This post follows up on the September 7th post, “Merger Impossible?,” regarding the AT&T/T-Mobile merger. “Merger Impossible?” discusses the Department of Justice’s (“DOJ”) antitrust lawsuit filed against AT&T seeking to block the merger of AT&T and T-Mobile. This time, it is Sprint who has invited itself to the party by filing suit to block AT&T’s $39 billion acquisition of T-Mobile. AT&T has moved to dismiss Sprint’s suit, and the main question is whether Sprint should be able to make its own claim against the merger.

As noted by the Wall Street Journal (“WSJ”), Sprint’s tactic of suing AT&T is unusual and potentially undermines its argument–it will seem as though Sprint is seeking to protect itself rather than consumers. While this may be true, it is equally plausible that Sprint’s interests are aligned with consumers, which, if true, would mean there is no harm in allowing the suit to proceed. For instance, even though antitrust laws protect competition, it seems as though they also inherently protect competitors. Therefore, consumers’ interests and Sprint’s interests would be aligned.

For the claim to proceed, Sprint must demonstrate both harm to itself from the merger as well as harm to competition. The WSJ reports that if the case moves forward, “the company is likely to try to work with the government.” In AT&T’s motion, they assert that consumers’ interests are not aligned with Sprint’s. Rather, “what is good for consumers is bad for Sprint, and that is why Sprint has filed suit.” Further, AT&T alleges that Sprint is not entitled to redress under antitrust law.

As a wireless consumer, I tend to side with Sprint. If the merger occurs, the market will be dominated by two companies, AT&T and Verizon (also note Verizon’s announcement earlier this week that its third quarter profit more than doubled). As Sprint alleges in its complaint, “AT&T’s proposed purchase would eliminate one of the four national competitors and marginalize a second (Sprint), pushing the market back toward a 1980s-style cell phone duopoly that would force consumers to endure higher prices and be denied the fruits of vigorous innovation…[T]hese Twin Bells [Verizon and AT&T] would control more than three quarters of all wireless services.”

So should we let Sprint join the party? I think yes. There seems to be little harm in allowing Sprint to work with the government in its case against AT&T. Ultimately, it is consumers that will benefit by having more legal minds working on its behalf with Sprint footing the bill. The court will obviously still decide whether the merger violates antitrust laws, and by allowing Sprint’s attorneys to work alongside the DOJ we can be more certain that all relevant legal arguments will be raised.

– Thomas E. Booms

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2 Responses to Who Invited Sprint?

  1. Niels Melius says:

    This article raises interesting points, but I ultimately disagree with the notions that “Sprint’s interests are aligned with consumers” and that the antitrust laws “inherently protect competitors.” Illegal mergers among horizontal competitors typically do not injure rivals. The main threat of an anticompetitive merger is the feared rise in prices or reduction in output. This would actually BENEFIT Sprint because the company could hold prices constant and capture “turned-off” AT&T customers or, alternatively, could increase their prices to the level of the new AT&T, thereby increasing profits. The other scenario is that the AT&T/T-Mobile merger creates efficiencies, causing prices to fall, which would benefit consumers. This would indeed harm Sprint by forcing the company to lower its prices to retain customers. However, enhanced rivalry that causes competitors to lose profits is not a cognizable antitrust injury. As the Supreme Court stated in Brown Shoe, “The antitrust laws were enacted for the protection of competition, not competitors.” In sum, Sprint is in a bind: they can either argue that prices will rise because of this merger, which would actually benefit Sprint and make it difficult to prove an “injury” OR the company could argue that its profits will be harmed by a more efficient AT&T, which isn’t a claim that is cognizable as an antitrust injury because it defeats the purpose of antitrust law – competition.

  2. Anti-Trustworthy says:

    I kind of like the simplicity of AT&T’s main argument here – that Sprint isn’t complaining because of the effects on customers, it’s complaining because of the effects on Sprint. Unfortunately, AT&T’s argument assumes that the merger will be good for consumers and bad for Sprint. They can certainly prove the latter point – in fact, it’s pretty self-evident – but I’m not sure they can prove the former.

    I fail to see how gobbling up more market share with only 4 major companies out there already is good for consumers. At this point, economy of scale benefits are probably maxed out.

    That being said, it’s feels weird to allow Sprint to proceed “on behalf of consumers” here. Even if we assume consumers will be harmed by the merger, does anyone believe Sprint really cares about that? I think we all know why they want to block the merger.