DOJ Antitrust Chief Makan Delrahim, along with FTC Chair Joe Simons, appeared at a Senate Antitrust Oversight Committee yesterday. Most of the questioning was on the various antitrust efforts directed to constrain the power of big tech companies, but there were some questions on the approval of the T-Mobile/Sprint deal. Some, such as noting the hotel preferences of T-Mobile executives, had political meaning but, in our view, no meaning in terms of the trial. We were, however, struck by three comments Mr. Delrahim made, one of which we think is likely to be used at the trial. The other two probably won’t but nonetheless, in our view they call into question the strength of some of the companies’ argument for the deal.
He undercut the importance of the FCC’s order in Clayton Act litigation.
T-Mobile’s lawyers have suggested in a number of filings that they will rely on the upcoming FCC order approving the deal as evidence that the Judge should also approve the deal. One of the questions for investors is how strongly will the Judge weigh that order in considering the evidence.
Mr. Delrahim suggested that the weight should be limited. In answering a question from Senator BlumenthalThe exchange can be found at 2:51 of the hearing. about the FCC’s informal approval prior to the DOJ obtaining additional concessions involving DISH. In his answer, Mr. Delrahim appeared to undercut the relevance of the FCC order to Clayton Act litigation, saying, “the FCC doesn’t look at the same matter or the markets as we [DOJ] do under Section 7 of the Clayton Act. They [the FCC] are an independent agency that has a different statutory construct and mandate…We were prepared to sue [in T-Mobile-Sprint] if we didn’t receive the remedies we did. Under antitrust law, the FCC’s conclusions to approve under the public interest test would not have had any precedential effect had we opposed the transaction, and I was prepared to do that had we not got the remedies we did.”
In our view that undercuts the relevance of the FCC conclusions for the Judge. One might say that Mr. Delrahim was trying to imply that the order does have precedential affect in light of the DOJ’s approval but the logic of that is pretty weak. Mr. Delrahim’s odd phrasing simply amounts to saying that the DOJ is the only relevant competition judge among the two. Moreover, by saying that without the remedies, the DOJ would have opposed the deal, Mr. Delrahim is implicitly undercutting the competition analysis of the three FCC commissioners who voiced approval of the deal before the DOJ obtained those concessionsMuch like Mark Antony with Brutus, Mr. Delrahim did praise Chairman Pai’s antitrust expertise before implicitly criticizing his decision..
He suggested that DISH is a questionable entity in terms of compliance.
Mr. Delrahim stated that if DISH had not agreed to the deal, DISH would “have ended up in litigation over its spectrum.” We have no idea if Mr. Delrahim is correct; indeed we suspect the opposite, as we believe DISH is on track to complete its Narrowband IoT network on time and the FCC, despite private rumblings, has never publicly said that the Narrowband deployment does not meet the build-out requirements.
But whether he is factually correct or not, what is striking to us is that he appears to be saying that DISH’s lack of adherence to a commitment to build-out would have justified the FCC bringing a lawsuit against the company. Given that the remedy that Mr. Delrahim approved to fix competitive harms has to be “timely, likely and sufficient” (LINK), it is odd for Mr. Delrahim to suggest that entity on which he is relying to meet those criteria has a track record of not living up to its commitments.
He justified the deal on social policy grounds.
Finally, we note that Mr. Delrahim justified the deal as a “big win for rural consumers.” We have no view on the correctness of that assertion but simply note that a public interest benefit to one geographic market is not relevant to the Clayton Act analysis of whether merger substantially lessens competition in a relevant product and geographic market. Mr. Delrahim can be forgiven for providing a political answer to an institution (the Senate) that is significantly over weighted to rural interests and in other answers, he gave more traditional justifications, such as “increasing capacity.” Still, we were struck by how he veered to defend the deal in a way that we thought would have no resonance with the Judge actually presiding over the trial.
To be clear, none of these materially change the odds and we are expecting filings from experts that will be more important. Still, we thought it interesting that Mr. Delrahim did not do a better job, under legal precedent, of justifying his decision and moreover, undercut one of the key arguments we expect the company lawyers to make.