Plaintiffs: 7th Circuit’s Gypsum Decision ‘Dooms’ T-Mobile’s Interlocutory Appeal

T-Mobile’s 2020 Sprint buy “fundamentally changed the structure of the retail wireless market,” causing reduced competition and higher prices, said the seven AT&T and Verizon customer plaintiffs who seek to vacate the transaction on antitrust grounds. Their answering brief Thursday (docket 24-8013) in the 7th U.S. Circuit Appeals Court opposes T-Mobile’s petition for interlocutory review to reverse the district court’s denial of its motion to dismiss their T-Mobile/Sprint challenge for lack of antitrust standing (see 2404090059).

Before the companies combined, “the smaller, newer T-Mobile and Sprint competed fiercely with each other and with the larger, more entrenched AT&T and Verizon,” said the brief. Their efforts to scale up their businesses “resulted in frequent price decreases and plan improvements by all four firms,” it said.

The court that tried the merger challenge found that the acquisition, because of the resulting level of concentration in an already concentrated market, “would presumptively violate the antitrust laws,” said the brief. The court nevertheless approved it, “relying principally on the promises of T-Mobile executives” to preserve competition and keep prices steady, it said. While the court ultimately found in favor of T-Mobile, “it expressed considerable uncertainty with the ultimate market effects of the merger” because deciding such cases typically calls for a judicial reading of the future, it said.

Though T-Mobile "purportedly committed to hold nominal prices steady" after its 2020 Sprint buy, “it increased its support fee for activation and upgrades three times between April 2021 and June 2022,” said the brief. Verizon and AT&T followed suit, it said. AT&T announced in May 2022 that it would raise rates on older wireless plans by $6 a month for single-line users and as much as $12 a month for customers with multiple lines, it said. Verizon announced in June 2022 that it would raise its administrative fee for postpaid customers by $1.35 per voice line per month, it said.

The reduction in competition “can also be seen in the sharp decline in the introduction of new plans, an important method of competition among the carriers,” said the brief. T-Mobile’s premerger commitments to hold prices steady and preserve competition “have not been met,” it said.

The acquisition landed regulatory approval “explicitly on the promise” that Dish Network, through divestitures and access to T-Mobile’s CDMA network, would “fill Sprint’s shoes as an independent fourth wireless carrier with its own network,” said the brief. But Dish hasn’t been an “aggressive competitor” from day one, it said. It continues to be mainly a virtual network operator “reliant on resale access to the networks of other carriers,” it said. “It has also lost nearly a million and a half net subscribers,” it said.

The district court’s Nov. 2 denial of T-Mobile’s motion to dismiss for lack of antitrust standing (see 2311030011) held that the 7th Circuit’s 2003 decision in U.S. Gypsum v. Indiana Gas makes clear that the plaintiffs, as AT&T and Verizon customers, didn’t transact directly with T-Mobile or Sprint isn’t automatically a basis for dismissal, said the brief. The court found that T-Mobile/Sprint likely “exacerbated the risk of price coordination” in the wireless market space, thereby reducing competition among all the carriers.

T-Mobile’s petition should be denied because the 7th Circuit, in Gypsum, “has already addressed the exact issue T-Mobile contests” -- whether the plaintiffs can plead antitrust standing if they aren’t customers of T-Mobile or Sprint, said the brief. The Gypsum plaintiffs brought Sherman Act claims against a joint venture of two competitors that, they contended, increased the prices they paid in transactions with non-defendants, it said.

The 7th Circuit “rejected the argument mounted by T-Mobile here,” that the plaintiffs lacked standing as a matter of law because they didn’t transact with a defendant, said the brief: “Gypsum controls this case.” T-Mobile “implicitly concedes this” by spending the first eight pages of its substantive argument invoking 2nd and 11th Circuit cases and mischaracterizing U.S. Supreme Court decisions, it said. When T-Mobile addresses the 7th Circuit’s cases, “it then mischaracterizes Gypsum as a cartel case,” it said.

The complaint to vacate T-Mobile/Sprint “pleads voluminous, detailed facts supporting an inference that the merger reduced competition and harmed consumers,” said the brief. These facts “include direct statements by executives, increased quality-adjusted prices, decreased customer churn, and less frequent plan offerings,” it said. The plaintiffs’ allegations “fit the standard model of merger analysis, which recognizes that greater market concentration can reduce competition and lead to coordinated pricing,” it said.

T-Mobile argues that recognizing the antitrust standing of Verizon and AT&T customers “will incentivize rivals of a merged company to raise prices for the sole purpose of generating lawsuits against the merger,” said the brief: “How ironic. T-Mobile argues on the one hand that it is implausible that companies would raise prices due to market consolidation. But it then contends those same companies would raise prices, and risk losing market share and billions of dollars in revenue (in a supposedly competitive market), in hopes that their customers might sue T-Mobile.”

T-Mobile “espouses a different understanding of plausibility than the federal courts,” said the brief. Neither of these arguments, nor the fact that this antitrust lawsuit -- as many do -- potentially seeks billions of dollars in damages, “makes the antitrust standing question here contestable,” it said. “Gypsum dooms T-Mobile’s appeal,” it said. The 7th Circuit “need not grant interlocutory appeal merely to confirm Gypsum’s continued vitality,” it said. T-Mobile’s petition “should therefore be denied,” it said.