The legal issues that relate to mergers and acquisitions (M&A) of businesses.

Comptel has filed comments in connection with Tunney Act proceedings pending in United States v. SBC Communications, Inc., which involved SBC's merger with AT&T, and United States v. Verizon Communications, Inc., which involved Verizon's merger with MCI. When the government proposes an antitrust consent decree, as it did in these cases, a court cannot enter it as final until it has reviewed it and made a finding that the decree is in the "public interest" pursuant to the Tunney Act. The government proposed two consent decrees--one for each merger.  Comptel apparently opposes the entry of both.

In its response to Comptel's opposition, the Justice Department argues that the government has met the requirements of the Tunney Act by providing the public with all of the documents and information required by the statute. The government defended its investigation of the proposed mergers and the consent decrees:

• that the government properly defined the relevant geographic market as individual buildings because "markets are properly defined based on what options a customer faces" and as "customers for local private lines can select only from the set of providers that offer service to the particular building to which those customers need to connect and the set of providers varies from building to building, it is appropriate to consider markets as small as an individual building";

• that the proposed decrees redress the harm in all 2-to-1 buildings where the government concluded that the proposed merger would cause competitive harm;

• that the resolution of the Qwest/Allegiance merger is irrelevant;

• that the proposed decrees do not increase the risk of collusion; and
  

• that several sophisticated telecommunications carriers bid for the divestiture assets demonstrates the viability of the divestiture package.

On Sunday, March 5, AT&T announced its intent to acquire BellSouth for $67 billion. According to Marketwatch.com's article, AT&T to pay $67 billion for BellSouth, the combined company will become "the largest phone company." It will have "70 million local phone customers, 10 million broadband users and more than 300,000 employees."

Big doesn't mean bad, though. Indeed, from an antitrust perspective, this isn't a terribly interesting deal. There is no geographic overlap between the parties in the market for local phone service. AT&T and BellSouth both offer wireless service, but they do it through Cingular, a joint venture in which AT&T owns a 60 percent interest. Because AT&T's majority ownership interest effectively gives it control of Cingular for antitrust purposes, AT&T's acquisition of the remaining 40 percent has no competitive significance.

Other factors militate in favor of relatively quick antitrust approval. The DOJ and FCC recently investigated and approved other deals in the telecommunications sector including SBC's acquisition of AT&T and Verizon's acquisition of MCI. Thus, the agencies should have a lot of current information about the relevant markets and how they operate. In addition, the telecommunications market is vastly different from the days of the old AT&T. Today, cable companies compete against the SBC's and BellSouth's of the world to offer consumers local and long distance telephone service and Internet access. You have VOIP companies like Vonage competing in the telephone service market. And, you can't forget feisty, aggressive competitors like Verizon.

The only possible competitive overlap that might raise some competitive concerns is in the market for enterprise customers. It's possible that either the DOJ or the FCC could require some relief, e.g., divesting some lines, but it's doubtful that that alone would derail this deal.