10 states sue to halt T-Mobile bid for Sprint
A group of state attorneys general, led by California’s Xavier Becerra and New York’s Letitia James, filed a federal lawsuit Tuesday to block T-Mobile’s $26.5 billion bid for Sprint, citing consumer harm.
The attorneys general said the promised benefits, such as better networks in rural areas and faster service overall, cannot be verified, while eliminating a major wireless company will immediately harm consumers by reducing competition and driving up prices for cell phone service.
James said in a statement that combining the two companies would reduce access to affordable, reliable wireless service nationwide and would particularly affect lower-income and minority communities in New York and other urban areas.
Other attorneys general joining Tuesday’s
lawsuit are from Colorado, Connecticut, the District of Columbia, Maryland, Michigan, Mississippi, Virginia and Wisconsin. All 10 attorneys general are Democrats. The lawsuit was filed in U.S. District Court in New York.
The lawsuit is an unusual step by state officials ahead of a decision by federal antitrust authorities. The Justice Department’s decision is pending. The Republican majority of the Federal Communications Commission supports the deal, though the agency has yet to vote.
Becerra said that it is important to stop the merger to protect “the most vulnerable” residents of the state.
“Fewer choices means higher prices for lowincome Californians,” he tweeted. “They may be promising faster, better, and cheaper service, but the real rationale is profits, pure and simple.”
Noting how vital phones have become to everyday lives, he said on Twitter: “They’re how we conduct business, access the internet, get transportation and education, do our banking and so much more. If the cost of service goes up, many Californians could be disconnected from these vital services.”
James said at a news conference that too many mega mergers “have sailed through the governmental approval process,” so it’s up to the states to step up.
“There’s no rule or regulation that we have to wait” for the Justice Department to act, she said. She added that the attorneys general will continue to press the litigation whether or not the merger is approved.
Diana Moss, president of the American Antitrust Institute and an advocate for tougher antitrust enforcement, said the states’ lawsuit could signal to other potential merger partners that there would be tougher enforcement from states even if the federal government permits deals to go through.
T-Mobile and Sprint have argued that they need to bulk up to upgrade to a fast, powerful 5G mobile network that competes with Verizon and AT&T. The companies are appealing to President Trump’s desire for the U.S. to win a global 5G race.
Consumer advocates, labor unions and many Democratic lawmakers worry that the deal could mean job cuts, higher wireless prices and a hit to the rural cell phone market.
Amanda Wait, an antitrust lawyer and former Federal Trade Commission lawyer, said states are acting because they disagree with what they have seen the federal government doing.
“They see the FCC accepting certain remedies and concessions that don’t, in their minds, solve the problem,” she said.
T-Mobile declined comment. Sprint and the Justice Department did not immediately respond to requests for comment.
One famous example of when the states and federal government diverged on a big antitrust case was in the fight against Microsoft, although that was not a merger case. Several states dissented from the Justice Department’s settlement roughly 20 years ago, pushing for tougher sanctions to curtail Microsoft’s ability to use its dominance in the Windows operating system to thwart competition in other technologies.
More recently, in the Bayer-Monsanto agribusiness merger, five states last year criticized the federal government’s approval.
T-Mobile and Sprint previously tried to combine during the Obama administration but regulators rebuffed them. They resumed talks on combining once Trump took office, hoping for more industry-friendly regulators.
T-Mobile has a reputation for consumerfriendly offers. T-Mobile and Sprint led the return of unlimited-data cell phone plans, for example.
T-Mobile, trying to reassure critics, promised the FCC it would build out a 5G network and invest in rural broadband on a specific time frame or pay penalties. It also promised to sell off Sprint’s prepaid Boost Mobile brand and keep price increases on hold for three years.
That was enough for FCC Chairman Ajit Pai to back the deal. The two other Republican commissioners indicated they would join him.
But public-interest advocates said these conditions did not address concerns about higher prices and reduced competition— and would be difficult for regulators to enforce.
The Justice Department evaluates deals using stricter criteria than the FCC’s public interest standard — namely whether they harm competition and raise prices for consumers. Staff attorneys at DOJ have reportedly told the companies they won’t approve the deal as proposed, but the ultimate decision lies with Makan Delrahim, the top antitrust official who is a political appointee.
The state attorneys general said in Tuesday’s lawsuit that combining Sprint and T-Mobile would make the industry as a whole — Verizon and AT&T, too — less likely to offer plans and services that consumers like. And they say the companies have already been working to roll out 5G and don’t need to combine to do so.
Japanese tech conglomerate SoftBank owns Sprint, and Germany’s Deutsche Telekom owns T-Mobile. Chronicle staff contributed to
this report.