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Speaker 1: Live from the Bloomberg Interactive Broker Studio. T Mobile suffered

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Speaker 1: a setback and it's bid for regulatory approval of its

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Speaker 1: takeover of Sprint after failing to win over the Justice

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Speaker 1: Department with a remedied package, putting pressure on the companies

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Speaker 1: to offer more concessions. Joining me is Jennifer Re, Bloomberg

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Speaker 1: Intelligence Senior Litigation analyst jen How significant is this setback? Well,

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Speaker 1: you know, we don't know yet. It could be significant

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Speaker 1: because obviously the big there are two big hurdles here,

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Speaker 1: FCC and d o J. And even if they got FCC,

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Speaker 1: if they don't get d J, it doesn't matter, you know,

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Speaker 1: they can't close the deal. And we don't know exactly

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Speaker 1: what the d o j's issue is. If it's that

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Speaker 1: they simply need a little bit more than what was

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Speaker 1: offered FCC, and it's something that T Mobile and Sprint

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Speaker 1: can do, they may still be able to get d

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Speaker 1: o J approval and go forward with this deal, assuming

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Speaker 1: that the state attorneys general don't also stand in their way.

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Speaker 1: But if they have problems that extend beyond what the

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Speaker 1: parties are are willing to do, such as you know,

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Speaker 1: a much greater package divested that maybe be economically unviable

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Speaker 1: for T Mobile to to go ahead and go forward

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Speaker 1: with then it could be a big problem. So, just

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Speaker 1: to be clear, the deal cleared the hurdle of the

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Speaker 1: f c C after the companies offered a package of concessions.

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Speaker 1: Explain why and how the concerns of the FCC differ

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Speaker 1: from those of the Justice Department. Well, first, I should

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Speaker 1: say it hasn't formerly formerly formally sorry cleared the f

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Speaker 1: c C. It looks like it will. They just need

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Speaker 1: a vote of three out of five commissioners, and three

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Speaker 1: have already said that they're behind it, so it will

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Speaker 1: be adopted by the commission. There's a real difference in

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Speaker 1: the standards that the two agencies use um to evaluate

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Speaker 1: a deal like this. What the Federal Communications does is

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Speaker 1: they ask whether the deal is in the public interest,

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Speaker 1: and they it's a pretty flexible standard and they can

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Speaker 1: consider a lot of aspects of the deal, including some

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Speaker 1: of these promises that the companies have made to them,

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Speaker 1: like expanding in rural areas and and getting into five

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Speaker 1: g across the country and in rural areas, the divestiture,

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Speaker 1: and also promising to keep their prices low for three years,

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Speaker 1: they can consider those sorts of things and and think

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Speaker 1: about what it will bring to the communications markets, whereas

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Speaker 1: the Department of Justice has a little bit of a

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Speaker 1: more narrow standard and it's based in economics. All they're

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Speaker 1: doing is asking whether the deal could potentially have an

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Speaker 1: anti competitive effect in a market that they defined Marketer markets,

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Speaker 1: and this usually means could it increase prices, could it

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Speaker 1: reduce output, reduced innovation, or reduced choice. When this deal

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Speaker 1: was first announced, it seemed to be uphill because you're

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Speaker 1: combining the number three and number four wireless carriers, you're

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Speaker 1: leaving just three national players. How can that not hurt competition.

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Speaker 1: I'm surprised they've gotten this far, you know. I think

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Speaker 1: everybody's need jerk reaction, including mine, was to say, really,

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Speaker 1: they're going to try this again, because if you remember,

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Speaker 1: this deal or similar deal was attempted in the past

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Speaker 1: and they couldn't get it through, get across the line.

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Speaker 1: But the issue is that they're going to look a

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Speaker 1: lot deeper into whether it's just a four to three.

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Speaker 1: They're gonna look at all of the facts. So they're

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Speaker 1: going to ask, first, what are the markets, what are

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Speaker 1: the market shares? What are the concentrations in those markets

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Speaker 1: if we allow the merger to go through, And what

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Speaker 1: are the pro competitive consumer benefits that could come out

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Speaker 1: of this if we let the merger go forward. And

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Speaker 1: within the Department of Justices guidelines, it says that even

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Speaker 1: if a deal has the potential for anti competitive effects

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Speaker 1: i e. A price increase, if there are extremely strong

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Speaker 1: and very identifiable merger specific efficiencies that will bring consumer

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Speaker 1: benefits and those could outweigh this potential for anti competitive effects,

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Speaker 1: the Department of Justice can still clear that deal. So

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Speaker 1: these are the kinds of things that they dig into

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Speaker 1: when they investigate for a year and they look at

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Speaker 1: this and this is why just the question of four

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Speaker 1: to three, how could it go through? That's why it

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Speaker 1: goes beyond that. Now, suppose the Justice Department decides it

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Speaker 1: wants to block the merger. It's going to go to

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Speaker 1: a judge to try to block it. Will the fact

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Speaker 1: that the f c C has approved the merger make

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Speaker 1: a difference there? You know, I think it certainly will,

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Speaker 1: because the FCC literally is saying affirmatively, we think this

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Speaker 1: deal is in the public interest. We think it's a positive,

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Speaker 1: a good thing for people. So the Department of Justice

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Speaker 1: is going to have to explain that away. Now. As

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Speaker 1: I said, they do have different standards and they look

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Speaker 1: at these deals very differently, and they have come out

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Speaker 1: differently in the past in terms of how they've evaluated

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Speaker 1: a deal and what that deal's effect will be. So

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Speaker 1: I think, you know, it's a little bump for the

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Speaker 1: Department of Justice in court, but but it doesn't mean

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Speaker 1: that they would automatically lose. Now, as you mentioned states

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Speaker 1: attorneys general, they've signaled, more than a dozen have signaled

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Speaker 1: that they may block the deal, try to block the

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Speaker 1: deal even if the Justice Department clears it. What would

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Speaker 1: that look like? So the states, just like the Department

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Speaker 1: of Justice, can go to court under the same exact

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Speaker 1: statute that the Department of Justice uses to seek to

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Speaker 1: block a deal. But you know, in this case, most

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Speaker 1: of the states, at least what's been reported is that

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Speaker 1: their issue is primarily in the segment for prepaid consumers,

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Speaker 1: and this is an area where the companies have made

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Speaker 1: a lot of promises to the Federal Community Patient's Commission,

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Speaker 1: including selling off a brand. And it may be that

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Speaker 1: given the promises made to the FCC, the states at

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Speaker 1: least some of them back off and are willing to

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Speaker 1: accept that. I suspect that what the states will do

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Speaker 1: is agitate a little bit more to try to get

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Speaker 1: something more for their state or something very specific to

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Speaker 1: their state, like ensuring you're going to cover a certain

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Speaker 1: percentage of the rural consumers in my state. And if

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Speaker 1: they can get something like that, I would think that

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Speaker 1: they wouldn't sue. Is there any timeline here or the

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Speaker 1: d o J just takes its time. The d o

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Speaker 1: J probably has a timing agreement with the companies. They

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Speaker 1: do have a statutory timeline, which is normally thirty days

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Speaker 1: after the parties have finished complied with a second request.

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Speaker 1: Now that probably happened months and months and months ago,

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Speaker 1: and so what that means is they have a timing

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Speaker 1: agreement with the companies. The companies have not said what

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Speaker 1: that timing agreement says, so we don't know if they

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Speaker 1: have an agreement when that agreement ends, or if that

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Speaker 1: agreement is open ended. So it's a little bit unclear,

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Speaker 1: but I suspect they're probably going to say something fairly soon,

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Speaker 1: given the FCC's announcement. Just briefly, because we only have

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Speaker 1: a minute here, Uh, the upcoming hearing on the CVS

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Speaker 1: ETNA matter, where does that stand? You know, that's a

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Speaker 1: really interesting case in the world of antitrust law because

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Speaker 1: this judge is allowing testimony at that three day hearing

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Speaker 1: on the harm that could potentially be caused by the deal.

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Speaker 1: And really that kind of hearing is meant to just

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Speaker 1: ask whether the remedy fixes the harm identified with the

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Speaker 1: d o J in their complaint. But what the judge

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Speaker 1: is doing there is asking, well, did they identify the

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Speaker 1: right harm? And that's really going to be interesting to

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Speaker 1: see what happens. It's it's quite unprecedented June, so we

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Speaker 1: will be talking to you about that coming up. That's

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Speaker 1: Jennifer Ready, Bloomberg Intelligence Senior Litigation Analysts. For more of

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Speaker 1: Jen's analysis, go to b I go on the Bloomberg

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Speaker 1: terminal