Proposed At&t Merger with T-Mobile

AT&T and T-Mobile Merger is a direct horizontal merger between competitors that raises a major anti-trust dilemma. Should the government allow the marketplace to move from four major competitors to three nation-wide competitors? If the merger happens AT&T would get more spectrum in the marketplace along with T-Mobile customers.

Although this clip provided many different opinions on the positive and negative implications of the merger, I believe that Parul Desai opinion was true. She explained that the merger of AT&T and T-Mobile would control 80% of the mobile service market. This would be the highest concentration level that is not seen in any other industry today, including the oil industry. With this amount of control, consumers will endure a limited amount of control within the market. The merger would also create limited options for consumers that would create a raise in prices for all cellular competitors.

However one of the biggest problems that Parul Desai mentioned is that by eliminating the fourth largest competitor in the marketplace, there would little incentive to innovate. In other words, AT&T would only concentrate on production orientation; mass production instead of consumer needs. This has caused major problems in the past for dominant industries. An example would be the railroad industry, they did not innovate and their industry slowly died out to the automobile.

Creating huge conglomerates like the AT&T and T-Mobile merger is why the Department of Justice (DOJ) brought up the point of the Anti-Trust Laws. Historically the DOJ reviews transactions in cellular market areas. Because of this there is only a granular review of the market place. By allocating market concentration for the entire nation with the Herfindahl-Hirshman Index (HHI) they are able to make a more accurate representation. These laws prohibit firms from having too much control over consumers. It keeps a balance between the two.

Recently, the merger was denied by the DOJ. I strongly support this decision. AT&T however is appealing the decision. I believe that it the decision will be upheld because the market share would just be too high.