In a sprawling, 173-page opinion issued on February 11, Judge Victor Marrero of the Southern District in New York blocked a request for an injunction filed by a coalition of states attempting to block the merger of T-Mobile and Sprint, the third- and fourth-largest mobile carriers in the United States. The injunction paves the way for the proposed merger to take place, barring an appeal, as the FCC and Department of Justice have already approved of the combination.
Unusually, reports emerged the evening prior to the ruling that the result would favor the defendants. The Wall Street Journal sourced that report to “people familiar with the matter.” By the time markets opened on Tuesday, after the opinion was released, Sprint’s stock price had increased by nearly 75%.
The case turned on Section 7 of the Clayton Antitrust Act, which “prohibits a merger if its effect ‘may be substantially to lessen competition in any line of commerce in any section of the country.” The judge added that “Courts must judge the likelihood of anticompetitive effects in the context of the ‘structure, history, and probable future’ of the particular markets that the merger will affect.”
The plaintiff states argued that the combination and subsequent reduction in the number of wireless carriers participating in the marketplace would reduce competition and increase prices to consumers, as well as result in job losses.
In ruling for the merging companies, the judge concluded that “Despite the strength of Plaintiff States’ prima facie case, which might well suffice to warrant injunction of mergers in more traditional industries, a variety of considerations raised at trial have persuaded the Court that a presumption of anticompetitive effects would be misleading in this particularly dynamic and rapidly changing industry.” The judge added that “The Proposed Merger would allow the merged company to continue T-Mobile’s undeniably successful business strategy for the foreseeable future.”
In a statement, T-Mobile CEO John Legere said ” Today was a huge victory for this merger … and now we are FINALLY able to focus on the last steps to get this merger done!” Legere is set to leave T-Mobile in April.
The judge placed significant weight on the plan to transfer redundant telecommunications equipment and wireless spectrum from the merging companies to DISH Network, who would then repurpose that infrastructure into a replacement fourth competing wireless network. The judge also heavily weighed “behavioral clues” derived from the testimony of various telecom industry executives in ruling that the combination was not likely to cause harm to consumers. Specific examples included “manifested personal and commercial ambition and aggressiveness by company executives” and “resort to disruptive or contrarian ways to gain competitive ends.”