Enlarge / A T-Mobile store in Times Square in New York City. Getty Images | picture alliance
(T-Mobile’s $) billion acquisition of Sprint is basically a done deal, as a federal judge today ruled that the merger can go forward. T-Mobile that “the companies are now taking final steps to complete their merger,” signaling that the deal will likely be finalized soon. said in response
Attorneys general from thirteen states and the District of Columbia sued to block the merger, saying it would reduce competition in the wireless telecommunications market and harm consumers with higher prices. Their arguments were rejected in a
ruling issued by District Judge Victor Marrero of US District Court for the Southern District of New York.
Marrero’s ruling said his decision was difficult because the sides’ predictions of how the post-merger future will unfold amount to “competing crystal balls” that “essentially cancel each other out as helpful evidence the Court could comfortably endorse as decidedly affirming one side rather than the other.”
“Confronted by such challenges, courts acting as fact-finders ordinarily turn to traditional judicial methods and guidance more aptly Fitted for the task. Specifically, they resort to their own tried and tested version of peering into a crystal ball, “Marrero wrote.
Apparently writing the ruling after his own crystal-ball examination, Marrero wrote that he “is not persuaded” that a combined T-Mobile and Sprint “would pursue anticompetitive behavior that, soon after the merger, directly or indirectly, will yield higher prices or lower quality for wireless telecommunications services, thus likely to substantially lessen competition in a nationwide market.”
Marrero also disagreed with the states’ contention that Sprint on its own “would continue operating as a strong competitor in the nationwide market for wireless services. ” Finally, Marrero was not swayed by objections to
government-imposed merger conditions
that are supposed to help Dish replace Sprint as the fourth major competitor in the market.
“[T] he Court does not credit Plaintiff States’ evidence in arguing that Dish would not enter the wireless services market as a viable competitor nor live up to its commitments to build a national wireless network, so as to provide services that would fill the competitive gap left by Sprint’s demise, “Marrero wrote.
NY AG, consumer advocates disappointed
States could appeal the ruling, but that wouldn’t necessarily stop T-Mobile and Sprint from completing the deal this week. For example, the US Department of Justice
the court ruling that allowed AT&T to purchase Time Warner Inc. a month after that merger was
completed . The DOJ appeal was not successful in reversing the merger after the fact.
The states challenging the T-Mobile / Sprint deal were New York, California, Connecticut, Hawaii, Illinois, Maryland, Massachusetts, Michigan, Minnesota, Oregon, Pennsylvania, Virginia, and Wisconsin. New York Attorney General Letitia James
said She and other state attorneys general are “review [ing] our options, including a possible appeal.”
“From the start, this merger has been about massive corporate profits over all else, and despite the companies’ false claims, this deal will endanger wireless subscribers where it hurts most: their wallets, “James said. “There is no doubt that reducing the mobile market from four to three will be bad for consumers, bad for workers, and bad for innovation, which is why the states stepped up and led this lawsuit.”
Consumer-advocacy groups supported the states ‘lawsuit and expressed disappointment in the judges’ ruling.
“Well the decision is out, and it’s even more jaw-droppingly naive than expected,” Free Press VP of Policy and General Counsel Matt Wood
wrote on Twitter . “The judge says on page that it’s not rational to expect a newly entrenched oligopolist to stop competing. Has he never even heard of phone and cable companies? “
In the portion of the ruling quoted by Wood, Marrero wrote that a “major new or reinforced market participant” It is not likely to pursue anti-competitive strategies instead of seeking new customers by innovating and investing.
Wood expanded on his opposition in a
longer statement . Public Knowledge Legal Director John Bergmayer said the judge’s ruling “puts consumers at risk.”
“The states put on a strong case, and the DOJ’s proposed remedy is still very risky — at best we are losing a competitor today, in the hope of getting one back later, “Bergmayer wrote. Bergmayer said he hopes Dish will become a viable fourth competitor, but even if that happens “there will be a great deal of uncertainty for consumers in the meantime, as a result of this decision. New entry into the wireless market is not easy, especially when it requires the cooperation of your competitors, as under the DOJ’s proposal. “
Small carriers wanted deal blocked
A trade group representing small wireless carriers that compete against the big phone companies also objected to the ruling.
“This court has ignored the clear evidence from the record demonstrating the harm that will befall consumers, particularly rural consumers , “the
said. “With only some concessions by T-Mobile and Sprint to sell off parts of their business to Dish, the consolidation will result in the US having only three viable national wireless carriers, which in the long game will result in price increases for all consumers in the US. “
Sally Hubbard, a former antitrust enforcer with the New York attorney general’s office who is now director of enforcement strategy at the Open Markets Institute , argued that Marrero did not apply US antitrust law correctly.
“The Clayton act
prohibits mergers that ‘may ‘substantially lessen competition. Judge Marrero ruled against the states because he doesn’t think the merger is’ reasonably likely’ to substantially lessen competition. Not the standard, not the law, ” (Hubbard wrote
. Judge swayed by DOJ and FCC
Marrero acknowledged that the states’ case against the deal “might well suffice to warrant injunction of mergers in more traditional industries. ” But he argued that “a presumption of anticompetitive effects would be misleading in this particularly dynamic and rapidly changing industry.”
He wrote: T-Mobile has redefined itself over the past decade as a maverick that has spurred the two largest players in its industry [Verizon and AT&T] to make numerous pro-consumer changes. The Proposed Merger would allow the merged company to continue T-Mobile’s undeniably successful business strategy for the foreseeable future.
While Sprint has made valiant attempts to stay competitive in a rapidly developing and capital-intensive market, the overwhelming view both within Sprint and in the wider industry is that Sprint is falling farther and farther short of the targets it must hit to remain relevant as a significant competitor.
Marrero was also swayed by the Department of Justice and Federal Communications, which analyzed and approved the merger. The DOJ and FCC “expended significant energy and resources to arrange the entry of Dish as a fourth nationwide competitor, based on its successful history in other consumer industries and its vast holdings of spectrum,” the judge wrote.
Marrero acknowledged there is a “possibility” the merger will reduce competition but wrote that this possibility is “remote. ” The court “does not believe that such a possibility is reasonably likely” and thus “concludes that Plaintiff States have failed to prove a violation of Section 7 [of the Clayton Act] and thus declines to enjoin the acquisition of Sprint by T-Mobile, “he wrote.