Sprint, C Spire Challenges to AT&T/T-Mobile to Proceed in Part

Huvelle allowed Sprint and C Spire (formally Cellular South) to pursue claims regarding the deal’s effects on the market for mobile wireless devices. Huvelle also will allow C Spire to push forward on claims regarding affiliate Corr Wireless as a purchaser of GSM roaming. But the judge dismissed some key claims, including Sprint’s assertion that the elimination of T-Mobile as one of four national carriers would potentially marginalize Sprint as a competitor.

"Sprint can spin this however they'd like, but anytime a judge dismisses nearly all your claims, it’s hardly a good day in court,” said AT&T Senior Executive Vice President James Cicconi. “We are pleased with the ruling that dismisses the vast majority of the claims,” said AT&T General Counsel Wayne Watts. “We believe the limited, minor claims they have left are entirely without merit."

"Both Sprint and C Spire have demonstrated to the court that they would be injured if the AT&T’s proposed takeover of T-Mobile were completed,” countered Susan Haller, Sprint vice president for litigation. The decision “will ensure that all parties harmed by AT&T’s proposed takeover of T-Mobile will have the benefit of a fair hearing,” said C Spire Vice President Eric Graham.

But Andrew Schwartzman, senior vice president of the Media Access Project, said Huvelle’s decision really was a win for Sprint and C Spire. Schwartzman, a merger opponent, said Huvelle deserves credit for turning around a complicated decision in a little more than a week. “It matters more that she kept the cases alive than that she dismissed a number of the specific counts. This enables Sprint and C-Spire to have access to discovery material and permits them to share their experts and input with the DOJ,” he said. “This delays things, which itself increases the likelihood that T-Mobile will walk. We won’t know until Dec. 9 when the trial will be, but if she rules against DOJ at trial, she will still have to have a second trial, which leaves uncertainty for several more months.” Perhaps most significantly, the decision “creates one more huge obstacle to AT&T’s increasingly dubious claims that the case will settle out,” Schwartzman said. “Even if AT&T were able to get DOJ to settle, which I think was never a very realistic possibility, it would have to get Sprint and C Spire to settle. They have very little incentive to do that."

The ruling is “interesting but limited in what it says about the judge’s disposition on the central question of whether the planned merger violates antitrust law,” said Stifel Nicolaus. “We nevertheless believe [AT&T/T-Mobile] faces an uphill battle to overcome government opposition, and we remain skeptical of a settlement, with the FCC’s review an added complication."

"The possibility that a post-merger AT&T could raise market prices does not, without more, threaten injury-in-fact to Sprint and Cellular South,” Huvelle wrote. “It therefore does not confer antitrust standing on them.” Huvelle similarly said Sprint and C Spire had not proved that AT&T’s enhanced spectrum position would harm either and justify an antitrust claim. “Sprint neither alleges facts about T-Mobile’s holdings nor describes its own holdings,” she wrote. “Sprint has not alleged facts sufficient to state a claim to antitrust injury arising from AT&T’s acquisition of T-Mobile’s unknown stock of spectrum."

Huvelle cited cases from outside the telecom industry in looking at Sprint and C Spire concerns about the effect of the merger on the availability of handsets. “Mobile wireless devices, and smartphones in particular, are Sprint’s and Cellular South’s first-run movies, mall locations suitable for department stores, and shelf space and promotional time, for they are necessary inputs for plaintiffs’ businesses,” she wrote. “Sprint and Cellular South have alleged that the transaction in question threatens their continued access to these inputs. As a general matter, plaintiffs’ threatened injuries are those of the type the antitrust laws were designed to prevent, and courts have approved claims similar to those specifically raised here.” Huvelle said both companies’ pleadings “provide factual support for the allegation that AT&T already possesses significant market power as a purchaser of mobile wireless devices, and that the acquisition of T-Mobile threatens them with harm.”

Public Knowledge Legal Director Harold Feld said in a blog entry a decision by another federal court this week upholding DOJ’s lawsuit against H&R Block’s buy of smaller competitor Tax Act was good news for AT&T/T-Mobile opponents (http://xrl.us/bmhr5u). “DoJ’s complaint against H&R Block/Tax Act relied on pretty much the same arguments it outlined in its complaint against AT&T/[T-Mobile],” Feld said. “Notably, DoJ, relied in the complaint against H&R Block on traditional market share metrics and on Tax Act’s status as a ‘maverick firm’ forcing larger firms to respond through aggressive pricing discounts and new business models.”