The SunGard Meme
The SunGard Meme
The SunGard Meme

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    One of the annoying little memes that’s been going around regarding the AT&T/T-Mobile antitrust suit is that Judge Ellen Huvelle, because of her past ruling against the government’s antitrust action in US v. SunGard Data Systems, is somehow predisposed to find against the government in antitrust cases generally. This makes as much sense as saying that because the government didn’t prove its case against one burglar that all future burglars are going to go free. Not only is it preposterous to draw broad conclusions from a sample set of one (no other antitrust action before Judge Huvelle went to trial), there are specific reasons why SunGard is not a useful predictor of what will happen this time around.

    SunGard was a different case, with different facts. One data security and recovery business, SunGard, sought to buy another, Comdisco, and the Department of Justice filed to stop it. It’s primarily notable for the speed with which it was resolved–the DoJ filed its complaint on October 22, 2001, and Judge Huvelle issued her decision on November 14, 2001. That’s fast–SunGard was able to accelerate the trial process because it showed that its proposed transaction was time-sensitive. If anything Judge Huvelle’s record of moving cases along quickly helps the government in this instance: even if you don’t agree with it, its case is straightforward, while AT&T’s defense is much more subtle.

    In SunGard, the government failed because the judge didn’t accept its product market definition. As she wrote, “Not only is the proper definition of the relevant product market the first step in this case, it is also the key to the ultimate resolution of this type of case, since the scope of the market will necessarily impact any analysis of the anticompetitive effects of the transaction.” Basically the DoJ failed to meet its burden to show that the a market for “provision of shared hotsite services for customers with mainframe and midrange computer processing centers” would be harmed, because there was evidence that a similar product, “quick-ship solutions” could serve as an adequate substitute. It’s as if the government had argued that the orange juice market would be harmed by a merger, but the judge thought that it made more sense to look at the juice market at a whole. After all, if orange juice gets too expensive you can always just switch to POM Wonderful and drink Jack and Coke instead of screwdrivers.

    But it’s harder to make the same kinds of arguments in AT&T/T-Mobile. The government has already adopted a broad market definition: consumer and government/enterprise mobile telecommunications service. Other forms of communication–such letter-writing, semaphore, or landline phones–are not an adequate substitute for wireless phone service. AT&T will certainly challenge the relevant geographic market. The national market has four competitors (AT&T, Verizon, T-Mobile, and Sprint), while there are smaller carriers in places like Mississippi (CellSouth, who has also sued to stop the merger) and New York City (MetroPCS). This will be an interesting argument to have but it’s also one that SunGard has nothing to do with.

    Understandably people want to try to predict what will happen, but in this case the media pundits, augurs, and haruspices just don’t have enough to go on. It’s better to focus on the facts of this case instead of trying to read into an old one portents that aren’t there.