Advice For Your Next Merger

After reading my colleague Will Oremus’ piece on the AT&T/T-Mobile merger, I wanted to throw in an observation about the fact that “[h]oping to secure federal approval for a deal that raised obvious antitrust flags, AT&T splashed $16 million on lobbying and $2 million on campaign contributions,” namely that in a weird way AT&T’s political strategy undermined its legal strategy here. 

One key point here is jobs. If you want to make members of congress and the public like you, saying “I want to do this merger so I can lay off a ton of workers” is not a great strategy. But if you want to persuade an anti-trust economist that your proposed merger should be approved, this is in many ways exactly what you want to say. That’s because the economist is going to assume, in the first instance, that you’re not just making a huge blunder. You want to undertake the merger, presumably, to make more money. Is the plan to make more money by stifling competition and screwing consumers? If so, that’s a reasonable plan but not one the Justice Department wants to approve. Something like “if I combined these two firms, I’d be able to lay off a bunch of back office workers” is a perfectly valid, non-monopolistic business strategy. The fact that AT&T was running around claiming the merger would be a net job creator, by contrast, sounds good as a PR strategy but raises red flags.