TR Daily State AGs File Lawsuit to Block T-Mobile, Sprint Merger
Tuesday, June 11, 2019

State AGs File Lawsuit to Block T-Mobile, Sprint Merger

Attorneys general from nine states and the District of Columbia, led by New York and California, today filed a lawsuit to stop the proposed merger of T-Mobile US, Inc., and Sprint Corp., claiming the deal violated antitrust laws.

The lawsuit, filed in the U.S. District Court for the Southern District of New York, alleges that the proposed $26 billion merger would increase prices for wireless consumers and deprive them of the benefits of competition. In addition to New York and California, attorneys general in Colorado, Connecticut, D.C., Maryland, Michigan, Mississippi, Virginia, and Wisconsin, signed onto the lawsuit seeking to enjoin the proposed acquisition of Sprint by T-Mobile and to “obtain equitable and other relief as appropriate.”

New York AG Letitia James said the proposed combination of the nation’s third- and fourth-largest wireless carriers “as it has been presented to us” was in violation of antitrust laws and would not result in lower prices or increased competition. She said her office was particularly concerned about lower-income consumers who rely on prepaid wireless service. The merger, according to the lawsuit, could cost Sprint and T-Mobile subscribers more than $4.5 billion annually.

“The T-Mobile and Sprint merger would not only cause irreparable harm to mobile subscribers nationwide by cutting access to affordable, reliable wireless service for millions of Americans, but would particularly affect lower-income and minority communities here in New York and in urban areas across the country,” Ms. James said in a statement. “That’s why we are going to court to stop this merger and protect our consumers, because this is exactly the sort of consumer-harming, job-killing megamerger our antitrust laws were designed to prevent.”

California Attorney General Xavier Becerra (D.) added, “Although T-Mobile and Sprint may be promising faster, better, and cheaper service with this merger, the evidence weighs against it. This merger would hurt the most vulnerable Californians and result in a compressed market with fewer choices and higher prices.”

AG James explained today that the states’ review of the merger was separate from the review being conducted by the U.S. Department of Justice and that the lawsuit would proceed regardless of whether the federal agency approved the merger. Although both the DoJ and the FCC are still reviewing the deal, the FCC’s three Republican Commissioners recently indicated that the commitments offered by the merging companies were sufficient to win their support for regulatory approval of the deal (TR Daily, May 20). T-Mobile and Sprint, among other things, agreed that the merged company would not raise prices for three years and pledged to advance the rollout of 5G wireless service and divest T-Mobile’s Boost Mobile prepaid service unit.

The lawsuit alleges that the proposed commitments that Sprint and T-Mobile made to the FCC “do not ameliorate the harms to competition and the resulting harms to consumers that will result if the merger is completed.”

The proposed commitments do not provide verifiable, merger-specific benefits to retail mobile wireless telecommunications subscribers when compared to the probable state of competition without the merger, including the progress the Big Four [mobile network operators], including Sprint and T-Mobile, have already made on deploying 5G technology,” according to the lawsuit.

“Consumer prices for mobile wireless telecommunications services have decreased over time. Thus, a promise not to raise prices, when those prices would be falling in a competitive market, does not address the harm to competition that will result. Nor does it prevent T-Mobile from raising prices after the commitment ends,” the lawsuit further states.

Sprint and T-Mobile didn’t immediately respond to requests for comment today.

Consumer advocates and other industry groups, however, welcomed the filing of the lawsuit to stop the proposed merger.

Free Press commended the states for “stepping up where the Trump FCC has failed and while the Justice Department leadership sits on the fence.”

“This merger has always been a terrible idea, and it would be a disaster for people who rely on the affordable wireless services these two companies compete to provide today. This large group of state attorneys general apparently understands that no matter how much companies promise, less is indeed less when it comes to competition and choices,” said Matt Wood, Free Press’s vice president-policy and general counsel.

“These states have apparently reached exactly the right conclusion: Combining T-Mobile, Sprint and all of their lower-cost plans and prepaid brands under one roof would be a huge blow to people who need more affordable service. This merger would harm every wireless customer in the United States, but especially those in lower-income communities and communities of color who rely on T-Mobile and Sprint,” Mr. Wood added.

Public Knowledge, another group that has opposed the merger, said today’s legal action was the “right decision and will protect consumers across the U.S. and promote competition in the wireless market, as well as the proliferation of competitive next-generation wireless networks.”

“After more than a year of review, the unsupported claims T-Mobile and Sprint have made regarding the benefits of their merger have collapsed under close scrutiny from antitrust enforcement officials and the public. The wireless market is already highly concentrated. Permitting T-Mobile and Sprint to merge -- reducing the national wireless market to only three competitors -- will give the combined firm the market power and incentives to raise prices and coordinate, rather than compete, with AT&T and Verizon,” said Phillip Berenbroick, senior policy counsel for Public Knowledge, in a statement.

George Slover, senior policy counsel for Consumer Reports, said, "We applaud the leadership that these states are taking to stop this anti-competitive merger and protect the benefits that consumers get from competition between these two giants. The Justice Department has been carefully examining this deal, and we urge Justice to join the states in opposing it. At a time when the Justice Department and the Federal Trade Commission are pledging to look at reining in the power of tech giants like Facebook, Google, and Amazon, the last thing that should happen is allowing these two telecom giants to combine.”

“Ten state attorneys general have recognized that the consolidation of the wireless market that would result from this proposed merger is bad for American wireless users, workers, and competition. This deal would reduce choice, limit competitive pressures, and stifle innovation. We are pleased that state attorneys general from across the country have recognized these harms,” according to a statement from the 4Competition Coalition.

Communications Workers of America (CWA) President Chris Shelton pointed out in a statement today that T-Mobile and Sprint were each other’s closest competitors, “and their merger would clearly mean higher prices for consumers. It would also result in significant job loss for retail wireless workers due to the closing of duplicative stores.”

“Reducing the number of national wireless carriers from four to three would mean less competition in the wireless labor market, giving T-Mobile and other wireless companies more power to cut wages and benefits. T-Mobile and Sprint have a long history of interfering with their workers’ freedom to join a union. Without collective bargaining, T-Mobile and Sprint workers have limited ability to protect themselves from the negative impact of this merger,” he said.

“The states’ action today is a welcome development for American workers and consumers and a reminder that regulators must take labor market concerns seriously when evaluating mergers,” Mr. Shelton added.

NTCA also said it supported the filing of the lawsuit today by the state attorneys general.

“We appreciate the heightened scrutiny the states are giving the proposed merger of T-Mobile and Sprint. Despite the companies’ speculative and unenforceable promises, changing our country’s competitive landscape from four nationwide wireless providers to three will result in higher prices for consumers and poorer availability of services, particularly in rural areas,” said NTCA’s chief executive officer, Shirley Bloomfield.

“This merger is bad for competition, and it is bad for consumers, especially those living in or traveling through rural areas, who will experience fewer choices, price increases, and substandard service,” said Carri Bennet, general counsel for the Rural Wireless Association. “We are pleased that the New York attorney general, along with nine states, have filed their lawsuit to block the merger. The process at the FCC has not been transparent, and the FCC appears to be blindly accepting New T-Mobile’s words as truth.”

Sen. Amy Klobuchar (D., Minn.), ranking member of Senate Judiciary Committee’s antitrust, competition policy, and consumer rights subcommittee, called on the Justice Department to take similar action to stop the merger.

“I have repeatedly raised serious antitrust concerns about the harmful effects of merging T-Mobile and Sprint, two of the four remaining nationwide wireless carriers. This merger would harm competition and consumers, and I am pleased that action is being taken by state attorneys general to block it,” Sen. Klobuchar said in a statement today.

On the other hand, former FCC Commissioner Mignon Clyburn, an adviser to T-Mobile, made a statement today in support of the proposed merger.

"I firmly believe that a strong third nationwide wireless competitor would be in the public interest. The T-Mobile-Sprint merger would help bridge the digital divide by accelerating inclusive 5G and prioritizing affordable broadband access for underserved consumers in urban and rural America. Particularly for those on the wrong side of the digital divide, this lawsuit by a small number of state attorneys general would reinforce an unacceptable status quo, further entrench two telecom behemoths, and ensure those without next-generation telecommunications opportunities today remain so tomorrow,” Ms. Clyburn said. —Carrie DeLeon, [email protected]

MainStory: MergersAntitrust NewYorkNews CaliforniaNews FCC Courts

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