Bloomberg News

AT&T Seeks to Knock Out U.S. Ally Sprint in T-Mobile Hearing

October 24, 2011

(Updates with Sprint filing in sixth paragraph.)

Oct. 24 (Bloomberg) -- AT&T Inc. will ask a federal judge to throw out Sprint Nextel Corp.’s lawsuit to stop its purchase of T-Mobile USA Inc., seeking a decision that would curb Sprint’s ability to help the U.S. block the deal.

AT&T will argue at a hearing today in Washington that Sprint, as a competitor rather than a consumer, has no right under antitrust law to bring the suit and that Sprint’s claims the $39 billion deal would hurt its business are unfounded.

Should AT&T persuade U.S. District Judge Ellen Segal Huvelle to dismiss the case, Sprint’s advice on the Justice Department’s suit would be limited by its restricted access to confidential AT&T information, said Thomas Horton, a law professor at the University of South Dakota Law School and former antitrust attorney in the department.

“It will expedite the government’s case to have Sprint as an official ally,” said Horton, who spent about eight years in the antitrust division.

Sprint told Huvelle on Oct. 12 that to prepare its case it needed access to confidential data the Justice Department collected from AT&T during the U.S. probe of the proposed T- Mobile merger. The company said it suffered from “fundamental unfairness” because, as a competitor with relevant information, AT&T is allowed to subpoena Sprint documents in the government’s antitrust case.

Document Challenge

Sprint is challenging AT&T’s own bid to obtain documents. AT&T has asked Sprint for information relating to transactions entered into since January 2004, including deals with Nextel Communications Inc., Virgin Mobile and Clearwire Corp., according to an Oct. 19 filing by Sprint.

“AT&T already possesses 2.2 million pages of Sprint documents,” Sprint said in a brief filed today in federal district court in Washington. It called the request “unduly burdensome.”

Huvelle, overseeing all the AT&T cases, froze Sprint’s ability to get documents from AT&T while she weighs the motion to dismiss.

The Justice Department said in court papers that its case would be helped by Sprint’s access to the material. Sprint has the “technological and business” expertise to analyze the arguments and evidence presented by Dallas-based AT&T, the government said.

While U.S. competition law is designed to protect consumers, not rivals, the government has relied on competitors in antitrust cases in the past.

Netscape Information

Netscape Communications Corp. provided information and witnesses for the Justice Department’s lawsuit against Microsoft Corp. accusing the software maker of improperly keeping computer manufacturers from promoting competitors’ products.

The Federal Trade Commission used material from private lawsuits alleging anticompetitive conduct by Intel Corp. when it sued the world’s largest chipmaker in 2009, said J. Robert Robertson, a former FTC official now at Hogan Lovells in Washington.

“On the one hand, the agencies do like to get the benefit of work done by other law firms,” said Robertson, who represented H&R Block Inc. this month in the Justice Department’s first merger trial in seven years. “On the other hand, you don’t want them interfering with what you’re doing.”

Since Overland Park, Kansas-based Sprint filed its lawsuit on Sept. 9, it has attacked the proposed merger in court filings and public comments. It also teamed up with Cellular South Inc., based in Ridgeland, Mississippi, which filed a similar lawsuit on Sept. 19.

Underlying Issues

Today’s hearing is the first to address any of the underlying antitrust issues in the case since the Justice Department sued to block the transaction on Aug. 31.

AT&T says in court filings that Sprint, the third-biggest wireless carrier, fears increased competition from the merger and has pushed for internal records detailing Sprint’s transactions since 2004.

Sprint, which has lost money for 15 consecutive quarters, argues that the proposed merger would weaken its ability to compete with AT&T, the second biggest, and Verizon Communications Inc., the market leader. The combination of AT&T and T-Mobile would form the country’s largest mobile phone company.

The last transaction the Justice Department challenged approaching the AT&T deal in size was the 2003 $8.4 billion Oracle Corp.-PeopleSoft Inc. merger. The deal was completed after the government lost its case.

Clayton Act

Section 7 of the Clayton Act, passed in 1914 to supplement the Sherman Act, lets the government and private parties challenge mergers that might dampen competition or create a monopoly.

The Justice Department could get help from Sprint even if the suit’s dismissed, said Jeffrey Jacobovitz, an antitrust lawyer with McCarthy, Sweeney & Harkaway PC in Washington.

“They can attempt to file amicus briefs with the court and feed the government information to support their case,” he said.

The government’s case is U.S. v. AT&T Inc., 11-01560; Sprint’s case is Sprint Nextel Corp. v. AT&T Inc., 11-01600; and Cellular South’s case is Cellular South Inc. v. AT&T Inc., 11- 01690, U.S. District Court, District of Columbia (Washington).

--With assistance from Phil Milford in Wilmington, Delaware. Editors: Fred Strasser, Peter Blumberg

To contact the reporters on this story: Tom Schoenberg in Washington at tschoenberg@bloomberg.net; Sara Forden in Washington at sforden@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net


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