New York, California and seven other states filed suit in Manhattan federal court Tuesday in a bid to block the merger between telecom giants Sprint and T-Mobile, alleging that it would deprive consumers of the benefits of competition and drive up prices for cellphone services.
New York Attorney General Letitia James, who is leading the litigation, claimed in the lawsuit that T-Mobile and Sprint are making promises about the benefits of their merger that they can’t deliver to consumers anytime soon.
Guarantees of lightning-fast speeds and increased capacity from the companies, for example, couldn’t be verified through an investigation by the states and might not be available to consumers until several years in the future, if at all. It could also drive up prices, which would disenfranchise low-income consumers, James said at a press conference Tuesday.
“When it comes to corporate power, bigger isn’t always better,” James said. “The T-Mobile and Sprint merger would not only cause irreparable harm to mobile subscribers nationwide by cutting access to affordable, reliable wireless service for millions of Americans, but would particularly affect lower income and minority communities in New York and across the country.”
Representatives from Sprint and T-Mobile did not immediately respond to a request for comment on the lawsuit.
The companies announced last year their plan to merge, saying that their combined resources would allow consumers in rural areas and elsewhere to gain access to high-speed cellular data connections. They’ve framed it as providing more innovation and competition in the industry to consumers, rather than less.
The proposed merger, valued at $26 billion, has yet to be approved by the U.S. Justice Department. The chairman of the Federal Communications Commission recommended earlier this year that the deal go through, but the companies would need final approval from both agencies of the federal government.
James said they chose to bring the lawsuit now, rather than earlier, because they hadn’t concluded their investigation until recently.
“Our standard of review is different from the Department of Justice. We have reached out to the Department of Justice, and we’ve also reached out to T-Mobile and to Sprint and negotiations are ongoing,” James said. “But we filed our case today because we recognize what has been proposed to us and put on the table is bad for consumers, bad for New York, bad for innovation, and bad overall, and it violates antitrust laws.”
The attorneys general involved in the suit said they considered arguments from the companies that their merger would largely benefit rural areas that have scarce reliable cellular data connections. But their investigation also found T-Mobile hasn’t yet provided any plans to expand its network beyond areas that are already served by the two companies.
James is leading the suit with California Attorney General Xavier Becerra, who said the merger would result in a smaller cellular market that would ultimately hurt consumers.
“Although T-Mobile and Sprint may be promising faster, better and cheaper service with this merger, the evidence weighs against it,” Becerra said. “This merger would hurt the most vulnerable Californians and result in a compressed market with fewer choices and higher prices.”
T-Mobile and Sprint are already two of the four largest cell carriers in the U.S., with Verizon Wireless and AT&T being the others. The former two are also known to generally have lower prices than the latter couple, the states said. Having all four in the market has led to declining prices over the last decade, coupled with increased coverage. They claimed in the lawsuit that, if approved, the merger would halt that trend.
“That’s why we are going to court to stop this merger and protect our consumers, because this is exactly the sort of consumer-harming, job-killing megamerger our antitrust laws were designed to prevent,” James said.
A pillar of the lawsuit relies on the alleged irreparable harm the merger would inflict on low-income consumers, who the attorneys general said already struggle to afford a cell carrier. Any increase in price could drive many families off those cellphone plans, which would deprive them of a form of communication essential to everyday life, they argued.
James and Becerra were joined on the lawsuit by attorneys general from Colorado, Connecticut, the District of Columbia, Maryland, Michigan, Mississippi, Wisconsin and Virginia. The complaint was filed in the Southern District of New York.