Seven States Sue to Block AT&T's T-Mobile Takedown

Seven states today joined the federal government in its effort to block AT&T Inc.’s proposed acquisition of T-Mobile USA Inc., saying the $39 billion deal would "substantially lessen competition."

The U.S. Department of Justice filed its civil antitrust lawsuit on August 31, seeking to enjoin the acquisition.  It amended the complaint today to add the seven states -- New York, California, Illinois, Ohio, Pennsylvania, Massachusetts and Washington -- as plaintiffs.

“Blocking this acquisition protects consumers and businesses against fewer choices, higher prices, less innovation, and lower quality service,” said Illinois Attorney General Lisa Madigan.

AT&T’s acquisition of T-Mobile would reduce the number of national competitors to three and eliminate a company whose low pricing and product innovation have made it an aggressive competitor in the mobile wireless telecommunications marketplace, the states said.

“We applaud the attorneys general who joined the Justice Department's suit today to block AT&T’s takeover of T-Mobile. They deserve praise for standing up to AT&T and standing with their citizens," said Craig Aaron, president of Free Press, a D.C. public interest group.

"They understand that families can’t afford to shoulder the burden of higher bills that would result from the merger, and that states struggling with unemployment can’t afford to stand aside while corporations kill competition and put people out of work. This lawsuit is yet another blow to AT&T and a victory for the public," Aaron said.

Four competitors

Four nationwide providers – AT&T, T-Mobile, Sprint and Verizon – account for more than 90 percent of mobile wireless connections. According to the complaint, AT&T and T-Mobile compete head to head nationwide. They also compete nationwide to attract business and government customers.

In addition, wireless customers across the country face similar choices from the four national competitors regardless of whether local or regional carriers also compete in any particular local area.

The complaint also describes the competitive limitations of regional providers, resulting from their lack of national networks. Similarly, it concludes that entry by a new provider would be difficult, time-consuming, and expensive, requiring among other things nationwide spectrum, the construction of a nationwide network, scale economies arising from having tens of millions of customers, and a strong brand.

AT&T’s efforts to increase its own already substantial scale economies through this transaction underscore the difficulties any new entrant would have in entering in a timely manner and with sufficient scale to thwart the competitive harm resulting from the proposed acquisition, the suit argues.

The complaint also concludes that the defendants have not been able to demonstrate merger-specific benefits that would sufficiently outweigh the proposed merger’s anticompetitive effects.