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The lawsuit was filed by customers of AT&T and Verizon
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They say the T-Mobile/Sprint merger has resulted in higher prices
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A research firm supports the class action lawsuit
Consumers who are fed up with higher wireless prices won a victory last week when the 7th Circuit rejected T-Mobile’s appeal to dismiss a class action suit related to its merger with Sprint.
The Chicago-based 7th U.S. Circuit Court of Appeals denied T-Mobile’s interlocutory appeal to dismiss the case, Reuters reported.
The lawsuit was actually filed by customers of AT&T and Verizon who argue that the $26 billion T-Mobile/Sprint merger resulted in higher prices. As Fierce reported last year, AT&T and Verizon are not directly involved in the suit. The class-action suit was filed by seven AT&T and Verizon subscribers on behalf of millions of customers who were affected.
Fierce reached out to T-Mobile for comment and will update this story if we hear back.
Indeed, according to data released by Rewheel last week, the T-Mobile/Sprint merger made the U.S. one of the most expensive markets in the world. Monthly prices are two to three times higher and gigabyte prices are five to six times higher in markets with only three mobile network operators, according to the Finnish research firm.
Lots of scrutiny
There certainly was plenty of opposition to the merger, which was completed in April 2020 after about two years of regulatory scrutiny. More than a dozen states challenged the merger, arguing that the combination would harm competition and raise prices. Of course, they were not successful in blocking it.
As part of the government’s “remedy” approving the merger, Dish Network was set up to become the No. 4 carrier, replacing Sprint, by acquiring Sprint’s Boost Mobile prepaid assets and given buildout requirements for Dish’s own 5G network. So far, that’s been anything but a slam dunk.
Dish has met its FCC 5G buildout requirements, but it’s struggling to keep mobile customers and faces stiffer buildout requirements and capital needs in 2025. At the start of this year, EchoStar became Dish’s parent company in a move that was largely seen as a financing strategy. But the financing troubles persist, and EchoStar earlier this year revealed doubts about its ability to continue as a “going concern.”
Chances of success
Back to the lawsuit against T-Mobile, its prospects don’t look promising, according to New Street Research (NSR) policy analyst Blair Levin.
While the lawsuit and the discovery process will be unpleasant for T-Mobile as well as AT&T and Verizon, “we believe that ultimately [T-Mobile] will win the litigation and not be forced to pay damages,” Levin wrote in a note for investors today.
T-Mobile will likely prevail for a multitude of reasons, he said, including that as a factual matter, “the court is likely to find that there are too many events independent of the merger to explain the price increases.”
Alternatively, “the law does not allow plaintiffs the retroactive ability to break up a merger on the grounds that the merging parties did not live up to ‘promises’ made to the approving government agencies,” he said.
NSR also is of the mind that either the trial judge or the Circuit Court will understand that if the court rules for the plaintiffs, “it opens the door to all kinds of post-merger litigation related to any harm to consumer welfare, dismissed by antitrust authorities during the merger review but that may occur after the deal closed,” according to Levin.
That would mean that any deal approval (in which the government authorities are supposed to make a predictive call about the future impact) is nothing more than an invitation for class action suits to be the real antitrust enforcement mechanism, a problematic outcome, he concluded.