Three states that have recently settled antitrust claims with
Nevada, Texas, and Colorado agreed to drop their opposition to the telecom merger in exchange for sweeteners such as improved rural wireless networks, donations to state philanthropies and payments, to state attorneys general offices.
The agreements’ language also ensures that those three states are still entitled to any additional concessions the telecom giants make as part of a future settlement above and beyond what they’ve already received, according to copies of the Nevada and Texas deals obtained by Bloomberg Law under the Freedom of Information Act.
“It’s a clever move by both the states and T-Mobile,” said Harry First, the former chief of the antitrust bureau of the New York Attorney General. T-Mobile reduces the number of parties it faces off against at trial and state attorneys general “don’t have to worry that they’ve given up for too little,” said First, who is now a professor at New York University’s School of Law.
More than a dozen states led by New York and California remain part of the multistate suit that asserts combining the No. 3 and No. 4 U.S. carriers will lead to higher consumer prices. The case is scheduled to go to trial Dec. 9 in Manhattan federal court.
The Justice Department required Sprint and T-Mobile to sell multiple assets, such as spectrum and Sprint’s pre-paid business, in order to setup Dish Network Corp. as a new wireless competitor—but the states don’t believe that fix is enough.
In total, T-Mobile has brokered five individual settlements in an effort to minimize the number of states involved in the litigation.
Mississippi and Florida also struck deals with T-Mobile. However, Mississippi’s agreement doesn’t include a provision that allows the state to avail itself of future settlement terms. Florida obtained the right to future state concessions, however the state was never involved in the multistate suit in New York.
Most states managed to broker state specific concessions from the companies, such as pledges to build wireless networks in rural areas. Some states gained payouts from T-Mobile that will go directly to their coffers once the telecom deal closes.
In the most recent settlement, Texas struck a $1.65 million payout that will go directly back to the state attorneys general office, according to a copy of its agreement with T-Mobile. The payout was not disclosed by Texas when it announced the settlement Nov. 25.
Nevada brokered a $30 million deal with T-Mobile that will fund several philanthropic groups throughout the state. Additionally Nevada will get a separate $175,000 payment to the state attorneys general office.
However, Colorado, which dropped out of the multistate suit in October, didn’t negotiate any upfront payout with T-Mobile.
Such payments are “a win, win for everyone,” said former Maryland Attorney General Doug Gansler, who now heads Cadwalader, Wickersham & Taft LLP’s state attorneys general practice.
The payouts are typically tax write-offs for the companies and for the attorneys general its a way to gain a little more to help their states, Gansler added.
All of the individual agreements contain several similar pledges, such as rural wireless coverage build-out plans and job commitments. Most of the agreements also contain provisions outlining how much T-Mobile would have to pay if it fails to meet those state commitments.
For example, Texas is entitled to a $25 million payout if T-Mobile fails to meet commitments to keep phone data plan costs low, make in-home broadband available to more than 2.5 million households, and offer employment opportunities to current Sprint and T-Mobile employees once the deal closes.
Of the states that have settled, Colorado, Texas, and Nevada also reserve the right to take advantage of any future settlement agreements states, who are still involved in multistate suit, strike with T-Mobile if those terms prove more favorable than what’s already been agreed to.
Florida, which never joined the multistate suit in New York, also brokered a deal with T-Mobile in September which similarly gives the state the right to join any future settlement agreement.
The side settlements won’t impact the upcoming trial involving 13 states and the District of Columbia, James Tierney, the former Maine attorney general, said.
“The judge really isn’t going to care how many states show up to trial as a plaintiff,” Tierney, who is now a lecturer at Harvard Law school, said.
A similar scenario where several states settled but others continued to litigate played out when the DOJ and twenty states sued Microsoft Corp. for anti-competitive conduct in 1998.
The DOJ and some states eventually settled with Microsoft in 2001, but a handful of states didn’t, instead opting to move forward with the suit in order to get more aggressive concessions from the software company.
Nine states and the District of Columbia eventually brokered a settlement in November 2002 after managing to obtain a $28.6 million payout and restrictions on Microsoft’s ability to develop and license software.
For T-Mobile, “the only settlements that really matter at the end of the day are New York and California,” since both states are the key drivers pushing the suit forward, Tierney said.
California Attorney General Xavier Becerra and New York Attorney General Letitia James have signaled they plan to proceed with the trial.
The merger “would dramatically increase market concentration in an already highly concentrated industry and, under well-established law, is presumptively, illegal,” the states said Nov. 26 in their latest pre-trial memo.
The multistate suit is State of New York et al. v. Deutsche Telekom AG et al., S.D.N.Y., No. 1:19-cv-05434