Antitrust Law Daily U.S. cautions against nationwide injunction in states’ T-Mobile/Sprint suit
Friday, December 20, 2019

U.S. cautions against nationwide injunction in states’ T-Mobile/Sprint suit

By Matt Pavich, J.D.

Justice Department and FCC argue that a multi-state lawsuit intended to block T-Mobile’s acquisition of Sprint is not necessary to protect competition and the public interest because of the relief already obtained.

Because settlements obtained by the Department of Justice Antitrust Division and the Federal Communications Commission (FCC) have already garnered strong relief on behalf of customers and will protect both the public interest and competition, a lawsuit filed by numerous states intended to block the acquisition of Sprint by T-Mobile is moot, the Department of Justice Antitrust Division argued in a statement of interest filed in the ongoing litigation in the federal district court in New York City (New York v. Deutsche Telekom AG, No. 1:19-cv-05434-VM-RWL).

Investigations. T-Mobile and Sprint, the nation’s third and fourth largest wireless carriers, announced the merger on April 29, 2018. The Antitrust Division conducted a 15-month investigation in which it considered the impact of the deal on the nationwide wireless market and on competition. It found that if not remedied, the acquisition would substantially lessen competition in that market, but that with appropriate relief, the deal would benefit consumers across the country. The Justice Department also found that the deal would allow T-Mobile to offer 5G wireless services more cost effectively and would incentivize the parties to create a "robust" 5G network. It filed a civil antitrust complaint along with a proposed Final Judgment that contained a settlement that required T-Mobile to divest to DISH Network wireless business and network assets, most prominently the Boost wireless network. Ten states joined the Division’s suit seeking approval of the settlement. The companies pledged to abide by the terms of the proposed Final Judgment.

At the same time that the Division was conducting its investigation and crafting its proposed settlement, the FCC was also investigating the proposed merger. It found that, subject to conditions imposed by the FCC to ameliorate potential harm to competition, the merger would generate benefits for consumers. The FCC required the parties to cover 97% of the U.S. population with 5G service within three years and to build out new 5G networks to rural communities. It noted that the proposed deal was "particularly important" for the nation’s rural communities. It further found that DISH Network’s agreement to buy the newly divested Boost Mobile would address decreased competition concerns, DISH would immediately enter the wireless market as a viable, effective competitor.

State lawsuit. Before either agency had completed its review, a group of thirteen states filed the instant complaint seeking to block the acquisition, arguing that it would substantially lessen competition. After the Antitrust Division filed its proposed Final Judgment, the states amended the complaint to argue that the settlement failed to ameliorate harm to competition and consumers posed by the merger. The agencies have now filed their Statement of Interest of the United States of America.

Public interest. The agencies contend that the states need to prove that the sought-after nationwide injunction would be in the public interest. They argue that individuals bringing antitrust suits must show, among other things, that the public interest would not be disserved by a permanent injunction. When courts consider the public interest, they examine the impact of the remedy on innocent third parties. The agencies argue that enjoining the merger would eliminate the benefits to rural residents, thereby harming innocent third parties and that the injunction would therefore not serve the public interest.

Necessity of injunction. The agencies also argue that the states need to show that their requested injunction is necessary following the relief obtained through the settlements obtained by the Division and the FCC. The FCC’s order would impose severe monetary penalties and strict verification requirements to ensure that both the new T-Mobile and DISH meet their commitments to build out new 5G networks. Both the FCC and the Division insisted that T-Mobile divest all Boost Mobile products and services. While the court is not bound by the Antitrust Division’s actions in this case, the agencies contend that their actions have already garnered sufficient relief and protections as to render the protections imposed by an injunction moot.

Relevance of agency determinations. The agencies also argue that the court should consider the findings by both agencies that the remedies they secured serve the public interest. They argue that the Antitrust Division’s initial finding that, left unremedied, the merger would harm competition did not conflict with the FCC’s finding that, if remedied, the merger would not harm competition. Furthermore, the agencies argue, they have both expertise and nationwide perspectives that the Litigating States lack. Both agencies could have sought a nationwide injunction, but instead chose to pursue other relief following extensive investigations. The agencies argue that the Litigating States erred in urging the court not to give weight to those deliberations, especially in light of the fact that the states do not represent a nationwide group of citizens, while the agencies operate from a nationwide perspective. The agencies asked the court to consider their judgments before approving any additional relief.

The case is No. 1:19-cv-05434-VM-RWL.

Attorneys: Amber Wessels-Yen, NYS Office of the Attorney General, for State of New York. Glenn D. Pomerantz (Munger, Tolles, & Olson LLP) for State of California. Michael Edward Cole, Office of the Attorney General, for State of Connecticut. Brian Edward Robison (Gibson, Dunn & Crutcher, LLP) for Deutsche Telekom AG. Daniel P. Culley (Cleary Gottlieb Steen & Hamilton LLP) for T-Mobile US, Inc. Bradley S. Lui (Morrison & Foerster LLP) for Sprint Corp.

Companies: Deutsche Telekom AG; T-Mobile US, Inc.; Sprint Corp.

MainStory: TopStory AcquisitionsMergers Antitrust AntitrustDivisionNews NewYorkNews

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