Speaker 1: Welcome to the Bloomberg Law Podcast. I'm June Grosso. Every
Speaker 1: day we bring you insight an analysis into the most
Speaker 1: important legal news of the day. You can find more
Speaker 1: episodes of the Bloomberg Law Podcast on Apple Podcasts, SoundCloud
Speaker 1: and on Bloomberg dot com slash podcasts. New York is
Speaker 1: leading a group of states that are set to sue
Speaker 1: to block Timoa's proposed point five billion dollar takeover of
Speaker 1: Sprint on antitrust grounds, putting pressure on the Justice Department
Speaker 1: as it nears a final decision on the merger of
Speaker 1: the two wireless carriers. Joining me is Bloomberg Intelligent Senior
Speaker 1: litigation analyst Jennifer ree So, Jenna, why are the state
Speaker 1: ags suing? Well, they're basically suing because on the basis
Speaker 1: that they believe this deal is more harmful than it
Speaker 1: is hopeful, and that the remedy that's already been decided
Speaker 1: by the FCC and looks like it will be adopted
Speaker 1: by the FCC isn't good enough according to the states. Now,
Speaker 1: they don't know what the Department of Justice is going
Speaker 1: to do, but obviously they believe that even if the
Speaker 1: Department of just this imposes more remedy or additional measures
Speaker 1: on the companies and clears it that that isn't going
Speaker 1: to be good enough. And they basically say, look, this
Speaker 1: is a market of four mobile providers to three, that
Speaker 1: the competition that's posed by an entity like let's say
Speaker 1: a Comcast that might piggyback on the infrastructure of one
Speaker 1: of these isn't good enough, and that not only nationally,
Speaker 1: but also in certain regions, the market shares exceed the
Speaker 1: thresholds that are considered not to be harmful under the
Speaker 1: anti dress guidelines, and that this creates a concentrated market
Speaker 1: that's likely to have harm. But why not wait until
Speaker 1: justice makes the decision? Perhaps they'll block the deal. I
Speaker 1: think that's the question that we're all wondering about. Now.
Speaker 1: Let me just say I believe this likely suggests that
Speaker 1: the States believe the d o J won't block the
Speaker 1: deal because they are in communication and even if they
Speaker 1: don't understand what the d OJ's ultimate decision is, I
Speaker 1: think if they were very assured that the d o
Speaker 1: J was actually going to suit a block, they would
Speaker 1: have waited and they would have joined that complaint because
Speaker 1: that's what's typically done. So this suggests to me it
Speaker 1: in their communications with the Department of Justice and aligning
Speaker 1: with them on the investigation here. They believe that the
Speaker 1: d o J may be getting ready to go ahead
Speaker 1: and clear this deal with the remedy. The deal has
Speaker 1: always seemed tenuous to me. It's clear as one roadblock
Speaker 1: and then it faces another. So, as you mentioned last month,
Speaker 1: the f c C announced support for the deal. Does
Speaker 1: that play at all into the Justice Department's decision whether
Speaker 1: to support the deal or not? You know, it doesn't.
Speaker 1: It doesn't. They'll want to look at the rationale for
Speaker 1: the f CC's decision. But the FCC has a different
Speaker 1: standard than the Department of Justice, So it is conceivable
Speaker 1: that there could be a situation where one of the
Speaker 1: agency's finds that the deal should go through with the
Speaker 1: remedy and the other finds that it's anti competitive. Because
Speaker 1: the FCC has a little bit of a broader standard,
Speaker 1: it can ask whether this is in the public interest,
Speaker 1: and they can look at these issues like the five
Speaker 1: G and development of five G and bringing it to
Speaker 1: all these rural communities, whereas the d o J really
Speaker 1: has to take that and balance that decide whether it's
Speaker 1: merger specific. And you know whether they can do it
Speaker 1: with or without the merger, and then if it they
Speaker 1: do believe that they really need the merger in order
Speaker 1: to do what they say they can do with five
Speaker 1: G whether that exceeds the harm that might be caused
Speaker 1: from going down to three mobile operators. Does the suit
Speaker 1: by the States put pressure on Makon Delraheem, who is
Speaker 1: the head of Justice Department's antitrust division, to block the
Speaker 1: deal or get better remedies. You know, I think to
Speaker 1: some extent it does, because I think that if the
Speaker 1: States go ahead with this and that the companies decided
Speaker 1: to litigate, and then the States win, what will be
Speaker 1: on the table in court will be whatever remedy. So
Speaker 1: let's just say the d o J clears with the remedy, Well,
Speaker 1: they will have to prove the States in court why
Speaker 1: that remedy is insufficient, and if they do, if they
Speaker 1: win this, it makes the d o J look a
Speaker 1: little bit foolish and the FCC because the States have
Speaker 1: now brought the evidence to a judge, a fact finder,
Speaker 1: and they have proven to this judge that even with
Speaker 1: the remedy, this is going to cause harm to consumers.
Speaker 1: And it does make the DJ look like it's a
Speaker 1: lax antitrust enforcer, which of course has been and something
Speaker 1: that has been a concern to many, you know, in
Speaker 1: many industries. Did the States have any new information or
Speaker 1: did they analyze the information that was already there in
Speaker 1: a different way. They would have the same information because
Speaker 1: usually these investigations are aligned, so any documents or data
Speaker 1: the companies turn over to the d o J, it's
Speaker 1: the same documents and data that the States will get.
Speaker 1: They have analyzed this. We don't know yet whether the
Speaker 1: analysis is different than the d o J is because
Speaker 1: the d o J hasn't spoken yet. But what we
Speaker 1: do know is that the States have decided that there
Speaker 1: isn't an appropriate remedy that can fix this. They don't
Speaker 1: believe the FCC's remedy fixes the harm, and apparently they
Speaker 1: don't believe a remedy that the do o J might
Speaker 1: be able to agree with what the companies would remedy
Speaker 1: the harm, because if they did, they would wait and
Speaker 1: see what that is. So the analysis is essentially the same,
Speaker 1: but there's a balancing act that has to happen here.
Speaker 1: In antitrust, it's a very gray area and there's no
Speaker 1: black or white, or yes or no. You have to
Speaker 1: ask what the harm is, and then you have to
Speaker 1: ask what the benefit is, and then you have to
Speaker 1: balance those two against each other. And really, when you
Speaker 1: think about it, that is somewhat subjective. So it's not
Speaker 1: unreasonable that two different entities could come up with two
Speaker 1: different decisions in that. Now, there have been several rumors
Speaker 1: about what d o J might be trying to forge
Speaker 1: as a remedy, including creating another network right when they're
Speaker 1: trying to merge to become one. What do you know
Speaker 1: about some of the remedies that have been floating around. Well,
Speaker 1: first of all, that is the standard. So if the
Speaker 1: DJ is determined that this deal is likely to cause
Speaker 1: harm and likely to violate the antitrust laws, the remedy
Speaker 1: is to recreate the competition, restore the competition that's going
Speaker 1: to be lost by virtue of the deal. So that
Speaker 1: means creating another network, having four networks instead of three.
Speaker 1: So you ask yourself, well, does that make any sense
Speaker 1: for these these companies. It makes sense if their arguments
Speaker 1: are not pretextual, Because if their arguments are not pretextable,
Speaker 1: they're saying what they can do together is far better
Speaker 1: than what they can do individually, and that means what
Speaker 1: they can do together, even if a fourth network is created,
Speaker 1: is still better than what they can do now. So
Speaker 1: it generally to me, would make sense if they really
Speaker 1: believe they need to come together to be a viable
Speaker 1: competitor in five G to Verizon and a T and T.
Speaker 1: What kind of challenges will these companies face if the
Speaker 1: deal doesn't go through. Well, you know, Sprint has said
Speaker 1: if the deal doesn't go through, obviously that they're in
Speaker 1: difficult financial position. My colleague John Butler has done a
Speaker 1: lot of analysis on this because he does believe T
Speaker 1: Mobile will actually be in a fine position going it alone.
Speaker 1: They'll continue to develop five G, they'll continue to innovate
Speaker 1: and put capital into their innovation in R and D,
Speaker 1: that Sprint may be in a worse position without getting
Speaker 1: some injection of capital. We have talked about how antitrust
Speaker 1: is just a legal area that keeps on giving what's
Speaker 1: the latest. Well, obviously the latest is what's happening with
Speaker 1: big tech. And you know the fact that it looks
Speaker 1: like the FTC and d o J may be investigating
Speaker 1: were ready to investigate any of Google, Facebook, Apple, and Amazon,
Speaker 1: So you know that's a big deal because an investigation
Speaker 1: can turn into nothing, but it can also turn into
Speaker 1: a lawsuit and actions taken. And we also have UM
Speaker 1: House Judiciary Committee hearings that started today and they're going
Speaker 1: to be looking at these issues with the mind of legislating.
Speaker 1: So that's something else down the road that that could happen,
Speaker 1: a new antitrust legislation or privacy legislation, or something completely
Speaker 1: separate from both. I don't think you can go on
Speaker 1: vacation this. I don't think so either. That's Bloomberg Intelligence
Speaker 1: Senior Litigation analyst Jennifer Rey and for more of our
Speaker 1: analysis going to be I go on the Bloomberg Terminal.
Speaker 1: Thanks for listening to the Bloomberg Law Podcast. You can
Speaker 1: subscribe and listen to the show on Apple Podcasts, SoundCloud,
Speaker 1: and on Bloomberg dot com slash podcast. I'm June Brolso
Speaker 1: this is Bloomberg