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.
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
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
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.
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
"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
Editor's Note: This story
was updated with comments from the Computer and Communications Industry
Association and the Rural Telecommunications Group.
Wayne Rash is a Senior Analyst for eWEEK Labs and runs the magazine's Washington Bureau. Prior to joining eWEEK as a Senior Writer on wireless technology, he was a Senior Contributing Editor and previously a Senior Analyst in the InfoWorld Test Center. He was also a reviewer for Federal Computer Week and Information Security Magazine. Previously, he ran the reviews and events departments at CMP's InternetWeek.
He is a retired naval officer, a former principal at American Management Systems and a long-time columnist for Byte Magazine. He is a regular contributor to Plane & Pilot Magazine and The Washington Post.