State AGs Fight T-Mobile Merger with Sprint at Trial

or drop to three. Thirteen states, led by New York and California, are suing to block the twenty six point five billion dollar merger of T Mobile, the third largest carrier, and Sprint, the fourth largest, arguing that it will drive up prices, reduce the level of service, and violate antitrust laws. The Justice Department in the Federal Communications Commission gave their blessings to the deal after the companies agreed to make

some concessions. Joining me as Spencer Waller, a professor at Loyola University Law School and director of the Institute of Consumer Antitrust Studies, is it on precedented for the states to reject a settlement by the Feds and sue to

block the merger. It's not unprecedented, but it's very very rare that the Streame Court for a long time has said that the States operate independently from the Feds in the antitrust area, and they can challenge things that the Feds don't challenge at all, or that they settle in. The States believe that they have a have a strong case, but it's been few and far between. By and large, the States prefer to work with either the FTC or the do J and work together in a coalition to

attack mergers of this kind. How can removing a low cost rival from a highly concentrated industry not have a negative effect on competition? What T Mobile sprints argument at trial? Well,

you know, it's tough. T Mobile has played a really unprecedented role in the cell phone industry as the maverick, as the disruptor, as the one that not only was aggressively competing on price and service and some other things, but also was the carrier in particular that was keeping a T and T and Verizon on their toes and forcing them to respond and kind in numerous markets. So

the theory is strong. It was part of why prior acquisitions of the mobile were challenge It was part of why this particular murder was of great concern four years ago under the Obama administration. The best I can tell you is they're positioning this as a merger that would create a strong number three and allow them to better compete with A T and T and Verizon. That is the story that they're pitching in their documents and their testimony and trial. When the FEDS gave their blessing to

the merger, they required certain concessions. What were those concessions that led the FEDS to say, Okay, this deal can go through. It's not unusual for the FEDS to approve a deal subject to restructuring. It is more often. You could imagine, let's say, take supermarkets. If there's a merger that creates a very highly concentrated local market, you could sell off some supermarkets to another national chain and keep

things roughly the same. What's unusual about this deal is that the divestitures are this rickety package of assets, spectrum, legal rights, and other things. So basically, the two companies are being forced to or agreed to spin off their prepaid cellular plans to dish Um, the satellite TV provider that does own some spectrum and has some plans to enter the cell phone market. In addition, there's some spectrum transfers.

There is provision of services so that the new dish cell phone entity can use the facilities of the two merging parties so that all the calls can be completed. That's basically the package. And this is really a lot differently than just selling off some supermarkets and having a

new operator. This is getting someone who's not been in the business before and will be dependent on the very parties who are merging in order to compete with these parties and with the two large carriers that are already dominating the market. So on Tuesday, the States presented company internal and analysis done before reaching the agreement with Sprint, showing the deal as a way to reduce competition and

raise prices. But while on the stand, Deutsche Telecomms chairman testified that sell customers will see lower prices if the deal goes through. He said, we commit that prices are

going down in this market. So how does a judge decide, Well, just you know, as a former trial lawyer, all I can tell you is documents that were written, you know, contemporaneously to before litigation and you know by the parties in the ordinary course of their business are are just you know, it's very traditional evidence, no matter what kind of a case. And it's very compelling because no one

is looking over their shoulder. Uh, They're going about their business and they're talking to each other presumably in in in candor. And that's very different than um testimony on the stand after a complaint has been filed. The judge is going to have to weigh that, Uh, this is not a jury trial. The judge gets to decide what is credible and what is convincing. And I think having these documents are are very helpful to the state's case, although it is not by itself the end of the case.

They will need other testimony from the companies, from competitors, from customers, from expert witnesses that talk about the effects of this further consolidation of a market where there are only four national players. This will go down to three plus the possibility that Dish will eventually become to some extent of a fourth player coming back into the market. The judge takes all this into consideration, but is he going to have to rely most on what analysts say

is going to happen. Well, normally speaking, companies don't get a free pass because they promised not to raise prices. Uh. What they're trying to do is predict the likely effects will they harm or hurt consumers as the main focus of the inquiry, and promise not backed up by other evidence, UM, isn't by itself going to be compelling. And the States also need more than just a couple of hot doc

meants to make their case. So both sides really have to lay out it's a crystal ball exercise because by definition, this deal hasn't happened yet. Both sides are trying to look into the future and say, here's the most likely scenario. And as you mentioned, a judge is going to make the decision in this case, not a jury, and he told them to skip their opening statements, trim the witness list to avoid beating him over the head with testimony. Explain the difference between a judge and a jury in

a case like this. Sure, UM, now I don't know this uh judge's background, but there's two kinds of cases. There's UH, there is a there's a jury trial where you have either six between six and twelve jurors and

a civil case, who who you know? Get here, opening statements, here, all the evidence to get jury instructions, get final arguments, and then go back in the room where we don't know exactly, uh, you know what happened, um, and then they come out with a with a verdict that doesn't have to be unanimous in a in most civil cases, a bench child. This is not a case about any

asking anybody for damages. No one's going to jail. This is just whether or not the judge will issue a preliminary injunction stopping this transaction from going forward or not. So the judge um will decide all this and has to put forward um conclusions of law and findings of fact. You know that that takes time. So the judge doesn't need the oratory from the parties. Uh, you know in the opening statements and the full flowery presentations that that

often go to a go to a jury. So the judge has a fair amount of discretion in any kind of case to streamline what amount of time and number of witnesses and documents it can be introduced in the bench trail, and it usually goes faster because you don't have to worry about the jury. You don't have to

send the jury out when there's a legal argument. You don't have to have arguments about evidence and uh, and then come back, you know, with the jury in the box to then hear whatever the the dispute of that is. So you know, the judge has to make all the decisions. And there are very few district court judges who have a lot of experience with antitrust cases. They're just one of dozens and dozens of types of cases that come

before an average federal judge. On average, each judge has a between two and four cases, depending on where they're sitting in how busy they are at any particular moment. Uh. This judge has a has a distinguished background, but but he to my knowledge that never worked in the nitrust area in neither private practice or in government before he

became a judge. And um, you know, these are these are tough cases and the probably it's one of the very few ones in the nitrust area he has heard or will ever hear in his time on the bench. So you know, he uh, he's going to have to go through and here some um economic expert testimony as to what the market looks like, how competition will be affected.

Someone is going to have to introduce evidence that either explains or debunks the efficiencies on the technological progress that the party's claim is going to result from this deal, and then the judge who will have to in short order issue his ruling, although that wouldn't necessarily come from the bench at the end of the trial itself. Thanks Spencer that Spencer Waller of Loyola University Law School. Thanks

for listening to the Bloomberg Law Podcast. You can subscribe and listen to the show on Apple Podcasts, SoundCloud, and on bloomberg dot com slash podcast. I'm June Grosso. This is Bloomberg