September 01, 2011
United States v. AT&T: Is it About the Jobs?
Posted by Christine Hurt

All the antitrust profs must be excited as they can be -- an actual case of the DOJ suing to block a merger!  Wow!  The Department of Justice has sued to stop the merger of AT & T, Inc. and T-Mobile USA, Inc. on the grounds that the merger will have anticompetitive effects.  The Complaint is here.  The Complaint alleges the things you expect:  the firms operate in a nationwide market, there are four big players in the market, the merger would take this from four to three, and the effect will be higher prices, poorer services and decreased innovation.

All that's great, and the antitrust folks can bring out their eyeshades and calculate concentration, etc.  But, what interested me was a statement that is being ascribed to Deputy Attorney General James Cole yesterday at a press conference regarding the lawsuit: 

“The view that this administration has is that through innovation and through competition, we create jobs,” said James M. Cole, the deputy attorney general, at a news conference announcing the lawsuit. Mergers usually reduce jobs through the elimination of redundancies, he said, “so we see this as a move that will help protect jobs in the economy, not a move that is going in any way to reduce them.

Note that this may have come up during Q & A, as it is not in Cole's published remarks.

This is very interesting.  Yes, the government can use its powers to block mergers to foster competition and the good things it brings to consumers:  lower prices, better quality, innovative products and services.  However, after my exhaustive research questioning two antitrust professors in the hall, I don't believe that preserving jobs is a valid use of this power.  Almost all mergers result in fewer jobs, so basically no merger should then go through.  So why did Cole bring up jobs?  (Admittedly, he could have merely been responding to a particular question about jobs or in response to the dubious argument that AT&T advanced that the merger will create jobs.)

I can think of two reasons.  First, it could be that the merger is anticompetitive and just a bad idea.  But, the administration doesn't want to seem like it's anti-business to voters and/or may want to take the opportunity to look like the protector of jobs.  So, let's throw in that the administration is about job creation and preservation, Mr. and Ms. Voter.  Second, it could be that the merger isn't all that anticompetitive or at least not any mroe than the rest that have been let throught in the past decade or two.  But, the administration sure doesn't want any more jobs to be included in any of those pesky "jobs lost during this administration" counts.  So, let's hang on to those jobs during this election cycle, even if it means stopping this big merger.  The first scenario is probably the more accurate one, but I still think it's interesting to think about.

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