UNITED STATES OF AMERICA v. AT&T, INC. et al

Filing 13

MEMORANDUM OPINION granting 11 the government's Motion for Entry of Final Judgment. Signed by Judge Ellen S. Huvelle on March 20, 2008. (lcesh1)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
__________________________________________
)
UNITED STATES OF AMERICA,
)
)
Plaintiff,
)
)
v.
) Civil Action No. 07-1952 (ESH)
)
AT&T INC. and DOBSON
)
COMMUNICATIONS CORP.,
)
)
Defendants.
)
__________________________________________)
MEMORANDUM OPINION
The United States of America brings this case against AT&T Inc. (“AT&T”) and Dobson
Communications Corp. (“Dobson”) for antitrust violations arisng out AT&T’s acquisition of
Dobson. The government “alleges that the likely effect of this acquisition would be to lessen
competition substantially for mobile wireless telecommunications services in seven (7) geographic
areas in the states of Kentucky, Missouri, Oklahoma, Pennsylvania, and Texas, in violation of
Section 7 of the Clayton Act, 15 U.S.C. § 18.” (Competitive Impact Stmt. [“CIS”] at 1.) Pending
before the Court is the government’s Motion for Entry of the Final Judgment in this case. For the
reasons stated herein, the Court will grant the motion.
BACKGROUND
I.

Defendants and the Proposed Transaction
AT&T, with headquarters in San Antonio Texas, is a corporation organized and existing

under the laws of the state of Delaware. (CIS at 3.)

In terms of revenues, it is the largest

communications holding company both in the United States and globally, and it is the largest mobile

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wireless services telecommunications services provider in the United States as measured by
subscribers. (Id.)
Dobson, is a corporation organized under the laws of Oklahoma and is headquartered in
Oklahoma City. (Id.) It is the ninth largest mobile wireless telecommunications services provider
in the United States, as measured by number of subscribers. (Id.) Dobson also owns Cellular One
Properties, L.L.C., an Oklahoma limited liability corporation, which licenses the Cellular One brand
and promotes the Cellular One service mark and certain related trademarks, service marks and
designs. (Id.)
On June 29, 2007, AT&T and Dobson entered in an agreement by which AT&T will acquire
Dobson for approximately $2.8 billion. (Id. at 4.)
II.

Alleged Harm as a Result of the Acquisition
In identifying the potentially harmful impact of the proposed acquisition, the government

considered, inter alia,
the number of mobile wireless telecommunications services providers
and their competitive strengths and weaknesses; AT&T’s and
Dobson’s market shares, along with those of other providers; whether
additional spectrum is, or is likely soon to be, available; whether any
providers are limited by insufficient spectrum or other factors in their
ability to add new customers; the concentration of the market, and the
breadth and depth of coverage by different providers in each market;
the likelihood that any provider would expand its existing coverage
or that new providers would enter; whether AT&T or Dobson own
rights to influence the competitive operations of another provider in
the market; and the particular rights associated with any such
minority interests.
(Id. at 7-8.) Based on this fact-intensive analysis, the government determined that defendants’
proposed transaction would substantially lessen competition in mobile wireless communication
services in seven geographic areas, which are represented by the following FCC spectrum licensing
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areas: Kentucky RSA-6 (CMA 448); Kentucky RSA-8 (CMA 450); Missouri RSA-1 (CMA 504);
Oklahoma RSA-5 (CMA 600); Pennsylvania RSA-5 (CMA 616); Texas RSA-9 (CMA 660); and
Texas RSA-11 (CMA 662). (Id. at 7.)
In three areas, Kentucky RSA-6, Kentucky RSA-8, and Oklahoma RSA-5, “either AT&T
or Dobson has the largest share of subscribers and the other defendant is a particularly strong and
important competitor.” (Id. at 8.) The proposed acquisition would therefore result in increased
concentration in these markets to a level likely to cause competitive harm. (Id.) In two areas,
Missouri RSA-1 and Texas RSA-9, greater than 70% of mobile wireless subscribers are served
either by a business owned by Dobson or a company in which AT&T has a minority equity interest
and exercises significant control over core business decisions. (Id. at 9.) “Post-merger, AT&T
would likely have the ability and incentive to coordinate the activities of the wholly-owned Dobson
wireless business and the business in which it has a minority stake, and/or undermine the ability of
the latter to compete against the former,” which would result in a lessening of competition. (Id.)
Finally, in two areas, Pennsylvania RSA-5 and Texas RSA-11, AT&T is the largest provider of
wireless communication services and a business operating under the Cellular One brand name
owned by Dobson is a strong and important competitor. (Id. at 9-10.) The providers that operate
under the Cellular One brand “have invested considerable resources in developing and building the
brand.” (Id. at 10.)

The proposed acquisition would give AT&T all rights to the Cellular One

brand, and would give AT&T “the incentive and ability to impair the effectiveness of the Cellular
One brand, or even deny a license to the current licensee entirely, since by doing so, it could reduce
competition by significantly increasing costs to a primary competitor at little or no cost to itself.”
(Id. at 11.) “In all seven markets, the providers wholly or partially owned by AT&T and Dobson,

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and/or a Cellular One licensee control all or most of the 800 MHz band cellular spectrum licenses,
which are more efficient in serving rural areas than 1900 MHz band PCS spectrum” making new
entries into these markets time-consuming, expensive, and unlikely. (Id. at 11-12.)
III.

Procedural History
The government filed a complaint in this matter on October 30, 2007, alleging that the

proposed acquisition of Dobson by AT&T violates Section 7 of the Clayton Act. Simultaneously
with the filing of the complaint, the government filed a proposed Final Judgment and a Preservation
of Assests Stipulation and Order in which the parties consented to the entry of the proposed Final
Judgment after compliance with the requirements of the Tunney Act.

Pursuant to those

requirements, the government also filed a CIS, describing the alleged anti-trust concerns surrounding
the acquisition and explaining the proposed Final Judgment.
The proposed Final Judgment is designed to remedy the anti-competitive imapct of the
acquisition in the seven markets of concern. It requires defendants, within 120 days after the
completion of the transaction or five days after the entry of the Final Judgment, to divest (1)
Dobson’s entire mobile wireless telecommunications services business in the three markets where
AT&T and Dobson are each other’s closest competitors (the “Wireless Business Divestiture
Assests”); (2) AT&T’s minority interests in the two markets in which a Dobson company and a
company in which AT&T holds an interest service more than 70% of subscribers (the “Minority
Interests”); and (3) all assets related to the Cellular One brand (“the Cellular One Assets”).1 (CIS

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The government may, at its discretion, extend the time for divestiture by up to 60 days.
Additionally, because the FCC’s approval is required for the transfer of wireless licenses, if the
applications for the transfer of a wireless license are filed with the FCC, but the FCC has not
acted before the end of the divestiture period, the period for divestiture of these assets will be
extended until five days after the FCC has acted. (CIS at 15-16.)
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at 14-15; Final Judgment at 8.) The Final Judgment further provides that should the defendant not
accomplish the divestiture within the prescribed period, the Court will appoint a trustee selected by
the government and compensated by AT&T and Dobson to effectuate the divestitures. The Final
Judgement expires ten years from the date of its entry, unless extended by order of the Court.
Pursuant to the requirements of the Tunney Act, the government published the proposed
Final Judgment and the CIS in the Federal Register on November 19, 2007, see 72 Fed. Reg. 65,060
(2007), and published a summary of their terms, together with directions for submitting written
comments, in the Washington Post for seven days beginning on November 18, 2007, and ending on
November 24, 2007. (Pl.’s Mot. at 3.) The 60-day period for public comments ended on January
22, 2008. (Id.) One comment was submitted by Mid-Tex Cellular, Ltd. (“Mid-Tex”), a company
in which AT&T has a minority interest, which competes with the merging firms in some markets.
The government filed its response to the comment with this Court and published both the comment
and its response in the Federal Register on March 13, 2008. See 73 Fed. Reg. 13,570 (2008). The
government now moves for entry of the Final Judgment.
ANALYSIS
I.

Standard of Review
Before approving a consent judgment, the Court must decide whether the proposed final

judgment is “in the public interest.” 15 U.S.C. §16(e)(1).2

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This inquiry must be informed by

“[T]he procedure for making the public interest determination is generally left to the
discretion of the Court.” United States v. SBC Commc’ns, Inc., 489 F.Supp. 2d 1, 10 (D.D.C.
2007) (citing 15 U.S.C. § 16(f)). The “Court is not required to conduct an evidentiary hearing
nor is it required to permit anyone to intervene.” Id. (citing 15 U.S.C. § 16(e)(2)). The “Tunney
Act expressly allows the court to make its public interest determination on the basis of the
competitive impact statement alone.” United States v. Enova Corp., 107 F.Supp.2d 10, 17
(D.D.C. 2000).
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consideration of the factors enumerated in the statute,which require the Court to evaluate both “the
competitive impact of the proposed remedies, i.e., how well the settlement remedies the harms
alleged in the complaint[],” as well as “issues unrelated to the competitive impact of the settlement.”
SBC Commc’ns, Inc., 489 F.Supp.2d at 17. See 15 U.S.C. § 16(e)(1)(A) & (B) (listing factors).3
In making its determination the Court may not simply “rubberstamp” the government’s
proposal, but rather it must engage in an “‘independent’ determination of whether a proposed
settlement is in the public interest.” Id. at 15 (quoting United States v. Microsoft Corp., 56 F.3d
1448, 1458 (D.C. Cir. 1995)). However, the Court must also take into consideration that the
government is entitled to “broad discretion to settle with the the defendant within the reaches of the
public interest.” Microsoft Corp., 56 F.3d at 1461. “[A] district court is not permitted to reject the
proposed remedies merely because the court believes other remedies are preferable,” SBC
Commc’ns, 489 F.Supp.2d at 15(citation omitted), and “should be deferential to the government’s
predictions of the proposed remedies.” Id. See also United States v. Tel & Tel. Co., 552 F.Supp.

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15 U.S.C. § 16(e)(1)(A) & (B) provide that in making the “public interest”
determination, the Court must consider
(A) the competitive impact of such judgment, including
termination of alleged violations, provisions for enforcement and
modification, duration of relief sought, anticipated effects of
alternative remedies actually considered, whether its terms are
ambiguous, and any other competitive considerations bearing upon
the adequacy of such judgment that the court deems necessary to a
determination of whether the consent judgment is in the public
interest; and
(B) the impact of entry of such judgment upon competition in the
relevant market or markets, upon the public generally and
individuals alleging specific injury from the violations set forth in
the complaint including consideration of the public benefit, if any,
to be derived from a determination of these issues at trial.
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131, 151 (D.D.C. 1982) (internal quotation marks and citations omitted) (“[A] proposed consent
decree must be approved even if it falls short of the remedy the court would impose on its own, as
long as it falls within the range of acceptibility or is within the reaches of the public interest.”) In
sum, “the relevant inquiry is whether there is a factual foundation for the government’s decisions
such that its conclusions regarding the proposed settlement are reasonable.” SBC Commc’ns, 489
F.Supp.2d at 15-16, 17.
II.

“Public Interest” Determination
Applying the statutory factors to the proposed Final Judgment, the Court concludes that it

“falls within the range of acceptibility” because it sufficiently minimizes the anti-competitive
impact of AT&T’s acquisition of Dobson. This result is accomplished by requiring AT&T to
divest itself of assets in those markets in which AT&T and Dobson collectively service a
substantial majority of subscribers, either directly or indirectly. There is a clear and logical
relationship between the allegations set forth in the government’s complaint and its proposed
remedies. The Final Judgment provides for a timeline and for an enforcement mechanism in the
event that AT&T and Dobson fail to meet the mandated deadlines. The Court therefore finds
that the entry of the Final Judgment is within the public interest.
The limited objection filed during the public comment period does not dissuade the Court
from this view. In its comment, Mid-Tex first argues that the government should require AT&T to
make additional divestitures in some parts of Texas RSA-9. (Comments of Mid-Tex Cellular Inc.
[“Comment”] at 2-4.) The government explains that it rejected this proposal because AT&T is not
a strong competitor in all areas of Texas RSA-9, and in the small part where AT&T is strong, there
are three other companies (Sprint, Verizon, and T-Mobile) offering wireless service. (Response to

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Public Comments [“Response’] at 9-10.)

The government therefore did not believe it could

successfully allege and prove that the combined businesses would be likely to reduce competition
substantially. (Id.)
While Mid-Tex might be correct that its proposed addition to the divestitures would make
the Final Judgment more effective, it is not for the Court to determine “whether the proposed remedy
is the best one, but only whether it is ‘within the reaches of the public interest.’” SBC Commc’ns,
489 F.Supp.2d at 15 (quoting Microsoft, 56 F.3d at 1460) (internal quotation marks and citations
omitted). The Court is mindful that “a consent decree is the product of a negotiated settlement . .
. .” United States v. Archer-Daniels-Midland Co., 272 F.Supp. 1, 6 (D.D.C. 2003). It must therefore
defer to the government’s determination that it could not prove an allegation that the combined
businesses would pose a competitive risk in this area. See Microsoft, 56 F.3d at 1458 (“Remedies
which appear less than vigorous may well reflect an underlying weakness in the government’s case,
and for the district judge to assume that the allegations in the complaint have been formally made
out is quite unwarranted.”)
Mid-Tex next argues that AT&T should not be prohibited from reacquiring a non-controlling
interest in Mid-Tex during ten-year term of the proposed Final Judgment. (See Comment at 4.) It
contends that if AT&T were to reacquire a passive, non-controlling interest in Med-Tex, it would
not pose a threat to competition. (Id. at 4-5.) The government responds that even a passive interest
may have anticompetitive consequences and explains that a bright line prohibition will help ensure
the success of the divestiture. (See Response at 13.) Again, the Court must “defer[] to the

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government’s predictions as to the effects of the proposed remedies.”4 SBC Commc’ns, 489
F.Supp.2d at 15 (citation omitted).
CONCLUSION
For the foregoing reasons, the Court concludes that the proposed Final Judgment is well
“within the reaches of the public interest.” United States v. Western Electric Co. 900 F.2d 283, 309
(D.C. Cir. 1990) (citation, internal quotation marks and emphasis omitted). The government’s
Motion for Entry of Final Judgment is GRANTED and shall be entered by separate order.

/s/
ELLEN SEGAL HUVELLE
United States District Judge

DATE: March 20, 2008

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Finally, Mid-Tex argues in a footnote that if market conditions change, a reacquisition
by AT&T would not necessarily limit competition. (See Comment at 5 n. 11.) Should this
occur, appropriate steps may be taken to modify the reacquisition clause and thus the Court need
not address this hypothetical.
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