Judge Orders Review of Telecom Mergers

In a stunning rebuke of the Justice Department, a federal judge on Friday ordered a review of the agency's handling of the Verizon-MCI and SBC-AT&T mergers. While the ruling could not undo either merger, the judge would have the power to add new restrictions, possibly requiring the companies to shed some of their assets.

Critics of the Bush administration say it has not acted forcefully enough in approving new mega-mergers, which has hurt smaller companies. Unlike other antitrust challenges, this particular case does not come out of any legal action from opponents. Rather, an independent judicial review of the settlements is granted by powers awarded to federal judges by Congress in the 1970s.

Washington Federal District Judge Emmet Sullivan asked the attorneys for the Justice Department to respond on the topic of Sullivan's authority to question the terms of settlement. Additionally, he posed new questions for the lawyers to answer. Most notably, Sullivan seemed to suggest that neither merger was in the public's best interest.

"Through the eyes of a layperson, the mergers, in and of themselves, appear to be against public interest given the apparent loss in competition," he wrote. Sullivan asked for an explanation as to why the administration feels this is not the case.

Additionally, he questioned the Justice Department ignoring the concerns of New York Attorney General Eliot Spitzer, who said the deals could harm the Internet.

The judge could reject the two mergers, but it would only mean a change in their conditions. However, if that were to occur, both the companies and the government are likely to appeal. The Bush administration also argues Sullivan has limited authority in altering the settlement.

The review follows legal action being taken by Spitzer as well as smaller telecommunications companies, calling the mergers an attempt to recombine the once powerful "Ma Bell" monopoly.