WASHINGTON (06/27/2000) - The U.S. Department of Justice (DOJ) on Tuesday filed suit to block the proposed merger of WorldCom Inc. and Sprint Corp., saying that the elimination of an important competitor in the telecommunications market would lead to higher prices and fewer choices for American consumers and businesses.
The DOJ has spent almost nine months examining the proposed merger and concluded that, if the deal were to go forward, consumers and businesses would pay the price, because competition would be reduced in many important telecommunications markets, Attorney General Janet Reno said at a news conference called to announce the DOJ suit.
The markets that would be adversely affected are long distance services sold to residential customers in the U.S., international long distance services between the U.S. and foreign countries, Internet backbone services, international private line services between the U.S. and foreign countries and data and custom network services, Reno said.
Joel Klein, assistant attorney general and the head of the DOJ's antitrust division, joined Reno at the news conference, emphasizing the department's belief that the merger would harm competition in a wide range of telecommunication services used by virtually every American.
"Despite significant progress toward increased competition (in the telecommunications market) many important markets are still dominated by the big three -- WorldCom, Sprint and AT&T," Klein said. "In critical telecom markets, this merger would reduce those big three to a big two -- too few."
AT&T Corp. and a merged WorldCom and Sprint would have about 80 percent of the market for residential and small business long distance, Klein said.
But it's also important that WorldCom and Sprint compete aggressively, and the DOJ's analysis of the market showed that consumers consider Sprint and WorldCom to be a close substitute for each other. A disproportionately large number of Sprint customers believe that WorldCom is their next best alternative for long distance, and vice versa, Klein said.
"That's important in competitive terms. Therefore, eliminating the competition between these two companies would permit WorldCom and AT&T to charge higher prices," Klein said.
WorldCom, in Jackson, Mississippi, can be reached at +1-601-360-8600 or http://www.wcom.com/. Sprint, in Westwood, Kansas, can be reached at +1-913-624-3000 or http://www.sprint.com/. The DOJ, in Washington, D.C., can be reached at http://www.usdoj.gov/.