Customers of telecoms AT&T and Verizon have been forced to pay more and get less services, as a result of an allegedly illegal merger of competing telecoms Sprint and T-Mobile, according to a new class action lawsuit.
On June 17, attorneys with the firms of Lieff Cabraser Heimann & Bernstein, of San Francisco; Berger Montague, of Philadelphia; Hausfeld LLP, of Philadelphia; and the Law Offices of Kenneth N. Flaxman P.C., of Chicago, filed an antitrust class action lawsuit in Chicago federal court against the parent companies of T-Mobile and Sprint.
The lawsuit names as defendants T-Mobile parent Deutsche Telekom AG and Sprint parent Softbank Group Corp.
Brendan Glackin
| Lieff Cabraser
The lawsuit was filed on behalf of named plaintiffs, identified as Anthony Dale, Brett Jackson and Johnna Fox, all of Indiana; Benjamin Borrowman, Ann Lambert, Robert Anderson and Chad Hohenberry, all of Illinois. All of the named plaintiffs are identified as customers of AT&T and Verizon.
However, the lawsuit seeks to expand the action to include potentially hundreds of millions of other customers of the two telecommunications giants, identified in the complaint as “the industry’s leviathans.”
The lawsuit takes aim at the merger of Sprint and T-Mobile, which created the third largest telecom in the U.S.
According to the lawsuit, the merger unfairly reconfigured the marketplace for wireless communications and mobile internet services, leaving consumers with far fewer choices and much higher prices.
“The merger not only consolidated the number of national retail mobile wireless carriers from four to three; it combined two fierce competitors into a single behemoth with no incentive to compete meaningfully against the equally-large AT&T Inc. and Verizon Communications, Inc.,” the complaint said. “As a result, small businesses and consumers in the United States who subscribe to national retail mobile wireless carriers, including AT&T and Verizon customers, have paid billions more for wireless service than they would have if the merger had never happened.”
According to the complaint, before the merger, Sprint and T-Mobile routinely targeted AT&T and Verizon customers with more economically priced data and communications plans and products.
However, the two companies allegedly changed their strategy in 2018, when they announced their intent to merge to create the nation’s third large mobile telecommunications provider.
The merger was challenged by dozens of U.S. states and other government agencies, which asserted the it was anti-competitive and violated federal antitrust law.
However, a federal judge ultimately backed the merger and allowed the deal to be consummated in 2020.
The aftermath left consumers with little more than more expensive bills, the complaint said.
“In the decade preceding the merger announcement, the average price of a nationwide wireless plan decreased by approximately 6.3% per year,” the complaint said. “Quality-adjusted prices consistently decreased as well. Since the announcement of the merger, that trend has stopped: quality-adjusted prices have inflated and stabilized because the three surviving carriers have no reason to compete as vigorously for subscribers and can focus on maximizing profits from existing customers.
“And, led by T-Mobile, all three carriers have begun raising prices, both through outright increases in plan prices as well as through increases in taxes, fees, and surcharges.”
The lawsuit says the merger harmed customers of Verizon and AT&T, as well. On their behalf, it seeks to “undo the merger” and create a “viable firm that can replicate Sprint’s competitive significance in the consumer mobile wireless telecommunications services market or otherwise restore competition in that market to the extent it existed before the illegal merger.”
Further, the complaint seeks a court order forcing the new T-Mobile and Sprint entity to pay the customers of their competitors who have allegedly been overcharged as a result, plus pay the attorneys who brought the lawsuit.
“I’m hard-pressed to think of a more anti-competitive and damaging acquisition in recent history,” said attorney Brendan P. Glackin, of Lieff Cabraser, in a press release announcing the lawsuit.
“Mobile phones are now integral to American life, and the three carriers provide mobile wireless service to the vast majority of American subscribers. The consequences of the merger are currently being felt in the pocketbook of nearly every person living in this country and will continue to be felt until competition is restored and the ill effects of this merger are undone.”
Glackin’s colleague, Gary I. Smith Jr., of the Hausfeld firm, said the lawsuit will “serve an important function in remediating undesirable effects of a merger that should not have been, and restoring competitive balance moving forward.”
“This suit alleges that the Sprint-T-Mobile merger is one example where judicial predictions of the merger’s effects did not align with real world outcomes,” said Smith.