T-Mobile and Sprint Merger Antitrust Class Action

The complaint for this antitrust class action alleges, “This lawsuit challenges one of the most anti-competitive acquisitions in history”— the merger of T-Mobile US, Inc. and Sprint Corporation. According to the complaint, T-Mobile has arbitration clauses that shield it from lawsuits from its own customers. This class action is brought by two AT&T customers who allege they have had to pay more for wireless services than they had to before the merger.

The class for this action is all persons or entities in the US who, on or after April 1, 2020, paid for a national retail mobile wireless plan offered by Verizon or AT&T, on a prepaid or postpaid basis.

Before the merger, four major wireless carriers existed in the US market: T-Mobile, Sprint, Verizon, and AT&T. The merger, the complaint alleges, reduced this to three, “combin[ing] two fierce competitors into a single behemoth with no incentive to compete meaningfully against the equally-large” AT&T and Verizon. Now, the complaint claims, consumers and small businesses have had to pay “billons more for wireless services” than they would have if the merger had never happened.

Originally, the complaint claims, “T-Mobile and Sprint were two scrappy upstarts challenging Verizon and AT&T, the industry’s leviathans.” Sprint slashed its prices against its competitors, the complaint alleges, and T-Mobile introduced various innovations. Because of the fierce competition, the complaint alleges that wireless rates decreased.

T-Mobile’s parent company was Deutsche Telekom AG (DT), a German company and a defendant in this case along with T-Mobile US, Inc. and Softbank Corporation. DT was looking for a merger partner for T-Mobile.

T-Mobile and Sprint announced they were intending to merge in April 2018. The Department of Justice (DOJ) had to approve the merger, however, so T-Mobile got rid of some of its business to DISH Network. DISH was then supposed to become a competing wireless carrier, leasing access to T-Mobile’s network while it developed its own.

According to the complaint, fourteen states and Washington, DC sued to stop the merger, claiming it would cost consumers $9 billion more per year. Even so, the merger was approved on April 1, 2020. The complaint alleges that DT’s CEO then made a telling remark: “It’s harvest time.”

The merger changed the wireless market, the complaint alleges: “Verizon and AT&T are no longer competing against two smaller maverick firms incentivized to cut prices to increase their respective market shares. They are now competing against a single large competitor that is more than happy to observe a competitive détente in return for stable market shares and prices.”

Meanwhile, DISH has failed to become a real competitor, and T-Mobile has shut down its CDMA network, which it had agreed to lease to DISH to help it compete.

In the ten years before the merger, the complaint alleges, prices of wireless plans went down by around 6.3% per year; now, it says, “quality-adjusted prices have inflated and stabilized” and prices are now rising.

Article Type: Lawsuit
Topic: Antitrust
Tags: Anticompetitive Actions, Antitrust, Requiring Consumer to Pay Higher Prices