Results tagged “dismissal”

November 4, 2011 3:03 PM

The Walking Dead: Still Walking, and Still Dead

I kind of feel like I'm the guy that made it all happen.  All I have to do is to call the Sprint/C Spire antitrust cases against AT&T/DT/T-Mobile "The Walking Dead" on Halloween, and what happens?  Two days later, the court issues an order that really turns these cases into the legal equivalent of zombies, by dismissing all but a fraction of one of Sprint's claims, and preserving C Spire's equally-weak claims.  Doh!  

To be fair, though, after applying the law evenly and giving plaintiffs every benefit of the doubt--the court allowed all adequately-pled claims to move forward; notwithstanding the poor prognosis for these surviving claims.  Now, just what "move forward" means is anybody's guess, but I'll again make some intrepid predictions.

Sure, some of you might say that because the court did not dismiss the private cases in their entirety as I predicted at the beginning of the week, I should be eating at least a little crow--maybe the feathers of the claims that are still left--and that's fair.  So, if you want to make fun of me, please do.  I'm not so important that I can't take a little abuse.  But, since I never get comments, please do me a favor and submit them in the "comments" section--it'll be fun.

Now that we've seen the court's order, let's look at what's left of the private case claims, and try to guess what happens next.

Sprint

Sprint still maintains a small portion of its argument that the merger will injure them in the input market for handsets.  Sprint contends that AT&T's acquisition of T-Mobile will increase AT&T's incentive and ability to use its post-merger buying power to coerce handset/operating systems vendors to disadvantage Sprint by foreclosing access to the most desirable handset models.  Sprint is allowed to try to prove its theory that AT&T's incremental increase in its buying power (as a result of the merger) will cause AT&T to not just get lower prices for itself, but to disadvantage Sprint.

Outcome:  Ouch!  Almost the worst imaginable, because if you were at the oral argument on October 24th, you would have heard the court incredulously ask Sprint, "are you saying AT&T and Verizon control Apple and Google?"  By allowing only this claim to survive, the court pits Sprint not against AT&T, but against the handset vendors.  Why do I say this?

Because in order for this claim to succeed, Sprint needs to get a handset vendor to agree with it in court.  After committing over $20 billion in handset spend over the next 3 years to one vendor (Apple), do you really think Sprint is going to get a vendor to alienate AT&T and Verizon by making such a statement?

But let's just consider the facts as they stand.  Handsets are a worldwide market.  T-Mobile is a wholly owned subsidiary of Deutsche Telecom: a company with 128 million mobile subscribers today (more than either AT&T or VZ).  Hasn't Sprint already seen the "horror" of a competitor with superior buying power?

Moreover, assuming T-Mobile stays a wholly-owned subsidiary of Deutsche Telecom (which recently combined procurement operations with France's Orange), T-Mobile becomes an even bigger threat (under Sprint's theory) as it will have more handset buying power than AT&T, Verizon, and Sprint combined (the joint DT/Orange procurement group will represent 286 million mobile customers).  Sprint is thus in the difficult position of asserting that AT&T--with an estimated post-merger customer base of around 130 million mobile customers--is a more dangerous buyer with T-Mobile, than T-Mobile is with DT and Orange.  Are you buying?

C Spire

The court clearly viewed C Spire's complaint as the better-pled complaint, in that it allowed more of C Spire's handset-related claims to stand, and the court allowed C Spire's roaming injury allegation to stand (that a portion of C Spire's customers are GSM-based and buy roaming from AT&T and T-Mobile now, but will be left with only AT&T post-merger).  

Prognosis:  On the handset claims, C Spire has essentially the same problems as Sprint, but made worse by the fact that C Spire only has 875,000 customers.  U.S. Cellular, Leap, and MetroPCS all have multiples of this number--making these firms (as well as the larger firms) much more attractive to handset vendors.  After all, is it really unnatural, or anticompetitive, that a Sears or WalMart might be able to carry a larger inventory selection (for any product) than a small town general merchandiser?  For an AT&T, with or without T-Mobile, the defense is as simple as "don't hate me 'cuz you ain't me."

C Spire's surviving roaming claims are even less attractive than Sprint's "monopsony" claim.  Instead of pitting C Spire against its own vendors (as the surviving Sprint claim does), this claim pits C Spire against its regulator. You see, in order to prove that the proposed acquisition could harm C Spire's access to a regulated service, C Spire will have to produce some evidence that the regulator can't effectively regulate AT&T's obligation to offer roaming.

What's Next?

Well, considering that the DoJ was well aware of all of these vertical claims, and chose to include none in its complaint, we have to believe the private cases are on the slow burner.  Why? 

First, the court didn't schedule a status conference on discovery and case management until 5 weeks after its order came out--December 9th.  Coincidentally, this status conference occurs two days after the parties to the DoJ case have identified all of their witnesses (by December 7th).  (see scheduling order, para 11).

It's highly unlikely that the court will require AT&T to defend on two fronts--and indulge discovery on these unique (from the DoJ complaint) claims--until after the February 13th trial ends.  Before these claims will go to trial, we'll know the outcome of the DoJ case--most likely rendering these claims moot, either way.  

It seems like a good time for Sprint to consider that, if it really wanted to help DoJ, how effective a witness it will be as an interested party in a related case vs. simply folding a losing hand.