T-Mobile-Sprint Merger Said to Face Possible Lawsuit by States

States investigating T-Mobile US Inc.’s planned acquisition of Sprint Corp. are considering a lawsuit to block the deal on antitrust grounds and may act even if the Justice Department approves it, according to two people familiar with the matter.

State attorneys general haven’t made a final decision about the merger, but are keeping all options open as they investigate whether the $26.5 billion deal harms competition and would lead to higher prices for consumers, said the people, who asked not to be named because the probe is confidential.

The states’ antitrust investigation could represent a major hurdle to T-Mobile and ...