If it’s anything like mine, which has soared into the hundreds of dollars a month, you’ll understand why last week the Justice Department filed suit to block ATT’s takeover of T-Mobile.

The antitrust laws are intended to protect consumers, like wireless customers, by promoting competition. You could be forgiven for forgetting there are antitrust laws, given how feeble enforcement efforts have been over the last decade. Even Adam Smith railed against the pernicious effects of monopolies, but in recent years free market fervor and the writings of influential academics like Robert Bork have led many to wonder if the antitrust laws were just a quaint relic of a bygone era.

That, or something like it, may have been the thinking of the lawyers for ATT who negotiated the terms of the T-Mobile deal.

It’s hard to blame them: of the five major telecom mergers in the last decade, not one was challenged on antitrust grounds. ATT agreed to give T-Mobile a huge breakup fee of $3 billion in cash plus wireless spectrum and a roaming agreement valued at another $3 billion should the deal fall through on antitrust or other grounds.

Such confidence on ATT’s part seems inexplicable otherwise. For if ever there was a merger likely to be blocked on antitrust grounds, this is it.

“It’s only a slight overstatement to say that if they weren’t going to block this one, the Justice Department might as well just throw the antitrust guidelines out the window,” said Herbert Hovenkamp, professor of law at the University of Iowa, who is considered by many to be the dean of American antitrust law. “This merger clearly seems to violate them.”

The antitrust division has long published explicit guidelines that tell companies which mergers it is likely to block as anticompetitive.

The analysis begins with a mathematical formula for calculating the deal’s effect on competition. It’s called the Herfindahl-Hirschman Index, or HHI, a phrase you may want to drop at your next dinner party if you want to bring conversation to a halt.

Although the formula looks slightly complicated, it’s derived from the common-sense principle that the more competitors in a market, the lower the prices and the greater the innovation. In short, more competitors means more competition, which benefits consumers.

The Justice Department has officially used HHI since 1982, and the guidelines were revised by the Obama administration in 2010. Mr. Hovenkamp notes that despite tougher antitrust rhetoric from President Obama, the revision actually made it easier for proposed mergers to pass muster. Without getting too deeply into the math, industries can be scored on a scale up to 10,000, with 10,000 being a perfect monopoly. During the Bush administration, an HHI score of 1,800 or higher was deemed a concentrated industry, and a merger that increased the score by more than 100 points in such an industry was presumed to raise anticompetitive concerns. The new guidelines raised those numbers to 2,500 and 200.

“It was becoming legendary that the Bush administration wasn’t enforcing the old guidelines,” Mr. Hovenkamp said. “What good is a guideline that doesn’t provide any guidance? The Obama administration conceded that perhaps the old guidelines were too strict. So it made it easier, but at the same time said, ‘We’re going to enforce this.’ ”

How does the proposed ATT and T-Mobile merger fare under the revised guidelines? Let’s go to Exhibit B of the government’s complaint, in which the Justice Department does the math. ATT has argued strenuously that the case should be considered market-by-market, and not for the nation as a whole, where there are only four national wireless providers. So let’s look at some local markets.

Article source: http://feeds.nytimes.com/click.phdo?i=b269fddc17abe515979d1066dc1ed808