U.S. Regulators Clear $48.5 Billion AT&T-DirecTV Merger

Clearance Relies On Compass Lexecon Merger Simulation

Compass Lexecon experts and economists assisted AT&T in securing regulatory approval of its acquisition of DirecTV. Professors Michael Katz of the University of California, Berkeley, and Philip Haile and Steven Berry of Yale University were supported by a Compass Lexecon team led by Theresa Sullivan and Andres Lerner and including Eugene Orlov, Ka Hei Tse, Emmett Dacey, Aren Megerdichian, Joel Papke, Alice Kaminski, and many others in Compass Lexecon's Washington, Chicago, and Los Angeles offices. Compass Lexecon worked closely with AT&T's counsel Wm. Randolph Smith of Crowell & Moring and Richard Rosen of Arnold & Porter to secure DOJ and FCC approval of the $48.5 billion deal.

The Compass Lexecon team used state-of-the-art merger simulation techniques bolstered by extensive data collection (including a consumer survey designed by Professor Ravi Dhar of Yale University) to model the likely impact of the merger on consumers of video and broadband Internet services (both on a standalone and bundled basis). The analysis showed that—even if cost efficiencies that the parties expect in the form of reduced programming payments do not materialize and even though AT&T and DirecTV were pre-merger competitors in some geographic areas in video services—consumers will benefit from the merger due to the complementarity of certain of the AT&T and DirecTV services. In its order approving the transaction, the Commission found that "the economic analysis ... demonstrates that the consumer surplus would increase slightly without accounting for programming payment reductions and would increase more substantially when programming payment reductions are included." The Commission described the merger simulation submitted by Professors Haile and Berry and Compass Lexecon as "sophisticated" and "a very fine example of a merger simulation." The Commission adopted the framework of the Berry-Haile analysis, noting that "the underlying approach is accepted as persuasive and as representing current best practice in merger simulation."