On Tuesday, February 11, 2020, the U.S. District Court for the Southern District of New York released its decision in the T-Mobile/Sprint merger challenge, deciding in favor of T-Mobile/Sprint and not enjoining the proposed acquisition of Sprint by T-Mobile (the “Proposed Merger”). Plaintiffs, the State Attorneys General (“AGs” or “States”) of New York, California, Connecticut, Hawaii, Illinois, Maryland, Michigan, Minnesota, Oregon, Wisconsin, Massachusetts, Pennsylvania, Virginia, and the District of Columbia, sought to enjoin the Proposed Merger, which would result in New T-Mobile, arguing that the Proposed Merger would substantially lessen competition in the market for retail mobile wireless services in violation of the Clayton Act.
The Court rejected the States’ arguments on three main points. First, the Court was not persuaded that the States’ prediction of the future after the merger was sufficiently compelling, having argued that New T-Mobile would pursue anticompetitive behavior that, soon after the merger, directly or indirectly, will yield higher prices or lower quality for wireless telecommunications services, thus likely to substantially lessen competition in a nationwide market. Second, the Court disagreed with the States’ projection that Sprint, without the merger, would continue operating as a strong competitor in the nationwide market for wireless services. Third, the Court was not persuaded by the arguments that DISH would not enter the wireless services market as a viable competitor, nor live up to its commitments to build a national wireless network, so as to provide services that would fill the gap in competition from Sprint’s absence. The Court also discounted arguments that the Proposed Merger would result in increased coordinated and/or unilateral effects. Accordingly, the Court entered judgment in favor of T-Mobile, and denied the States’ request to enjoin the Proposed Merger.
The States do have the right to appeal the Court’s decision, and two of the State AGs have referenced this morning that such an appeal is possible. However, any such appeal would face a high bar, and holding out the possibility of an appeal may be a way for the States to attempt to extract additional conditions from the parties.
Even with this decision, the parties are still not able to consummate the transaction, as two outstanding approvals on the Proposed Merger remain: (1) the California Public Utilities Commission (“CPUC”) has yet to release a decision on whether to greenlight the merger; and (2) the U.S. District Court’s review of the Tunney Act, which is to determine whether the proposed divestiture plan to DISH is in the public interest, remains pending. It is unlikely that either of these pending reviews would result in a block of the merger, but we will continue to monitor developments.
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