The Department of Justice (“DOJ”), joined by seven states, has commenced proceedings against AT+T, T-Mobile and T-Mobile’s parent, Deutsche Telekom, to block AT+T’s US$39 billion acquisition of T-Mobile.  The proceedings will be heard in February 2012, approximately five months after the DOJ filed its complaint.

Commentators say that the recent addition of the states to the proceedings may make it more difficult for AT+T and T-Mobile to settle with the DOJ, as it shows that states want to make sure that the DOJ does not settle on bad terms.  On the other hand, a number of House of Representatives Democrat members have urged President Obama to settle the DOJ’s proceedings, claiming that the acquisition could create employment for thousands of Americans.

AT+T and T-Mobile are the second and fourth largest providers of mobile wireless telecommunications services in the US, Sprint Nextel is the third largest and Cellular South is a regional carrier.  Following the acquisition, AT+T would be the largest provider of mobile wireless telecommunications services in the US, and there would be three, rather than four, nationwide providers of those services.

The DOJ has alleged that the proposed acquisition would substantially lessen competition and increase the risk of anticompetitive coordination as a result of the number of nationwide providers of mobile wireless telecommunications services being reduced.  The alleged effect is that “the important price, quality, product variety, and innovation competition that an independent T-Mobile brings to the marketplace,” would be removed, with the result that customers “likely will face higher prices, less product variety and innovation, and poorer quality services due to reduced incentives to invest.”

In response, AT+T and T-Mobile have submitted that the deal would be good for consumers as the merged firm will be more than the sum of its parts, leading to increased output, higher quality service, fewer dropped calls, and lower prices in an already competitive market in which T-Mobile has been losing customers.

In Australia, acquisitions of shares or assets that have the effect, or likely effect, of substantially lessen competition are prohibited by section 50 of the CCA.  To adopt the words of the Act, it appears that the DOJ considers T-Mobile to be a “vigorous and effective competitor”, referring to T-Mobile as a “challenger brand” and independent, low-priced rival.

Separately to the DOJ’s proceedings, Sprint Nextel and Cellular South have each commenced proceedings against AT+T, T-Mobile and Deutsche Telekom.  AT+T has filed a motion to dismiss Sprint Nextel’s complaint, arguing that Sprint Nextel, as a competitor, does not have standing to challenge a horizontal merger of wireless service providers and has not plausibly argued that the acquisition will harm Sprint Nextel as a buyer of services or equipment.