Sprint Nextel Files Antitrust Suit Against ATandT, Deutsche Telekom, T-Mobile

News Analysis: Sprint's suit aims to lend weight to the separate U.S. Department of Justice's antitrust lawsuit seeking to block the AT&T-T-Mobile merger while serving as insurance against a possible adverse settlement of the government case.

WASHINGTON - Sprint Nextel filed an antitrust lawsuit against AT&T, Deutsche Telekom and T-Mobile Sept. 6 in the federal district court for the District of Columbia, opening another front in the legal battle to block the proposed merger of AT&T and T-Mobile.

The suit alleges that the proposed merger is a violation of Section 7 of the Clayton Antitrust Act. That section prohibits mergers between companies if they would create an anti-competitive market concentration. The suit is separate from the U.S. Department of Justice's antitrust lawsuit to block the merger, but will be heard in the same court.

"Sprint opposes AT&T's proposed takeover of T-Mobile," Susan Z. Haller, vice president, litigation, at Sprint, said in a prepared statement. "With today's legal action, we are continuing that advocacy on behalf of consumers and competition, and expect to contribute our expertise and resources in proving that the proposed transaction is illegal."

Sprint says that its action focuses on the anti-competitive nature of the merger, and the potential for harm to consumers. According to the Sprint statement, the merger would harm retail and corporate consumers through higher prices and lower levels of innovation.

Sprint said the merger would also create a duopoly in which two former Ma Bell entities would effectively control the market, undoing the 1982 antitrust action that broke up AT&T into seven regional operating companies. Sprint also said that the combined force of AT&T and Verizon would control more than three quarters of the wireless market and 90 percent of the profits.

The suit also claims the merger would harm Sprint and other smaller independent carriers by giving AT&T and Verizon nearly exclusive control over backhaul, roaming and spectrum. Furthermore, the merger would effectively force the other companies out of business by raising prices, limiting access to handsets and ultimately lessening competition.

Antitrust law allows third-party companies that may be affected by a merger to file their own antitrust suits in addition to any action that may be taken by the U.S. Department of Justice. The antitrust suit by Sprint effectively inserts the company into the litigation, and it helps ensure that the DOJ can't unilaterally settle its suit or create conditions unacceptable to Sprint.

While the court can combine the two suits into a single hearing, that step has yet to be taken. But either way, Sprint has ensured that it will have a place at the table as the antitrust actions wind their way through the courts. 

Communications industry groups applauded the Sprint suite. Computer and Communications Industry Association President and CEO Ed Black welcomed Sprint's antitrust lawsuit. "AT&T's takeover of T-Mobile is a textbook case of an anti-competitive, horizontal merger and the Justice Department did the right thing by filing a lawsuit to block it," Black wrote in statement to eWEEK via email.

"Sprint's own lawsuit brings additional expertise from the front lines of the telecommunications market to help explain why mergers, and especially this merger, would lead to higher costs for wireless service," Black wrote.

Cathy Sloan, CCIA vice president of government relations told eWEEK that she was pleased that Sprint showed that the federal government isn't the only entity to launch a court fight against AT&T's effort to eliminate a competitor. "The Justice Department has already taken statements from all of the industry sectors involved," Sloan explained. "But Sprint has lots to say based on their own dealings with AT&T that go back a long way."

Sloan noted that the lawsuit gives Sprint the ability to learn a lot more about AT&T's tactics regarding the merger through the discovery process. "So much of what AT&T files with the FCC is redacted," Sloan said. "While it's understandable that some is competitively sensitive, there will be something on the true cost of roaming and backhaul. This will allow Sprint to know how badly they're being screwed."

Sloan said that too often, the FCC is kept in the dark about these issues.

The Justice Department has opposed two other mergers in the telecom arena in recent years. The first was a proposed merger between Sprint and Worldcom. The second was between DirecTV and Dish Network. Both were opposed by the Justice Department, and both merger proposals ultimately were withdrawn.

The Rural Telecommunications Group, which represents small rural wireless providers, issued a statement supporting Sprint's antitrust lawsuit. "RTG fully supports Sprint Nextel's lawsuit seeking to enjoin AT&T from taking over T-Mobile," said TRG General Counsel Carri Bennet in a prepared statement.

"The removal of T-Mobile from the mobile wireless marketplace is thoroughly anti-competitive, a blatant violation of Section 7 of the Clayton Act, and will lead to higher prices, reduced innovation and fewer choices for all American consumers.

"The complaints of the Department of Justice, and now Sprint Nextel, clearly demonstrate the various harms that will result from this proposed transaction. Rural consumers and the carriers that serve them will be irreparably harmed by AT&T's takeover of T-Mobile, and RTG supports all efforts to block the transaction," the RTG statement said.

Editor's Note: This story was updated with comments from the Computer and Communications Industry Association and the Rural Telecommunications Group.