Vacating Sprint Buy Would ‘Rip Apart’ T-Mobile on 5G: Dismissal Motion

The seven consumer plaintiffs in the class action to overturn T-Mobile’s Sprint buy on antitrust grounds “are not customers of T-Mobile, do not purchase T-Mobile services, and have no basis to complain about the quality of those services or T-Mobile’s prices,” said T-Mobile and SoftBank in their memorandum of law Monday (docket 1:22-cv-03189) in U.S. District Court for Northern Illinois in Chicago, in support of their joint motion to dismiss. The plaintiffs, all customers of AT&T or Verizon, allege the anticompetitive nature of the T-Mobile/Sprint combination in 2020 caused their own wireless rates to soar.

The “gravamen” of the plaintiffs’ “unprecedented” lawsuit is that, despite having no relationship with T-Mobile, “they should be permitted to unwind the long-consummated T-Mobile/Sprint merger and seek treble damages for prices independently set by T-Mobile’s rivals because of their alleged unhappiness with the prices they pay to T-Mobile’s competitors,” said the memorandum. If the plaintiffs are unhappy with Verizon and AT&T, “there is a remedy available in the highly competitive market that wireless consumers enjoy today -- they should switch to T-Mobile, not sue it,” it said.

The “extraordinary” lawsuit “seeks to turn the antitrust laws on their head and fails as a matter of law,” said the memorandum. The complaint’s “fatal threshold defect” is that the plaintiffs “lack antitrust standing to challenge a consummated merger when they are not customers of the merged entity,” it said.

Even if the plaintiffs could clear “this formidable antitrust-standing hurdle,” their claims still would fail “because they do not plausibly allege that the merger substantially lessened competition,” said the memorandum. The plaintiffs cite “alleged higher prices” they paid to Verizon and AT&T after the transaction, but their complaint “is bereft of any allegations plausibly establishing that such increases resulted from the merger as opposed to a host of other obvious alternative explanations,” it said. Other possible reasons for the higher wireless rates, it said, are “record-high inflation, rising labor costs, and the industry’s transition to higher-quality 5G services.”

The class action’s request for the “extreme remedy” of T-Mobile’s Sprint divestiture “is barred by the doctrine of laches,” said the memorandum. The doctrine means plaintiffs should be barred from raising their claims because of their unreasonable delay in pursuing them, it said.

For more than four years after the deal’s highly publicized announcement, the plaintiffs didn't file suit to block it or otherwise object to it, said the memorandum. The complaint “offers no excuse for this tardiness, despite affirmatively asserting that the merger’s allegedly harmful effects were entirely foreseeable when the merger was announced.”

The class action’s belated divestiture request, if granted, “would rip apart T-Mobile’s nationwide 5G network, one constructed only with the benefit of the merging entities’ combined facilities,” said the memorandum. “The result would prejudice millions of T-Mobile customers who would lose access to those nationwide, integrated 5G services on which they have come to rely.” Allowing this case to proceed “would stretch beyond their breaking point the antitrust laws limiting who can sue, when, and for what relief,” and the court should dismiss the case with prejudice, it said.

T-Mobile/Sprint delivered to T-Mobile consumers “lower prices and higher-quality, faster network services than either company could have offered alone,” said the memorandum. The acquisition “benefited consumers, particularly by accelerating the industry’s deployment of 5G networks around the country,” it said. “In other words, the merger dramatically improved circumstances for T-Mobile customers and was overcompetetive and should not be undone.”

The Chicago litigation has been somewhat in limbo as the plaintiffs’ attorneys seek to serve the complaint through diplomatic channels on the one remaining foreign defendant, Deutsche Telekom. Lawyers say they expect service to Deutsche Telekom to be complete by late January.

T-Mobile moved earlier in the case to transfer the litigation to the Southern District of New York, which wrote the 2020 opinion greenlighting the acquisition. U.S. District Judge Thomas Durkin in Chicago denied the transfer, saying in his Oct. 7 order “it is hard to deny that T-Mobile’s request to transfer this case to SDNY at least creates the appearance of forum shopping, given that any purported efficiency gain in that district is speculative and it is not T-Mobile’s home district.”