Prices Soared, Innovation Tanked, Post T-Mobile/Sprint, Say Plaintiffs

Contrary to T-Mobile and SoftBank's assertions in their Dec. 5 motion to dismiss that the class action to overturn T-Mobile’s Sprint buy “would turn the antitrust laws on their head” (see 2212060052), the case “involves no gymnastics,” said the seven plaintiffs in their memorandum of opposition Friday in U.S. District Court for Northern Illinois in Chicago. The litigation “advances claims that go to the heart of the Clayton and Sherman Acts,” they said.

The plaintiffs, all AT&T or Verizon customers, allege the anticompetitive nature of the T-Mobile/Sprint combination in 2020 caused their own wireless rates to soar post-merger. The litigation challenges “two enormous corporations” that combined “to reduce competition and increase profits at the expense of consumers,” they said. “This consumer injury lies at the root of the enactment of our antitrust laws and every case brought to enforce them against a business combination.”

If any party to the litigation showed “a predilection for legal contortions,” it's defendants T-Mobile and SoftBank, said the plaintiffs. They ask the court “to accept their facts as true, draw all inferences in their favor, and then dismiss the case,” they said. “This is not the law.”

The 7th U.S. Circuit Court of Appeals “already resolved the question of whether antitrust plaintiffs must be in privity with the violator to state a claim,” said the plaintiffs. “They need not be.” The second part of the defendants’ argument in support of their motion to dismiss “addresses the claim that plaintiffs have failed to allege any anticompetitive effects,” they said. “This comes as some surprise, as the levels of concentration caused by the merger plainly meet the standard for a prima facie case of anticompetitive harm, as even the New York court found.”

T-Mobile and SoftBank “seem to concede this as well,” said the plaintiffs. “Rather, they treat the issue as they would a summary judgment motion after full-blown fact and expert discovery,” they said. Their motion to dismiss weaves together “selective quotations from material outside the complaint to try to persuade the Court that the regulatory conditions on the merger worked,” they said.

The “reality is simpler,” said the plaintiffs. Before the deal completed, retail wireless prices “declined for years,” they said. “After the merger, according to the best public data available, quality adjusted prices jumped and stayed high, and all three carriers either raised nominal prices or did so surreptitiously through new taxes, fees, and surcharges,” they said. “This was no accident -- it was planned,” they said. The “very executives who plotted the merger” hypothesized that combining Sprint and T-Mobile “could support a $5 increase” in average revenue per user “across the entire market,” including Verizon and AT&T, they said.

Post-T-Mobile/Sprint, “the worst fears of a 4-to-3 merger have been realized,” said the plaintiffs. “Prices have increased, innovation and consumer options have decreased,” and Dish Network “appears to have no chance of becoming a viable fourth competitor,” they said. Bureau of Labor Statistics data show “quality-adjusted prices flat-lined and then markedly increased” immediately following the merger announcement, they said.

Industry churn “has remained low since the merger announcement,” said the plaintiffs. “Lower churn is unsurprising,” they said. The combination of the market’s fiercest competitors “has left consumers with fewer options,” they said. “Likewise, new plan offerings, which were hallmarks of aggressive pre-merger innovation, have also cratered.”

The various “regulatory commitments” that were supposed to preserve competition post-merger “have been ineffective,” said the plaintiffs. The sale to Dish of T-Mobile’s prepaid phone business, Boost Mobile, was supposed to give Dish “a foothold in the marketplace,” they said. But T-Mobile revoked Dish’s promised access to T-Mobile’s legacy network a year ahead of schedule, they said. That forced Dish to depend on network access from yet another competitor, AT&T, “effectively making it a reseller of service rather than a true competitor,” they said. Dish “has floundered,” losing nearly 1.5 million subscribers, they said. Dish, a nonparty to the litigation, didn’t comment Monday.