Blog Post

Sprint Must Wear Its ‘Customer Hat’ To Stay In AT&T Case

Sprint’s lawsuit to stop the proposed merger between AT&T (NYSE: T) and T-Mobile went before a federal judge today. One antitrust expert explains why Sprint (NYSE: S) may be on a legal limb and what it must do to avoid having the case tossed out of court.

According to Washington lawyer, Andre Barlow, Sprint faces a few hurdles in persuading the judge not to grant AT&T’s petition to dismiss the case. The main problem for Sprint is that the country’s anti-trust laws are designed to protect consumers not competitors. This has led AT&T to argue that its rival lacks standing to even bring the lawsuit in the first place.

To get around the problem of standing, Sprint must show that it is challenging the merger not as a competitor but as a customer in its own right.

“Sprint is coming in with its customer hat and saying ‘AT&T’s merger with T-Mobile will raise our roaming and our backhauling charges’,” said Barlow, referring to two forms of services that one phone company can charge another for using its network.

If the court buys this argument, Sprint must also show that there is good reason for it to be involved in a case that it is already being fought by the government. The Department of Justice filed a complaint on August 31, asking the same court to apply the country’s antitrust laws and stop the merger.

Barlow said it is “odd” for a party to file a lawsuit to stop a merger when the government has done so already but that such a move is not unprecedented. In this case, he said, Sprint may be concerned that the Justice Department will not place every essential argument before the courts. Another possible motivation for Sprint may lie in the fact that the discovery process of the litigation provides it with a chance to peek at AT&T documents.

If Sprint succeeds in persuading the court not to dismiss the complaint, it is unclear what will happen next . Arguments in the case between AT&T and the government are slated to take place on February 13 and the court has the option of ordering the two cases to be consolidated. Alternately, the court could allow Sprint’s litigation to proceed in parallel or it could stay the Sprint case pending the February arguments.

The judge is expected to rule in coming weeks over whether Sprint, which filed the lawsuit on September 9, can remain a part of the litigation.

2 Responses to “Sprint Must Wear Its ‘Customer Hat’ To Stay In AT&T Case”

  1. Conrad Sands

    AT&T’s Dirty Money at Work …
    Snippets from CNN story …
    AT&T lobbyists push for T-Mobile deal
    For years, AT&T has been one of the biggest political and lobbying forces in Washington, D.C. Last year, it spent $15.3 million and had 93 lobbyists on its roster, including six former lawmakers. Germany’s Deutsche Telekom spent $3 million on lobbying for T-Mobile USA in 2010, armed with 41 lobbyists and one former lawmaker.
    Many lawmakers have a personal interest in seeing AT&T do well. AT&T ranked as the sixth most popular investment among members of the House and Senate in 2009, the most recent year for which such data is available, according to the Center for Responsive Politics.
    And AT&T is considered a heavy hitter during campaign election cycles. In 2010, donors with links to the company made nearly $4 million in campaign contributions to candidates running for federal office.

  2. Conrad Sands

    Consumers are finally noticing that AT&T and Verizon = The Most Expensive Wireless Plans in America. We know where Verizon and AT&T (both in the top 5 for corporate lobbying) get all that money to run commercials 24×7, pay out huge “fat cat” executive bonuses and hire armies of lawyers and lobbyists to push the U.S. market into a wireless industry duopoly — the American consumer.
    Taking into account the whole U.S. market, a combination of AT&T and T-Mobile would increase the Herfindahl-Hirschman Index (HHI), a widely accepted measure of market concentration, to 3,216 from 2,848, according to a Bloomberg analysis. Any score above 2,500 indicates a highly concentrated market, and any increase of more than 200 points clearly enhances market power, according to federal guidelines.
    If this ridiculous deal goes through, Sprint will be the only low-priced post-paid national wireless carrier left in the United States. T-Mobile customers are already fleeing to Sprint because they know they won’t get low prices from AT&T or Verizon. But AT&T and Verizon are two of the top corporate lobbyists in the country, so beware of how things could “mysteriously” turn in this case.
    “It’s only a slight overstatement to say that if they weren’t going to block this one, the Justice Department might as well just throw the antitrust guidelines out the window,” said Herbert Hovenkamp, professor of law at the University of Iowa, who is considered by many to be the dean of American antitrust law. “This merger clearly seems to violate them.”