A proposed class action looks to undo a merger between T-Mobile and Sprint that the lawsuit says has caused consumers to pay “billions more” for wireless services than they would have if the two carriers had remained separate entities.
The 66-page antitrust lawsuit, filed by a group of Verizon and AT&T customers, claims the April 2020 merger between T-Mobile and Sprint was “one of the most anti-competitive acquisitions in history” and has resulted in nationwide price increases triggered by a suppression of healthy competition.
The case argues that although T-Mobile and Sprint used to be “scrappy upstarts” who consistently forced “industry leviathans” Verizon and AT&T to keep prices low, the mobile carriers have now combined into “a single behemoth with no incentive to compete meaningfully” against its two competitors.
“All else being equal, the more concentrated a market, the easier it is for firms to avoid price wars and share the market while keeping prices high,” the complaint explains, arguing that the merger violates federal antitrust laws.
Named as defendants in the case are Deutsche Telekom AG, T-Mobile’s German parent company; T-Mobile US, Inc.; and Softbank Group Corp., the majority owner of Sprint Corporation prior to the merger.
According to the suit, the CEO of Deutsche Telekom told shareholders following the merger’s closing that it was “harvest time.”
“And, harvest they did,” the lawsuit says. “Real world post-merger data confirms that after the merger, the competitive landscape shifted. 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.”
The lawsuit relays that T-Mobile and Sprint, who first announced their intention to merge in April 2018, secured approval from the U.S. Department of Justice by agreeing to sell T-Mobile’s prepaid phone business, Boost Mobile, and other aspects of the carriers’ businesses to DISH Network Corp. and essentially help the company build its own network. The suit alleges, however, that T-Mobile and Sprint expected that DISH would never enter the wireless services market as a fourth viable competitor, and it has so far failed to do so, the complaint says.
Per the case, the carriers also faced challenges from 14 states and the District of Columbia, who sued to block the merger. Per the complaint, the court heard expert testimony predicting that the merger would result in $9 billion of consumer harm per year due to reduced competition. Nevertheless, the court, without the benefit of post-merger data, ultimately decided in favor of the carriers and trusted testimony that they would continue to “compete vigorously” and assist DISH with building its national network, the suit relays.
The case alleges, however, that the parties’ actions following the merger “proved to be in direct conflict with their representations to the district court.” According to the case, although competition drove down prices by an average of 6.3 percent per year in the years leading up to the merger, quality-adjusted prices since the deal was announced have “inflated and stabilized,” with the three surviving carriers focused on “maximizing profits” from existing customers instead of competing for subscribers.
The lawsuit looks to undo the merger, “create the viable fourth competitor that was promised” and recover damages for the overcharges consumers have allegedly experienced in the meantime.
The case proposes to cover anyone in the U.S. 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.
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