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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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