US carrier Sprint Nextel filed a suit rivals against AT&T and the Deutsche Telekom-owned T-Mobile against the former’s bid to acquire the latter on that it would create a ‘duopoly.’
It has come six days after the U.S. Department of Justice today moved to block AT&T Corporation’s proposed acquisition of T-Mobile USA which opposed it on similar grounds.
Sprint had, earlier, come out with a statement on the acquisition opposing it tooth and nail and terming it anti-competitive.
Sprint’s lawsuit focuses on the competitive and consumer harms which would result from a takeover of T-Mobile by AT&T.
The following are the arguments advanced by Sprint in its law-suit:
The proposed transaction will
Harm retail consumers and corporate customers by causing higher prices and less innovation.
Entrench the duopoly control of AT&T and Verizon, the two “Ma Bell” descendants, of the almost one-quarter of a trillion dollar wireless market. As a result of the transaction, AT&T and Verizon would control more than three-quarters of that market and 90 percent of the profits.
Harm Sprint and the other independent wireless carriers. If the transaction were to be allowed, a combined AT&T and T-Mobile would have the ability to use its control over backhaul, roaming and spectrum, and its increased market position to exclude competitors, raise their costs, restrict their access to handsets, damage their businesses and ultimately to lessen competition.
The suit filed by Sprint Nextel seeks to block the proposed acquisition as a violation of Section 7 of the Clayton Act. The section requires companies to inform the Government in advance if certain thresholds for market power are crossed by a merged entity and lays down specifications related to holding structures, indirect holdings etc..
Section 7 of the Clayton Act says:
“No person engaged in commerce … shall acquire … the whole or any part of … another person engaged also in commerce … where in any line of commerce or in … any section of the country, the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly.”
The suit was filed in federal court in the District of Columbia as a related case to the Department of Justice’s (DOJ) suit against the proposed acquisition, Sprint said.
The move is in line with Sprint’s earlier statement on the matter, which claimed that the new entity would control nearly 80% of the US “wireless post-paid market” and make life difficult for all competitors.
Sprint’s first statement on the merger deal:
“The combination of AT&T and T-Mobile USA, if approved by the Department of Justice (DOJ) and Federal Communications Commission (FCC), would alter dramatically the structure of the communications industry.
“AT&T and Verizon are already by far the largest wireless providers. A combined AT&T and T-Mobile would be almost three times the size of Sprint, the third largest wireless competitor.
“If approved, the merger would result in a wireless industry dominated overwhelmingly by two vertically-integrated companies that control almost 80% of the US wireless post-paid market, as well as the availability and price of key inputs such as backhaul and access needed by other wireless companies to compete.
“The DOJ and the FCC must decide if this transaction is in the best interest of consumers and the US economy overall, and determine if innovation and robust competition would be impacted adversely and by this dramatic change in the structure of the industry,”