customers, from expert witnesses that talk about the effects
Speaker 1: of this further consolidation of a market where there are
Speaker 1: only four national players. This will go down to three
Speaker 1: plus the possibility that Dish will eventually become to some
Speaker 1: extent of a fourth player coming back into the market.
Speaker 1: The judge takes all this into consideration, but is he
Speaker 1: going to have to rely most on what analysts say
Speaker 1: is going to happen. Well, normally speaking, companies don't get
Speaker 1: a free pass because they promised not to raise prices. Uh.
Speaker 1: What they're trying to do is predict the likely effects
Speaker 1: will they harm or hurt consumers as the main focus
Speaker 1: of the inquiry, and promise not backed up by other evidence, UM,
Speaker 1: isn't by itself going to be compelling. And the States
Speaker 1: also need more than just a couple of hot doc
Speaker 1: meants to make their case. So both sides really have
Speaker 1: to lay out it's a crystal ball exercise because by definition,
Speaker 1: this deal hasn't happened yet. Both sides are trying to
Speaker 1: look into the future and say, here's the most likely scenario.
Speaker 1: And as you mentioned, a judge is going to make
Speaker 1: the decision in this case, not a jury, and he
Speaker 1: told them to skip their opening statements, trim the witness
Speaker 1: list to avoid beating him over the head with testimony.
Speaker 1: Explain the difference between a judge and a jury in
Speaker 1: a case like this. Sure, UM, now I don't know
Speaker 1: this uh judge's background, but there's two kinds of cases.
Speaker 1: There's UH, there is a there's a jury trial where
Speaker 1: you have either six between six and twelve jurors and
Speaker 1: a civil case, who who you know? Get here, opening statements, here,
Speaker 1: all the evidence to get jury instructions, get final arguments,
Speaker 1: and then go back in the room where we don't
Speaker 1: know exactly, uh, you know what happened, um, and then
Speaker 1: they come out with a with a verdict that doesn't
Speaker 1: have to be unanimous in a in most civil cases,
Speaker 1: a bench child. This is not a case about any
Speaker 1: asking anybody for damages. No one's going to jail. This
Speaker 1: is just whether or not the judge will issue a
Speaker 1: preliminary injunction stopping this transaction from going forward or not.
Speaker 1: So the judge um will decide all this and has
Speaker 1: to put forward um conclusions of law and findings of fact.
Speaker 1: You know that that takes time. So the judge doesn't
Speaker 1: need the oratory from the parties. Uh, you know in
Speaker 1: the opening statements and the full flowery presentations that that
Speaker 1: often go to a go to a jury. So the
Speaker 1: judge has a fair amount of discretion in any kind
Speaker 1: of case to streamline what amount of time and number
Speaker 1: of witnesses and documents it can be introduced in the
Speaker 1: bench trail, and it usually goes faster because you don't
Speaker 1: have to worry about the jury. You don't have to
Speaker 1: send the jury out when there's a legal argument. You
Speaker 1: don't have to have arguments about evidence and uh, and
Speaker 1: then come back, you know, with the jury in the
Speaker 1: box to then hear whatever the the dispute of that is.
Speaker 1: So you know, the judge has to make all the decisions.
Speaker 1: And there are very few district court judges who have
Speaker 1: a lot of experience with antitrust cases. They're just one
Speaker 1: of dozens and dozens of types of cases that come
Speaker 1: before an average federal judge. On average, each judge has
Speaker 1: a between two and four cases, depending on where they're
Speaker 1: sitting in how busy they are at any particular moment. Uh.
Speaker 1: This judge has a has a distinguished background, but but
Speaker 1: he to my knowledge that never worked in the nitrust
Speaker 1: area in neither private practice or in government before he
Speaker 1: became a judge. And um, you know, these are these
Speaker 1: are tough cases and the probably it's one of the
Speaker 1: very few ones in the nitrust area he has heard
Speaker 1: or will ever hear in his time on the bench.
Speaker 1: So you know, he uh, he's going to have to
Speaker 1: go through and here some um economic expert testimony as
Speaker 1: to what the market looks like, how competition will be affected.
Speaker 1: Someone is going to have to introduce evidence that either
Speaker 1: explains or debunks the efficiencies on the technological progress that
Speaker 1: the party's claim is going to result from this deal,
Speaker 1: and then the judge who will have to in short
Speaker 1: order issue his ruling, although that wouldn't necessarily come from
Speaker 1: the bench at the end of the trial itself. Thanks
Speaker 1: Spencer that Spencer Waller of Loyola University Law School. Thanks
Speaker 1: for listening to the Bloomberg Law Podcast. You can subscribe
Speaker 1: and listen to the show on Apple Podcasts, SoundCloud, and
Speaker 1: on bloomberg dot com slash podcast. I'm June Grosso. This
Speaker 1: is Bloomberg