New York v. Deutsche Telekom AG - 439 F. Supp. 3d 179 (S.D.N.Y. 2020)

Rule:

Merger to monopoly would clearly contravene Section 7 even though hosting the entire range of mobile wireless spectrum on one network would yield the greatest increase in capacity. The difference here, however, is that the significant capacity benefits enabled by the merger can and likely will galvanize competition with AT&T and Verizon. That DISH may combine Sprint's remaining cell sites with its own to bring an even greater amount of currently unused spectrum into the market makes clear that the rationale pressed by Defendants is not merely advocacy for consolidation in general.

Facts:

Plaintiffs, the States of New York, California, Connecticut, Hawaii, Illinois, Maryland, Michigan, Minnesota, Oregon, and Wisconsin, the Commonwealths of Massachusetts, Pennsylvania, and Virginia, and the District of Columbia (collectively, "Plaintiff States"), brought the present action against Deutsche Telekom AG ("DT"), T-Mobile US, Inc. ("T-Mobile"), Softbank Group Corp. ("Softbank"), and Sprint Corporation ("Sprint," and collectively with DT, T-Mobile, and Softbank, "Defendants") seeking to enjoin the proposed acquisition of Sprint by T-Mobile (the "Proposed Merger"). Plaintiff States argued that the effect of the Proposed Merger would be to substantially lessen competition in the market for retail mobile wireless telecommunications services (the "RMWTS Market" or "RMWTS Markets"), in violation of Section 7 of the Clayton Act, codified at 15 U.S.C. Section 18 ("Section 7"). Defendants countered that the Proposed Merger would increase competition in the RMWTS Market and that Plaintiff States have thus failed to state a claim for relief.

Issue:

Should the Proposed Merger be enjoined for being violative of Section 7 of the Clayton Act?

Answer:

No.

Conclusion:

The court held that the Proposed Merger was not reasonably likely to substantially lessen competition in the RMWTS Markets. 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. T-Mobile has redefined itself over the past decade as a maverick that has spurred the two largest players in its industry to make numerous pro-consumer changes. The Proposed Merger would allow the merged company to continue T-Mobile's undeniably successful business strategy for the foreseeable future. The court further noted that the FCC and the DOJ have closely scrutinized the Proposed Merger and expended considerable energy and resources to arrange the entry of DISH as a fourth nationwide competitor, based on its successful history in other consumer industries and its vast holdings of spectrum, the most critical resource needed to compete in the RMWTS Markets. In light of the circumstances, the court held that the Plaintiff States have failed to prove a violation of Section 7 and thus, declined to enjoin the Proposed Merger.