State AGs Sue to Block T-Mobile-Sprint Merger

June 11, 2019 – A group of 10 state attorneys general led by New York’s Tish James and California’s Xavier Becerra is suing to block the $26 billion merger between T-Mobile and Sprint, putting pressure on President Donald Trump’s Justice Department, which is still reviewing the deal.

The deal would kill jobs and harm consumers, the AGs said in a statement Tuesday. Joining James and Becerra are the top state prosecutors from Colorado, Connecticut, the District of Columbia, Maryland, Michigan, Mississippi, Virginia, and Wisconsin. The suit was filed under seal in the U.S. District Court for the Southern District of New York.

“When it comes to corporate power, bigger isn’t always better,” James said. “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.”

The lawsuit was quickly cheered by merger opponents, who called on DOJ antitrust chief Makan Delrahim to join the states in attempting to block the deal in court. A number of states filed supporting briefs when DOJ unsuccessfully sought to block AT&T’s acquisition of Time Warner.

DOJ antitrust officials aren’t satisfied with the T-Mobile-Sprint transaction as structured and have been negotiating with the companies on divesting assets, with the goal of forging a pathway for a fourth competitor in the wireless market, a person familiar with the discussions told POLITICO.

That would address a key objection to the merger raised by opponents — that the reduction in competition that comes from combining two of the country’s four nationwide wireless carriers could harm consumers.

Gigi Sohn, a former FCC official who opposes the T-Mobile-Sprint deal, said it “defies belief” that DOJ would move to block the AT&T deal but not this one. States filing suit while DOJ still mulls the merger may be an effort to compel the agency to join them, she told POLITICO.

“They’re obviously trying to place pressure on Delrahim to do the right thing,” said Sohn, now a distinguished fellow at the Georgetown Law Institute for Technology Law & Policy. “They’ve seen all the same evidence that he’s seen. They know that his decision is political, and not based on the substance at this point. They’re basically calling him into question.”

James said at a press conference Tuesday afternoon that her office has been in talks with DOJ and the companies regarding its opposition. “We filed our case today because we recognize that right now, what has been proposed to us and put on the table unfortunately is bad for consumers,” she said.

She also said there is no “rule or regulation” that says the states need to wait for DOJ before acting.

Becerra told reporters on a press call that his office too has been in touch with federal counterparts, but the states’ effort would proceed despite the federal outcome.

“They don’t tell us what to do; we don’t tell them what to do,” Becerra said.

More states could still join the lawsuit or launch their own. The office of Texas Attorney General Ken Paxton “has concerns about the proposed merger, and we are continuing to assess the potential merger’s impact on consumers,” spokesperson Marc Rylander told POLITICO. Opposition to the deal from any such Republican AG could escalate pressure on Delrahim to follow suit. The 10 officials launching the suit are all Democrats, though one, Mississippi Attorney General Jim Hood, does hail from a solidly red state.

The companies didn’t immediately comment. A DOJ spokesperson declined comment.

FCC Chairman Ajit Pai announced in May that he planned to greenlight the deal after the companies agreed to divest Sprint’s prepaid wireless service, Boost Mobile, and made pledges relating to 5G coverage and speeds.

The AGs said, however, that T-Mobile “has yet to provide plans to build any new cell sites in areas that would not otherwise be served by either T-Mobile or Sprint.” And they provided a supporting statement from Carri Bennet, general counsel for the small telecom trade group, the Rural Wireless Association, who said, “The process at the FCC has not been transparent and the FCC appears to be blindly accepting new T-Mobile’s words as truth.”

The AGs also said they believe the merger would kill jobs and reduce pay for wireless retail workers.

T-Mobile and Sprint, the third- and fourth-largest U.S. wireless carriers, announced their $26 billion merger in April 2018, saying that by combining forces they could create a strong and lasting competitor to industry behemoths Verizon and AT&T.

T-Mobile CEO John Legere promised in February that prices for T-Mobile and Sprint subscribers would remain the same or better for three years following the merger, but critics were quick to point out potential loopholes in that commitment. DISH Network, a vocal merger opponent, said the language used by T-Mobile left room for the company to replace cheaper legacy plans with more expensive ones as it makes network improvements.

It’s unclear whether or how the lawsuit might affect Delrahim’s ongoing review of the deal. Even if he and his staff do extract more concessions from the companies in exchange for clearing the merger, they may do little to allay the state-level concerns.

The AGs stressed that after probing the deal, they concluded many benefits T-Mobile and Sprint say will result from combining are “unverifiable and could only be delivered years into the future, if ever.”

By Margaret Harding McGill, Politico
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