A federal judge will allow customers of wireless carriers Verizon and AT&T to continue suing the parent companies of T-Mobile and Sprint, accusing the companies of forcing everyone else to allegedly pay more and get less, because the merger of T-Mobile and Sprint allegedly illegally decreased competition in the cell phone industry.
The lawsuit is a class action that could ultimately include hundreds of millions of cell phone customers throughout the U.S.
On Nov. 2, U.S. District Judge Thomas Durkin denied the bid by T-Mobile and Sprint to dismiss the complaint in its entirety, saying the plaintiffs in the lawsuit to this point have provided enough evidence of "anticompetitive conduct" and "anticompetitive effects" to continue with their lawsuit seeking to extract payment under federal antitrust law.
The legal action has been in court since June 2022, when attorneys 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 T-Mobile parent Deutsche Telekom AG and Sprint parent Softbank Group Corp.
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.
The merger ultimately withstood legal challenges in court and regulatory scrutiny at the state and federal levels.
However, the plaintiffs claim the merger still illegally bulldozed the landscape of the mobile communications industry against consumers, resulting in consumers with higher bills, fewer choices and fewer services.
They claim the merger and resulting lack of competition also led rival carriers, including AT&T and Verizon, to raise their rates and reduce services.
The lawsuit ultimately seeks to undo the merger through a court order that would force the new company to create a "viable firm that can replicate Sprint's competitive significance in the consumer wireless telecommunications services market or otherwise restore competition in that market to the extent it existed before the illegal merger."
The lawsuit also seeks an order compelling the new T-Mobile company to pay the customers of their competitors who have allegedly been overcharged as a result, as well as pay the attorneys who brought the lawsuit.
In response to the claims, T-Mobile/Sprint argued the complaint overlooks a host of other explanations for recent wireless service price hikes. These, they said, included the need to pay for improved 5G service technology and the alleged effects of the Covid pandemic, among other issues.
Judge Durkin, however, said it was "far from obvious" that those alternative explanations can account for the industry-wide price hikes that have followed the merger, market effects, he said, that are likely to continue for years to come.
Pointing to the claims relating the industry's service upgrades from 4G to 5G tech, Durkin said: "It may be that, as a general matter, higher-quality goods are more expensive, but it is not at all clear that the same axiom applies in the context of 4G versus 5G cell services, or that the timing of the magnitude of that shift corresponds with the observable jump in the BLS data (price information maintained by the federal Bureau of Labor Statistics.)"
The judge noted plaintiffs have established a "reasonable inference that market-wide price increases flowed from the merger."
T-Mobile/Sprint is represented in the action by attorneys with the firms of K&L Gates, of Chicago; Gibson Dunn & Crutcher, of New York, Los Angeles and San Francisco; Massey & Gail, of Chicago; Covington & Burling, of Washington, D.C.; and Morrison & Foerster, of New York.