By Peter Schroeder - 09/01/11 08:57 AM EDT
The Department of Justice believes it has a strong case that the $39 billion merger between AT&T and T-Mobile USA is anti-competitive, but in making every effort to block the deal, it also is exposing itself — and the White House — to some major political headwinds.
The economy is widely expected to be the major issue on the 2012 campaign trail, and DOJ's efforts to suffocate the deal are not winning the White House any friends in organized labor.
Justice Department officials filed suit in federal court Wednesday to block AT&T's acquisition of T-Mobile USA, arguing it would drive up prices while lowering choices for consumers.
The acquisition of T-Mobile would create the nation's largest mobile carrier. Verizon Wireless and AT&T would account for more than 80 percent of the wireless market.
However, AT&T contended the merger would create thousands of American jobs, making opposition a tough sell in an economy where unemployment remains stubbornly high.
Dana Frix, a partner at Chadbourne & Parke LLP, said the strong complaint shows the DOJ is willing to pursue its work despite political and economic considerations.
"When unemployment is so high, it takes a lot of political resolve for the DOJ to fight something that is backed by the unions and which at least purports to increase the number of jobs that will be available in the US in the near term," said Frix, who also chairs the firm's communications, media and technology practice group.
"They decided that they were not going to turn away from the facts that were presented to them," he said.
The complaint, which draws fundamental issues with the merger, may also make other companies pursuing massive acquisitions think twice before testing the government.
"They're sending a big message," Frix said. "This is about as big and important an issue they've taken on that I can remember...It does not appear as if the DOJ has filed this complaint in order to negotiate."
"It's both a big deal and a high-profile deal. It's very significant action," concurred another antitrust attorney who asked to remain anonymous. "This looks like DOJ just flat out wants to block it."
But at the same time, the attorney noted that any potential shift is now coming well into President Obama's first term, which plays against the notion that the White House is dramatically changing course.
"This is coming three years into the administration, so therefore it's going to have less of an effect than it would have," he said. "But it does indicate a renewed aggressiveness of the DOJ."
While the merger involved some of the biggest names in business, the deal also enjoyed strong support from organized labor. The Communications Workers of America (CWA), the largest media labor union, was a big backer of the deal, as T-Mobile's non-union workforce would be assimilated within AT&T's union employees.
As a result, DOJ's decision to throw a blockade in front of the deal has earned the ire of a political force that Obama will need to harness in 2012.
The CWA blasted the move as "simply wrong."
However, the union directed all of its ire directly at DOJ, and did not broaden its critique to the entire Obama administration.
Despite the strong union support for the deal, it did not enjoy broad support from all liberal backers. Consumer groups were widely skeptical of the deal and hailed DOJ for trying to block the arrangement.
Sen. Al Franken (D-Minn.) praised the DOJ suit and called the merger a "terrible deal for consumers."
Ever since the "shellacking" Democrats took in the 2010 elections, Obama has taken great efforts to win over the business community that was widely wary of him in the first two years of his term. He has filled top positions within the White House with business-savvy advisers and has made great pains to highlight ways he wants to work with businesses, not against them.
Nonetheless, Republican opponents have relentlessly painted the president as imposing huge burdens on businesses, and the DOJ move allows them to return to that well once again.
"The Obama administration has waged a nonstop war of harassment against American businesses that has frozen job creation in this country, and left America’s 14 million unemployed with nothing more than a government check," said Steven Law, president and chief executive officer of major conservative spending group Crossroads GPS.
For its part, the Obama administration has regularly maintained that DOJ operates independently and is beholden to the nation's laws. However, that independence has sometimes dragged the White House into the harsh glare of the political spotlight.
Attorney General Eric Holder and the DOJ came under intense scrutiny from members of Congress for the decision to try terrorism suspects in New York civilian courts, as critics argued they should be tried in military courts at Guantanamo Bay. Holder defended the move by arguing politics had no place in the impartial pursuit of justice, but the department ultimately reversed course and agreed to military commissions off American soil.
But in backing off, Holder jabbed Congress, contending their complaints "tied our hands in a way that could have serious ramifications."