New lawsuit poses major threat to T-Mobile, Sprint merger

The $26 billion T-Mobile–Sprint merger is facing a new and potentially devastating obstacle after 10 attorneys general from nine states and Washington, D.C., filed a federal lawsuit to block the deal.

The state attorneys general in the lawsuit, filed Tuesday, argue the bid to combine two of the nation’s four top mobile carriers would jack up prices for customers, particularly low-income consumers, and result in unhealthy market concentration.

Legal experts who spoke to The Hill said the states have a strong antitrust case, predicting the ensuing legal battle could drag on for months, if not years.

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“[The case] materially increases the odds that the deal will never close,” Blair Levin, an analyst with New Street Research and a former Federal Communications Commission (FCC) official, said in an interview.

The lawsuit marks one of the first times a group of state attorneys general has sued to block a deal before the federal agencies overseeing the merger have both weighed in. The Republican-controlled FCC last month signaled it will approve the merger, but the Department of Justice (DOJ) has not yet made its decision on the deal.

Gigi Sohn, a former adviser at the FCC during the Obama administration, called the states’ move “unprecedented.” 

The multistate lawsuit to block the merger ups the ante for the DOJ and could be a way for the states to sway the department against the deal, experts said. In previous merger cases, the states have typically waited to see where the DOJ stands before announcing legal action. 

“I think it could mean that the deal is dead,” Sohn said. “At a minimum, it’s an opening salvo to [top DOJ antitrust attorney] Makan Delrahim to join in.” 

Antitrust staff at the Justice Department have reportedly shown more hesitation in approving the merger than Delrahim, who faced enormous scrutiny over his decision to try to block the AT&T–Time Warner deal last year. Top officials at the DOJ have pushed T-Mobile and Sprint to spin off a fourth competitor as part of any deal, a tough standard that the companies would likely struggle to meet, Bloomberg News reported. 

The unusual decision to sue at this point could indicate the states have gotten some insight into the DOJ’s plan and are not happy with it, according to John Mark Newman, a former DOJ antitrust official and assistant law professor at the University of Memphis. 

“It sounds like DOJ has been asking for some pretty significant concessions and if the states are not happy with what DOJ’s doing, that would maybe suggest that they just … want to block the deal outright,” Newman told The Hill. 

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The attorneys general, led by New York’s Letitia James and Xavier Becerra of California, filed the federal lawsuit in the Southern District of New York on Tuesday. Colorado, Connecticut, the District of Columbia, Maryland, Michigan, Mississippi, Virginia and Wisconsin have also joined the effort, with more Democratic attorneys general likely to join in. 

A spokeswoman for Nevada Attorney General Aaron Ford (D) told The Hill that his office is currently reviewing the suit, and a few Republican attorneys general have also signaled they are looking into it.

“I feel pretty confident there’ll be more Democrats,” Levin said, predicting the Republicans are likely “waiting to see what the DOJ says.” 

The states investigated the consumer impact of the T-Mobile–Sprint merger for more than a year before they filed the lawsuit, pulling in expertise from top economists and antitrust experts. 

Becerra and James in press briefings on Tuesday both denied they were seeking to put pressure on the DOJ, saying their investigation had led them to conclude that there would be tangible harms to consumers and irreparable harm to the market.

They are predicting the deal could raise prices for consumers by at least $4.5 billion a year, casting doubt on the promises T-Mobile and Sprint have offered if the merger goes through.

“This is exactly the sort of consumer-harming, job-killing mega-merger our antitrust laws were designed to prevent,” James said at a press conference.

T-Mobile and Sprint have both said a merger will help them build out a next-generation wireless network, also known as 5G, that would cover almost all Americans — particularly those in rural areas — within six years. They’ve pledged not to raise rates on consumers for three years and create a new in-home broadband service.

FCC Chairman Ajit Pai in a statement last month said he believes the merger would be in the public interest “in light of the significant commitments made by T-Mobile.”

But Becerra told reporters on Tuesday that the probe concluded T-Mobile was already planning to expand its rural coverage.

“We’ve … based our decisions on fact, not promises,” he said.

He added that Pai had “started the clock running” when the Republican FCC chairman gave his approval of the deal.

The lawsuits are certain to galvanize other critics of the merger.

Democrats in both chambers on Capitol Hill have pushed hard against the deal, sending letters to the DOJ and FCC urging them to block the merger out of concern for consumers.

“I have repeatedly raised serious antitrust concerns about the harmful effects of merging T-Mobile and Sprint, two of the four remaining nationwide wireless carriers,” Sen. Amy Klobuchar (D-Minn.), who is running for president, said in a statement. “This merger would harm competition and consumers, and I am pleased that action is being taken by state attorneys general to block it.”

“Now, the Justice Department must take similar action to stop this transaction,” she said.

“I’m glad that these courageous attorneys general, especially Dana Nessel from my home state, are taking action to stop this deal that will only help corporate shareholders,” Rep. Rashida Tlaib (D-Mich.) said in a statement to The Hill. “The Trump administration should recognize the negative impact this merger will have and reject it. However, if they do not, I am glad that this legal action is taking place to protect consumers.”

Experts told The Hill that the states likely have a straightforward case under the Clayton Antitrust Act of 1914, which lays out what constitutes anticompetitive behavior.

The companies have not yet responded publicly to the lawsuit.

Newman said he believes the states are stepping up on antitrust amid a “vacuum of federal enforcement” on the issue.

The issue comes down to Delrahim now, who is expected to announce his decision within the next few months.

“He has to decide, is he going to go with the states and his own staff, and the American people, or is he going to go with … Ajit Pai and make some people in the White House happy,” Sohn said.