SPRINT NEXTEL CORPORATION v. AT&T, INC. et al

Filing 41

Civil Statement Statement of the Case from Plaintiffs Sprint Nextel Corporation, Cellular South, Inc., and Corr Wireless Communications, L.L.C.. (Sunshine, Steven)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
SPRINT NEXTEL CORPORATION,
Plaintiff,
v.
AT&T INC., et al.,
Defendants.
CELLULAR SOUTH, INC., et al.,
Plaintiff,
v.
AT&T INC., et al.,
Defendants.

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Case No. 1:11-cv-01600-ESH

Case No. 1:11-cv-01690-ESH

STATEMENT OF THE CASE
Pursuant to the Court’s Initial Scheduling Conference Orders, Plaintiffs Sprint
Nextel Corporation (“Sprint”) and Cellular South, Inc., together with its subsidiary Corr Wireless
Communications, L.L.C. (collectively, “Cellular South”), respectfully submit the following
statement of the case.
I.

Plaintiffs’ Cause of Action

Plaintiffs bring a cause of action pursuant to Section 7 of the Clayton Act, 15
U.S.C. § 18, to enjoin the acquisition by AT&T Inc., and its wholly owned subsidiary AT&T
Mobility LLC (together, “AT&T”), of T-Mobile USA, Inc. (“T-Mobile”), a subsidiary of
Deutsche Telecom AG (collectively, “Defendants”). The two elements of Plantiffs’ cause of
action are: (1) that the acquisition violates Section 7 by substantially reducing competition in

wireless service markets; and (2) that Plaintiffs have standing under Section 16 of the Clayton
Act, 15 U.S.C. § 26. See IIA Phillip E. Areeda et al., Antitrust Law ¶ 335f, at 73 (3d ed. 2007)
(“To prevail, a private plaintiff must establish both (1) that it has standing and (2) the defendant
has violated the antitrust laws.”) (emphasis in original); Tasty Baking Co. v. Ralston Purina, Inc.,
653 F. Supp. 1250, 1257, 1265, 1272-73 (E.D. Pa. 1987) (analyzing the two elements of a
competitor plaintiff’s Section 7 cause of action, considering first whether the acquisition violated
Section 7 by substantially reducing competition in the horizontal output markets, and, second,
whether the plaintiff would suffer antitrust injury, and thus had standing to challenge the
violation); Cmty. Publishers, Inc. v. Donrey Corp., 892 F. Supp. 1146, 1152-53, 1164-66 (W.D.
Ark. 1995) (same), aff’d sub nom. Cmty. Publishers, Inc. v. DR Partners, 139 F.3d 1180 (8th Cir.
1998); Bon-Ton Stores, Inc. v. May Dept. Stores Co., 881 F. Supp. 860, 865-67, 877-78
(W.D.N.Y. 1994) (same).1
The basic outline for establishing the first element of Plaintiffs’ cause of action is
familiar. As this Court has explained, a prima facie case of a Section 7 violation is established
by “show[ing] that the merger would produce a firm controlling an undue percentage share of the
relevant market, and [would] result [] in a significant increase in the concentration of firms in
that market.” United States v. Sungard Data Sys., Inc., 172 F. Supp. 2d 172, 180 (D.D.C. 2001)
(Huvelle, J.) (quoting F.T.C. v. H.J. Heinz Co., 246 F.3d 708, 715 (D.C. Cir. 2001)) (internal
quotation marks omitted); see also United States v. Baker Hughes, Inc., 908 F.2d 981, 982-83

1

Section 7 of the Clayton Act prohibits a corporation from acquiring “the whole or any part of the
assets of another [corporation]…where in any line of commerce or in any activity affecting commerce
in any section of the country, the effect of such acquisition may be substantially to lessen competition,
or to tend to create a monopoly.” 15 U.S.C. § 18. Section 15 of the Clayton Act authorizes private
suits for injunctive relief by any party “threatened [with] loss or damage by a violation of the antitrust
laws,” including acquisitions that violate Section 7. 15 U.S.C. § 26.

2

(D.C. Cir. 1990); United States v. H & R Block, Inc., Civ. No. 11-00948 (BAH), 2011 WL
5438955, at *8 (D.D.C. Nov. 10, 2011). Such a showing “establishes a ‘presumption’ that the
merger will substantially lessen competition” in the relevant markets. Sungard, 172 F. Supp. 2d
at 180 (quoting H.J. Heinz Co., 246 F.3d at 715). Once this presumption is established, “the
burden of producing evidence to rebut the presumption shifts to the defendants.” F.T.C. v.
Swedish Match, 131 F. Supp. 2d 151, 167 (D.D.C. 2000). To rebut the presumption, “defendant
must ‘show that the market-share statistics give an inaccurate account of the merger’s probable
effects on competition in the relevant market.’” Sungard, 172 F. Supp. 2d at 180 (quoting H.J.
Heinz Co., 246 F.3d at 715).
Here, Plaintiffs allege, and will establish, a prima facie case for harm to
competition and increased market power for AT&T in the relevant market (or markets) for
wireless services. This is Count I of both Sprint’s and Cellular South’s complaints, see Sprint
Compl. ¶¶ 218-28; CS Compl. ¶¶ 97-106, and it remains intact after this Court’s ruling on
Defendants’ Motions to Dismiss. Plaintiffs allege and define the relevant wireless service
product and geographic markets, see Sprint Compl. ¶¶ 114-23, 128-32; CS Compl. ¶¶ 29-35, and
describe the undue increases in concentration in those markets. Sprint Compl. ¶¶ 135-48; CS
Compl. ¶¶ 78-83. Under established merger-review guidelines and precedents, this showing
leads to a presumption that the acquisition will substantially lessen competition for wireless
services. See H & R Block, Inc., 2011 WL 5438955, at *28-29 (prima facie case established
upon showing of significant increase in concentration in the relevant markets); Swedish Match,
131 F. Supp. 2d at 167 (same); Bon-Ton Stores, Inc., 881 F. Supp. at 875-76 (same); Tasty
Baking Co., 653 F. Supp. at 1265 (same). Moreover, even beyond this compelling prima facie
case, as alleged, the anticompetitive effects of this acquisition would actually be “far worse than

3

the high market shares and concentration levels indicate,” Sprint Compl. ¶ 3, given, among other
things, T-Mobile’s status as a low-price leader and innovator, Sprint Compl. ¶¶ 154-58, 195-96;
CS Compl. ¶¶ 73-76, and the fact that the acquisition also gives AT&T increased power to
undermine Plaintiffs’ ability to discipline AT&T’s post-merger price increases, by interfering
with Plaintiffs’ access to necessary inputs. Sprint Compl. ¶¶ 3, 160-69; CS Compl. ¶¶ 50-63.
Plaintiffs have alleged, and will establish, standing to pursue the horizontal count
in the wireless service markets, because this Section 7 violation threatens them with antitrust
injury. This is the second element of Plaintiffs’ cause of action. “Antitrust injury” is an “injury
of the type the antitrust laws were intended to prevent and that flows from that which makes
defendants’ acts unlawful,” meaning that the “injury [] reflect[s] the anticompetitive effect either
of the violation or of anticompetitive acts made possible by the violation.” Brunswick Corp. v.
Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489 (1977). Plaintiffs allege, and will prove, threatened
antitrust injury on the ground that the acquisition gives AT&T increased power to interfere with
access to a “necessary input”—here, handsets—which will impair Sprint’s and Cellular South’s
ability to remain viable wireless service providers in the relevant output markets.2
As this Court found in ruling on Defendants’ Motions to Dismiss, this threat of
harm to Sprint and Cellular South constitutes cognizable antitrust injury:
Mobile wireless devices, and smartphones in particular, are
Sprint’s and Cellular South’s first-run movies, mall locations
suitable for department stores, and shelf space and promotional
2

Indeed, as the Federal Communications Commission’s (“FCC”) staff report found, the acquisition’s
exclusionary effects on rivals’ access to inputs are an additional way in which the acquisition harms
competition in the relevant wireless service markets. See Federal Communications Commission,
Staff Analysis and Findings, Applications of AT&T Inc. and Deutsche Telekom AG for Consent to
Assign or Transfer Control of Licenses and Authorizations, WT Docket No. 11-65, at ¶¶ 96, 98 (Nov.
29, 2011) (finding that the record contained facts supporting concerns about potential competitive
harms relating “to the cost of certain inputs that [wireless] providers need in order to compete in the
product markets we have defined [i.e., the wireless output markets]”).

4

time, for they are necessary inputs for plaintiffs’ businesses. Like
the plaintiffs in Six West, Bon-Ton Stores, and Tasty Baking, Sprint
and Cellular South have alleged that the transaction in question
threatens their continued access to these inputs. As a general
matter, plaintiffs’ threatened injuries are those of the type the
antitrust laws were designed to prevent, and courts have approved
claims similar to those specifically raised here.
Mem. Op. at 19-20, Nov. 2, 2011 (Docket No. 28) (internal citations omitted).
Similarly, the Court found that Cellular South adequately alleged that the
acquisition gave AT&T the ability to interfere with Corr Wireless’s access to GSM roaming.
Mem. Op. at 37. Having found allegations of antitrust injury, the Court concluded that Sprint
and Cellular South adequately alleged standing to pursue their Section 7 causes of action, just
like the competitor plaintiffs in Tasty Baking, Bon-Ton Stores, and Six West Retail Acquisition,
Inc. v. Sony Theatre Management, Corp., No. 97 CIV. 5499 (DNE), 2000 WL 264295 (S.D.N.Y.
Mar. 9, 2000). As the Court explained, “where private plaintiffs have successfully pleaded
antitrust injury, the fact that they are defendants’ competitors is no bar.” Mem. Op. at 43.
In sum, both Sprint’s and Cellular South’s cases are now set to proceed through
discovery and trial on the two elements that comprise their cases: first, on the merits of the
alleged Section 7 violations in the output wireless services markets, and second, on the element
of standing as to which this Court found that each complaint adequately pled a theory that the
proposed acquisition would enable AT&T to interfere with a “necessary input” for that output
competition.
*

*

*

*

*

Although their position is not explicit, in the recently filed Joint Report Regarding
Loc. Civ. R. 16.3(c) (Docket No. 40) (“Joint Report”), Defendants appear to assert that Plaintiffs
are not entitled to prove the alleged Section 7 violations in wireless service markets. Thus,

5

Defendants object to using the discovery record in the Department of Justice’s (“DOJ”) action in
Plaintiffs’ cases, and assert that Plaintiffs are entitled to discovery only on a “narrow” purported
“mobile wireless devices claim” and (for Cellular South only) a “GSM roaming claim.” Joint
Report at 5-8; Defs.’ Proposed Case Mgmt. Plan at 2 (Docket No. 40-3) (“Defs.’ CMP”).
Defendants also propose a schedule in Plaintiffs’ cases that precludes full discovery until
resolution of the DOJ’s action, does not even provide for a trial date, and appears specifically
calculated to deny Plaintiffs an opportunity to be heard prior to the closing of the transaction.
See Joint Report at 9-12; Defs.’ CMP at 4. Defendants purportedly will attempt to justify their
position for the first time in their Statement of the Case. 3 Accordingly, Plaintiffs explain herein
how Defendants’ position is manifestly unfair, highly prejudicial, and lacks any foundation in the
law.
First, and most importantly, Defendants’ position as to the scope of Plaintiffs’
cases is legally baseless and fundamentally misconstrues the elements of a private Section 7
cause of action. Defendants’ Motions to Dismiss challenged whether Plaintiffs adequately
alleged standing to pursue the claimed Section 7 violation in wireless service markets—that is,
the alleged Section 7 violation was not even at issue. As the Court noted, Defendants did not
3

Plaintiffs and Defendants met to discuss the Joint Report on November 17, 2011. At that meeting,
Plaintiffs outlined the two elements of their cause of action, and made their proposals for initial
disclosures and the parameters of discovery, including that discovery in the DOJ case should serve as
the vast majority of discovery in Plaintiffs’ cases. Defendants rejected these proposals, but could not
explain how Plaintiffs could pursue their cases without discovery concerning wireless service markets,
particularly given Defendants’ denials of Count I of Plaintiffs’ complaints. At that meeting,
Defendants also rejected Plaintiffs’ proposals as to the timing of discovery and trial, but did not offer
a schedule of their own. Plaintiffs sent their proposed Case Management Plan and Protective Order,
along with their sections of the Joint Report, to Defendants on November 29, outlining in writing
what Plaintiffs had proposed at the initial conference. Defendants provided their Case Management
Plan and language for the Joint Report to Plaintiffs at 12:30 p.m. on December 2, the day that it was
due. With Defendants’ position finally articulated, even if only generally, Plaintiffs updated their
portions of the Joint Report to explain how Defendants’ proposal was unfair, prejudicial, and legally
flawed. Defendants then chose to reserve their position for the Statement of Case filings made today.

6

challenge whether Plaintiffs “state[d] a claim ‘that the acquisition violates [§] 7 by increasing
AT&T’s market power in the relevant wireless markets.’” Mem. Op. at 14 n.18 (quoting Pls.’
Joint Opp’n at 16). Accordingly, as is common in evaluating antitrust injury and standing, the
Court assumed the Section 7 violation alleged by Plaintiffs, and simply evaluated whether
Plaintiffs had alleged antitrust injury stemming from that violation. Id. at 1-2, 9-10.
As noted above, the Court concluded that Plaintiffs adequately alleged antitrust
injury on the ground that the acquisition threatened to impair their access to inputs necessary to
provide wireless services—the relevant output services markets to which these inputs relate. The
Court expressly found that this injury was directly analogous to the “input” injuries that provided
standing to the competitor plaintiffs in Tasty Baking, Six West, and Bon-Ton Stores. It is
indisputable that the competitor plaintiffs in those cases asserted that the acquisitions violated
Section 7 by reducing competition in the horizontal output markets.4 The threat that those
acquisitions posed to the plaintiffs’ access to necessary inputs afforded standing to pursue those
claimed Section 7 violations in the output markets. See Six West, 2000 WL 264295, at *22-23
(access to first run movies); Bon-Ton Stores, Inc., 881 F. Supp. at 878 (access to mall space);
Tasty Baking Co., 653 F. Supp. at 1272-73 (access to shelf space). Thus, Plaintiffs must prove
that AT&T’s acquisition violates Section 7 by harming competition in the relevant wireless
service markets in order to prevail in their cases.

4

See Six West, 2000 WL 264295, at *21 n.35 (finding the relevant product and geographic markets for
the Section 7 violation to be “film exhibition” in Manhattan—that is, the horizontal output market);
Bon-Ton Stores, Inc., 881 F. Supp. at 865, 869-75 (finding the relevant product and geographic
markets for the Section 7 violation to be “traditional department stores” in Rochester—that is, the
horizontal output market); Tasty Baking Co., 653 F. Supp. at 1260, 1262, 1265 (finding the relevant
product and geographic markets for the Section 7 violation to be “snack cakes and pies” in six
regions—that is, the horizontal output markets).

7

That is, Plaintiffs have to prove the Section 7 violation—just as the DOJ must in
its case—by defining the wireless service markets and establishing anticompetitive effects in
those markets. The only material difference from the DOJ case is that Plaintiffs must also
separately prove the element of standing, as to which the Court denied Defendants’ Motions to
Dismiss. As a leading antitrust treatise explained:
Unlike the United States government, which is authorized to sue
anyone who violates the antitrust laws, a private antitrust plaintiff
must show “standing” to sue. In addition to proving everything
that would entitle the government to relief, the private plaintiff
must also show (1) that the acts violating the antitrust laws
caused—or, in an equity case, threatened to cause—it injury-infact to its “business or property;” (2) that this injury is not too
remote or duplicative of the recovery of a more directly injured
person; [and] (3) that such injury is “antitrust injury,” which is
defined as the kind of injury that the antitrust laws were intended
to prevent and “flows from that which makes defendants' acts
unlawful[.]”
Areeda, supra, ¶ 335a, at 61-62 (emphasis added); see also Mem. Op. at 10 n.11 (citing id. ¶
335f).
Plaintiffs’ obligation to prove the additional element of standing, does not, as
Defendants’ position nonsensically implies, narrow or change the nature of the Section 7
violation Plaintiffs must prove, or make it any different from the Section 7 violation asserted by
the DOJ.5 Rather, all of the elements and evidence in the DOJ action are at issue in Plaintiffs’
5

As the Court recognized, Plaintiffs still must prove that the acquisition harms wireless consumers in
order to establish the Section 7 violation. See Mem. Op. at 13 (noting that Plaintiffs’ “[a]llegations of
harm to [wireless] consumers” are “relevant to showing an antitrust violation”); see also Cmty.
Publishers, 892 F. Supp. at 1152-53, 1167-68 (DOJ and competitor plaintiff proved the same Section
7 violation); Bon-Ton Stores, Inc., 881 F. Supp. at 865, 869-78 (state attorney general and competitor
plaintiff proved the same Section 7 violation); Areeda, supra, ¶ 335f, at 75 (“[E]very plaintiff,
governmental or private, must always offer a coherent explanation of how and why the alleged
conduct violates the antitrust laws. Absent such a theory, no cause of action has been stated. If the
claimed theory and alleged facts would not support a suit by the government, which need not prove
standing, then there is no violation. If the government suit would not be dismissed, then suit by
private plaintiffs must also be allowed unless they lack standing. Put another way, if both
(cont'd)

8

cases, because (with the DOJ not having to establish standing) all of that material necessarily is
relevant to establishing the Section 7 violation.
Given this, Plaintiffs have proposed that the fact discovery in the DOJ’s case
should serve as the vast majority of discovery in their actions and have asked only for targeted,
non-duplicative discovery of issues or evidence not raised or present in the DOJ record. See
Joint Report at 3-5. This is the only efficient way to handle discovery concerning the first
element of Plaintiffs’ cause of action. Defendants, by contrast, ask for the pointless and wasteful
duplication of discovery in Plaintiffs’ cases, unfairly and unnecessarily burdening all those
involved, including numerous third parties. Id.
Second, Defendants simply cannot reconcile the jumbled mix of conflicting and
incoherent positions inherent in their plan for Plaintiffs’ case. The only unifying element is that
Defendants wish to prejudice Plaintiffs at every turn. To start, Defendants have denied Count I
of Plaintiffs’ complaints. See Defs.’ Sprint Answer ¶¶ 218-28; Defs.’ CS Answer ¶¶ 97-106.
Those counts outline Plaintiffs’ cause of action for a Section 7 violation in wireless service
markets. Defendants’ denial of those counts is an obvious acknowledgement that Plaintiffs must
prove the Section 7 violation alleged within them, and yet Defendants cannot explain how
Plaintiffs could possibly do so without access to discovery concerning that violation. Defendants
also neglect to mention that they already have received millions of pages of Plaintiffs’
documents through the DOJ litigation and now are clearly trying to make discovery one-sided.
There is no justification for Defendants’ manifestly unfair proposal that they receive months of
unilateral, unfettered access to the DOJ record (which all goes to the common Section 7
________________________
(cont'd from previous page)

government and private suits are rejected, there has been no violation; if only the private suit fails,
lack of standing must be the explanation.”).

9

violation), while Plaintiffs are unable to pursue full discovery, particularly when such discovery
has already been produced and can be replicated at no real costs to Defendants. As Defendants
surely intend, Plaintiffs will never be able to cure this imbalance in access to the evidence.
In another bit of incoherence, Defendants say they want a “sequencing of
discovery in the Private Actions,” because Plaintiffs’ cases are “likely to be affected in some way
by the resolution of the DOJ Action.” Joint Report at 5-6. Defendants cannot have it both ways.
On the one hand, Defendants’ vague suggestion that Plaintiffs’ actions could be “affected” by the
DOJ action is another tacit acknowledgement that Plaintiffs’ and the DOJ’s cases overlap, as
both involve the same Section 7 violation. In that case, the unfairness of denying Plaintiffs
access to discovery concerning that violation is obvious once again. On the other hand,
Defendants’ suggestion that the cases should be sequenced makes no sense, if, as Defendants
(incorrectly) say, the cases are somehow wholly distinct. If Plaintiffs’ cases are so different from
the DOJ’s case, then Plaintiffs should not have to wait for the resolution of the DOJ’s action to
take full discovery. They should, instead, get a chance to develop a full discovery record while
the DOJ case is ongoing, in time for a trial immediately after the conclusion of the DOJ’s trial, so
that they can be heard prior to the closing of the transaction.
The issue of timing leads to yet another set of contradictions. As outlined in the
Joint Report, Defendants continue to press for the earliest possible trial date in the DOJ case.
See Joint Report at 10-11. Yet Defendants have withdrawn their pending license transfer
applications from the FCC, and have offered no explanation or timeframe for how they intend to
obtain the necessary approvals from the FCC.6 Id. And Defendants here refuse to even propose

6

In fact, it is not clear what transaction Defendants will pursue or when they will pursue it. See Jim
Cicconi, AT&T Senior Executive Vice President of External & Legislative Affairs, Withdrawal by
Right, http://attpublicpolicy.com/wireless/withdrawal-by-right/ (“There are essentially two reasons
(cont'd)

10

a trial date in Plaintiffs’ actions, seemingly intent on denying Plaintiffs a hearing before they
close the transaction. Id. Whatever Defendants’ plans concerning the timing of the transaction
now are, it is unfair and highly prejudicial to deny Plaintiffs an opportunity to be heard and
access to discovery while it could actually make a difference, and instead to allow Plaintiffs to
develop their cases only after the Defendants have irrevocably “scrambled the eggs” of AT&T
and T-Mobile. 7
Third, Defendants cannot continue to use the pendency of the DOJ case and the
February 13, 2012 trial date as an excuse to delay Plaintiffs’ statutory right to a meaningful day
in court prior to AT&T closing the transaction. Plaintiffs’ schedule does nothing to interfere
with the DOJ’s trial date and assumes a separate (and abbreviated) trial in Plaintiffs’ action after
the completion of the DOJ’s case. See Joint Report at 3-5, 8-11; Pls.’ Proposed Case Mgmt. Plan
at 12 (Docket No. 40-1). Plaintiffs’ schedule also minimizes interference with discovery in the
DOJ case by simply allowing both Plaintiffs and Defendants to use the evidence in that case
without duplication of effort. See Joint Report at 3-5. Plaintiffs’ proposal likewise minimizes
the burden on all third parties. Id.

________________________
(cont'd from previous page)

why an applicant would withdraw a merger application – either it intends to abandon the transaction
altogether, or it plans to submit a new application reflecting changes to the transaction or materially
changed circumstances.”) (posted Nov. 29, 2011). Thus, there is a significant possibility that the
parties and the Court are devoting substantial resources to a transaction that may never happen—
certainly not in its present form.
7

See F.T.C. v. Whole Foods Mkt., Inc., 548 F.3d 1028, 1034 (D.C. Cir. 2008) (explaining that preclosing injunctive relief is preferred in Section 7 cases, because “even with the considerable
flexibility of equitable relief, the difficulty of ‘unscrambl[ing] merged assets’ often precludes ‘an
effective order of divestiture’”) (quoting F.T.C. v. Dean Foods Co., 384 U.S. 597, 607 n.5 (1966));
Bon-Ton Stores, Inc., 881 F. Supp. at 878 (explaining that pre-closing preliminary injunctive relief is
“the remedy of choice for preventing an unlawful merger” because “it becomes difficult, and
sometimes virtually impossible, for a court to unscramble the eggs”) (quoting Consol. Gold Fields
PLC v. Minorco, S.A., 871 F.2d 252, 261 (2d Cir. 1989)) (internal quotation marks omitted).

11

Finally, even accepting Defendants’ position that Plaintiffs are only pursuing a
purported “wireless device claim,” Defendants still cannot justify denying Plaintiffs full
discovery concerning competition in the wireless service markets. First, Plaintiffs would need
such discovery in order to understand the source and effects of AT&T’s buying power in the
handset market. As the Court recognized, AT&T’s handset buying power is intimately tied to its
market power in the wireless service (output) market.8 Second, Defendants have asserted
“public interest” and “efficiencies” defenses against Plaintiffs, presumably aiming to establish
that the transaction is good for wireless consumers. See infra, Part II. Plaintiffs therefore would
need complete discovery concerning all of the effects of the transaction on wireless consumers in
order to address these asserted defenses.
II.

Defendants’ Affirmative Defenses

Defendants have asserted two affirmative defenses in their Answers to Plaintiffs’
complaints. See Defs.’ Sprint Answer; Defs.’ CS Answer. First, Defendants assert that
“[g]ranting the relief sought is contrary to the public interest.” Plaintiffs are aware of no
cognizable “public interest” defense under the antitrust laws to an anticompetitive acquisition. In
any event, Plaintiffs dispute the contention that this acquisition is in the public interest.
Second, Defendants assert that “the expansion of capacity and other
overwhelming efficiencies that will result from this transaction will benefit consumers.”
Plaintiffs dispute the suggestion that Defendants’ purported efficiencies constitute a valid
defense. See Swedish Match, 131 F. Supp. 2d at 171 (finding an efficiency defense

8

Mem. Op. at 32 (“Because plaintiffs have alleged facts about the proposed transaction’s effects on the
output market (the market for mobile wireless services), and because they posited links between
AT&T’s increased selling power in the output market and its increased purchasing power in the input
market, they have stated a plausible claim to antitrust injury in the market for wireless devices.”).

12

“inappropriate” when the acquisition in question “would generate undue market share and
increased concentration”) (citation omitted).
Even if the Court were to consider this latter defense, “high market concentration
levels require ‘proof of extraordinary efficiencies’” to overcome the presumption of
anticompetitive harm. H & R Block, Inc., 2011 WL 5438955, at *44 (quoting H.J. Heinz Co.,
246 F.3d at 720). Additionally, to be even potentially cognizable, asserted efficiencies must be
“merger specific,” meaning “they must be efficiencies that cannot be achieved by either
company alone because, if they can, the merger’s asserted benefits can be achieved without the
concomitant loss of a competitor.” H.J. Heinz Co., 246 F.3d at 721. They must also be
“reasonably verifiable by an independent party,” H & R Block, Inc., 2011 WL 5438955, at *44,
and represent more than “mere speculation and promises about post-merger behavior.” H.J.
Heinz Co., 246 F.3d at 721. Certainly, one of the major issues in these cases is whether
Defendants will be able to offer proof of extraordinary and cognizable efficiencies in an effort to
overcome the strong presumption of anticompetitive harm that Plaintiffs plan to establish
through their prima facie case.
Finally, as noted above, Defendants’ affirmative defenses are yet another reason
why the DOJ record should be used as discovery in Plaintiffs’ cases. 9 Defendants’ efficiencies
models, already the subject of discovery in the DOJ case,10 purport to account for numerous
aspects of competition in the relevant wireless service markets, and Defendants contend that they
are an affirmative defense to the claims of adverse effects on competition. Defendants can offer
9

10

Notably, Defendants asserted the same two defenses against the DOJ. See Answer to Pls.’ Second
Amended Compl., United States, et al. v. AT&T Inc., et al., 1:11-cv-01560 (D.D.C. Oct. 5, 2011).
See Special Master Order No. 4, United States, et al. v. AT&T Inc., et al., 1:11-cv-01560 (D.D.C. Nov.
21, 2011) (Docket No. 88).

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no justification for denying Plaintiffs access to discovery concerning the effects of the
transaction on wireless service markets when they have made their purported efficiencies a
central part of their defense of Plaintiffs’ cases.

Dated: December 6, 2011

Respectfully submitted,

/s/ Chong S. Park
Chong S. Park (D.C. Bar No. 463050)
Kenneth P. Ewing (D.C. Bar No. 439685)
Matthew Kepniss (D.C. Bar No. 490856)
STEPTOE & JOHNSON LLP
1330 Connecticut Avenue, N.W.
Washington, DC 20036-1795
Tel: [phone]
[e-mail]

/s/ Steven C. Sunshine
Steven C. Sunshine (D.C. Bar No. 450078)
Gregory B. Craig (D.C. Bar No. 164640)
Tara L. Reinhart (D.C. Bar No. 462106)
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM LLP
1440 New York Avenue, N.W.
Washington, DC 20005-2111
Tel: [phone]
[e-mail]
[e-mail]
[e-mail]

Alan W. Perry (pro hac vice)
Daniel J. Mulholland (pro hac vice)
Walter H. Boone (pro hac vice)
FORMAN PERRY WATKINS KRUTZ &
TARDY LLP
City Centre, Suite 100
200 South Lamar Street
Jackson, Mississippi 39201-4099
Tel: [phone]
[e-mail]
Charles L. McBride, Jr. (pro hac vice)
Joseph A. Sclafani (pro hac vice)
Brian C. Kimball (pro hac vice)
BRUNINI, GRANTHAM, GROWER &
HEWES, PLLC
The Pinnacle Building, Suite 100
190 East Capitol Street
Jackson, Mississippi 39201
Tel: [phone]
[e-mail]

James A. Keyte (pro hac vice)
Matthew P. Hendrickson (pro hac vice)
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM LLP
4 Times Square
New York, NY 10036-6522
Tel: [phone]
[e-mail]
[e-mail]
Counsel for Sprint Nextel Corporation

Counsel for Plaintiffs Cellular South, Inc. and
Corr Wireless Communications, L.L.C.

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CERTIFICATE OF SERVICE
I hereby certify that, on December 6, 2011, I caused the foregoing Statement of the Case
to be filed using the Court’s CM/ECF system.

/s/ Tara L. Reinhart
Tara L. Reinhart (D.C. Bar No. 462106)
Counsel for Sprint Nextel Corporation