Shooting first, asking questions later on telecommunications mergers

[Commentary] Should regulators condemn potential mergers before they are even proposed? That’s the question being raised by statements coming out of the Department of Justice and the Federal Communications Commission about the rumored Sprint/T-Mobile deal.

These rumors have piqued the interest of regulators, who have made unusually public comments apparently designed to discourage the merger. Conversations between companies and regulators about proposed deals are not uncommon. Markets abhor uncertainty, so investors crave early feedback regarding how a hypothetical deal will be greeted by regulators and what may be done to reduce the risk of an unfavorable response. If regulators identify anticompetitive concerns that can be cured by concessions, it’s better for agency officials to pinpoint the problem and propose a tailored solution during the merger approval process, rather than have the parties guess what might be a problem and what concessions might fix it. Unquestionably, regulators should scrutinize this deal closely. But both due process and the public interest demand that they be given the opportunity to do so, without regulators placing a thumb on the scale. It may be that without a merger, neither company has the scale to compete effectively against Verizon and AT&T. If this is true, then the regulators’ quixotic quest to preserve four national carriers will deprive consumers of the benefits of a more efficient market structure and the more robust competition it would bring.

It is far too early to determine that a Sprint/T-Mobile merger would be good for consumers. But it is also far too early to unequivocally decide otherwise.

[Lyons is an assistant professor at Boston College Law School]