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` UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF COLUMBIA
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`Case No.
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`Filed:
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`UNITED STATES OF AMERICA,
`Department of Justice, Antitrust Division
`450 5th Street, N.W.
`Washington, D.C. 20530
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`STATE OF KANSAS,
`120 S.W. 10th Avenue, 2nd Floor
`Topeka, Kansas 66612-1597
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`STATE OF NEBRASKA,
`2115 State Capitol
`Lincoln, Nebraska 68509
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`STATE OF OHIO,
`150 East Gay Street, 22nd Floor
`Columbus, Ohio 43215
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`STATE OF OKLAHOMA,
`313 N.E. 21st Street
`Oklahoma City, Oklahoma 73105-4894
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`and
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`STATE OF SOUTH DAKOTA,
`1302 E. Highway 14, Suite 1
`Pierre, South Dakota 57501-8501
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`Plaintiffs,
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`v.
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`DEUTSCHE TELEKOM AG,
`Friedrich-Ebert-Allee 140
`Bonn, Germany 53113
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`T-MOBILE US, INC.,
`12920 SE 38th Street
`Bellevue, Washington 98006
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`SOFTBANK GROUP CORP.
`1-9-1 Higashi-shimbashi, Minato-ku,
`Tokyo, Japan 105-7303
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`Case 1:19-cv-02232-TJK Document 1 Filed 07/26/19 Page 2 of 13
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`
`and
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`SPRINT CORPORATION
`6200 Sprint Parkway, Overland Park,
`Kansas 66251-4300
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`Defendants.
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`
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`COMPLAINT
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`The United States of America and the States of Kansas, Nebraska, Ohio, Oklahoma, and
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`South Dakota (“Plaintiff States”) bring this civil antitrust action to prevent the merger of T-
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`Mobile and Sprint, two of the four national facilities-based mobile wireless carriers in the United
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`States. The United States and Plaintiff States allege as follows:
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`I. NATURE OF THE ACTION
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`1.
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`Mobile wireless service is an integral part of modern American life. The average
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`American household spends over $1,000 a year on mobile wireless service, not including the
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`additional costs of wireless devices, applications, media content, and accessories. Many
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`Americans now rely on mobile wireless service to communicate, pay bills, apply for jobs, do
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`schoolwork, get directions, shop, read the news, and otherwise stay informed and connected
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`from nearly any location in the country.
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`2.
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`Competition has kept mobile wireless service prices down and served as a catalyst
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`for innovation. Preserving this competition is critical to ensuring that consumers will continue to
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`have reasonable and affordable access to an essential service that, for many, serves as a gateway
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`to the modern economy.
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`3.
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`By combining two of the only four national mobile facilities-based wireless
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`carriers, without appropriate remedies, the merger of T-Mobile and Sprint would extinguish
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`substantial competition.
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`4.
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`As the nation’s third and fourth largest mobile wireless carriers, T-Mobile and
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`Sprint have positioned themselves as challengers to Verizon and AT&T, their larger and more
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`expensive rivals, targeting retail customers who particularly value affordability. Some of these
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`customers purchase mobile wireless service on a postpaid basis and are billed monthly after
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`receiving service. Others, including those who may lack ready access to credit, purchase prepaid
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`mobile wireless service and pay for service in advance of using it.
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`5.
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`The merger would eliminate Sprint as an independent competitor, reducing the
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`number of national facilities-based mobile wireless carriers from four to three. The merger
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`would cause the merged T-Mobile and Sprint (“New T-Mobile”) to compete less aggressively.
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`Additionally, the merger likely would make it easier for the three remaining national facilities-
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`based mobile wireless carriers to coordinate their pricing, promotions, and service offerings. The
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`result would be increased prices and less attractive service offerings for American consumers,
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`who collectively would pay billions of dollars more each year for mobile wireless service.
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`6.
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`Because the merger of T-Mobile and Sprint likely would substantially lessen
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`competition for retail mobile wireless service, the Court should permanently enjoin the proposed
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`transaction.
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`II. THE PARTIES AND THE PROPOSED MERGER
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`7.
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`Deutsche Telekom AG (“Deutsche Telekom”) is a German corporation
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`headquartered in Bonn, Germany, and is the controlling shareholder of T-Mobile US, Inc. (“T-
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`Mobile”), with 63% of T-Mobile’s shares. Deutsche Telekom is the largest telecommunications
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`Case 1:19-cv-02232-TJK Document 1 Filed 07/26/19 Page 4 of 13
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`operator in Europe, with net revenues of €75.7 billion (approximately $85 billion) in 2018.
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`8.
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`T-Mobile is a Delaware corporation headquartered in Bellevue, Washington, and
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`is the third largest mobile wireless carrier in the United States. In 2018, T-Mobile had nearly 80
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`million wireless subscribers, and approximately $43.3 billion in total revenues. T-Mobile sells
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`postpaid mobile wireless service under its T-Mobile brand, and prepaid mobile wireless service
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`primarily under its Metro by T-Mobile brand. T-Mobile also sells mobile wireless service
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`indirectly through mobile virtual network operators (“MVNOs”), such as TracFone and Google
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`Fi, that lack wireless networks of their own. These MVNOs obtain network access from T-
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`Mobile and resell mobile wireless service to consumers.
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`9.
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`SoftBank Group Corp. (“SoftBank”), a Japanese corporation and the controlling
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`shareholder of Sprint, owns 85% of Sprint’s shares. SoftBank’s operating income during its
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`2018 fiscal year was ¥2.3539 trillion (approximately $21.25 billion).
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`10.
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`Sprint Corporation (“Sprint”) is a Delaware corporation headquartered in
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`Overland Park, Kansas. It is the fourth largest mobile wireless carrier in the United States. At
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`the end of its 2018 fiscal year, Sprint had over 54 million wireless subscribers, and its fiscal year
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`2018 operating revenues were approximately $32.6 billion. Sprint sells postpaid mobile wireless
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`service under its Sprint brand, and prepaid mobile wireless service primarily under its Boost
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`Mobile and Virgin Mobile brands. Sprint also sells mobile wireless service indirectly through
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`MVNOs, which resell the service to consumers.
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`11.
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`On April 29, 2018, T-Mobile and Sprint agreed to combine their respective
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`businesses in an all-stock transaction, pursuant to a Business Combination Agreement. The
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`merged firm would be owned 42% by Deutsche Telekom and 27% by SoftBank.
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`III. INDUSTRY OVERVIEW AND RELEVANT MARKETS
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`A.
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`Industry Overview
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`12. Mobile wireless service includes voice, text messaging, and data service used to
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`access the internet from a mobile device. Consumers access these services through a variety of
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`devices, including phones, tablets, and smart watches. Mobile wireless carriers compete for
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`retail customers by offering a variety of service plans and devices at a variety of prices.
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`13. Mobile wireless carriers deliver service over certain frequencies of spectrum. To
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`build a national wireless network and become a facilities-based wireless carrier, a firm must
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`acquire licenses to a sufficient amount of spectrum across a sufficiently wide geographic
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`footprint. The firm also must deploy network infrastructure—including cell sites, radio
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`transmitters and receivers, and equipment to transmit (or “backhaul”) signals to a core network—
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`to transmit and receive signals over its licensed spectrum. The firm also must invest in building
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`a distribution network and marketing its services to retail customers. Facilities-based mobile
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`wireless carriers like T-Mobile and Sprint promote their prices, plan features, device offerings,
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`customer service, and network quality as they compete for retail customers. MVNOs typically
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`do not operate their own mobile wireless networks. Instead, these providers buy capacity
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`wholesale from facilities-based providers like T-Mobile and Sprint and then resell mobile
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`wireless service to consumers under their own brand name.
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`B.
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`14.
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`Retail Mobile Wireless Service Is a Relevant Product Market
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`Retail mobile wireless customers include consumers and small and medium
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`businesses who use mobile wireless service for voice communications, text messaging, and
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`internet access. These customers purchase mobile wireless service at retail stores or online, and
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`choose from pricing and service plans made available to the general public. Retail customers are
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`Case 1:19-cv-02232-TJK Document 1 Filed 07/26/19 Page 6 of 13
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`distinct from large business and government customers, who purchase mobile wireless service
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`through a bid process and receive different pricing than that available to the general public. A
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`hypothetical monopolist of retail mobile wireless service profitably could raise prices by at least
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`a small but significant, non-transitory amount. Accordingly, retail mobile wireless service is a
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`relevant product market under Section 7 of the Clayton Act, 15 U.S.C. § 18.
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`The United States Is a Relevant Geographic Market
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`C.
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`15. Mobile wireless carriers generally price, advertise, and market their services on a
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`nationwide basis. Consumers who seek mobile wireless service in the United States cannot turn
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`to carriers who do not provide service in the United States. A hypothetical monopolist of retail
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`mobile wireless service in the United States profitably could raise prices by at least a small but
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`significant, non-transitory amount. Thus, the United States is a relevant geographic market
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`under Section 7 of the Clayton Act, 15 U.S.C. § 18.
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`IV. ANTICOMPEITITVE EFFECTS
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`The proposed merger would substantially lessen competition and harm consumers
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`16.
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`in the relevant market. Post-merger, the combined share of T-Mobile and Sprint would account
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`for roughly one-third of the national retail mobile wireless service market, leaving only two other
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`national wireless carriers of roughly equal size (AT&T and Verizon).
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`17.
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`American consumers, including those who are customers of Verizon and AT&T,
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`have benefitted from the competition T-Mobile and Sprint have brought to the mobile wireless
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`industry. For instance, it was not until after T-Mobile and Sprint introduced unlimited data plans
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`to retail customers in 2016 that Verizon and AT&T followed with their own standalone
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`unlimited data offerings to retail customers in 2017.
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`18.
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`T-Mobile and Sprint have been particularly intense competitors for the roughly
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`30% of retail subscribers who purchase prepaid mobile wireless service. These customers tend
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`to be even more value conscious, on average, than postpaid subscribers.
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`19.
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`The head-to-head competition between T-Mobile’s Metro brand and Sprint’s
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`Boost Mobile brand has exerted significant downward pressure on prices. When Boost
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`introduced a family plan of four lines for $100 in February 2017, Metro countered with an
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`aggressive promotion that a Sprint executive described this way: “We gave them a jab and they
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`punched back with a left hook.” In the fall of 2017, when Metro responded to a Boost four lines
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`for $100 promotion with a three lines for $90 promotion of its own, Boost executives countered
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`with a “Metro attack plan.” Boost’s “Combat Metro” strategy upped the ante further by offering
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`five lines for $100. Observing in March 2018 that Sprint postpaid and prepaid plans were priced
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`50% lower than the competition, the senior leadership at T-Mobile’s Metro reduced prices to $40
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`per month and then to $30 per month for entry level plans.
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`20.
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`The competition between T-Mobile and Sprint also has led to improvements in
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`the quality of devices and the plan features available to prepaid subscribers. As one Sprint senior
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`executive observed in 2015, “The prepaid space is experiencing a severe price war. We now
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`have two competitors (Cricket and Metro) spending at postpaid-like advertising levels with
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`strong, best in class nation-wide networks. We need to find ways to differentiate our service
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`beyond device and rate plan price.” To “one up Metro” in May 2017, for example, Boost offered
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`unlimited calling to Mexico and unlimited voice roaming to customers traveling in Mexico. That
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`same year, Boost introduced its “BoostUp!” program, which allowed prepaid customers with a
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`solid payment history to purchase a phone for $1 down and pay for it over 18 months with no
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`Case 1:19-cv-02232-TJK Document 1 Filed 07/26/19 Page 8 of 13
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`interest. And in February 2018, Boost offered an iPhone 6 for $49 to customers who switched to
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`Boost and kept their phone number.
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`21.
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`If the merger were allowed to proceed, this competition would be lost. After the
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`elimination of Sprint, the industry’s low-price leader, New T-Mobile would have the incentive
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`and the ability to raise prices. In a post-merger world, the other remaining national facilities-
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`based mobile wireless carriers, Verizon and AT&T, also would have the incentive and the ability
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`to raise prices. Additionally, the merger would leave the market vulnerable to increased
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`coordination among these three competitors. Increased coordination harms consumers through a
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`combination of higher prices, reduced quality, reduced innovation, and fewer choices.
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`22.
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`Competition between Sprint and T-Mobile to sell mobile wireless service
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`wholesale to MVNOs has benefited consumers by furthering innovation, including the
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`introduction of MVNOs with some facilities-based infrastructure. The merger’s elimination of
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`this competition likely would reduce future innovation.
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`V.
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`ABSENCE OF COUNTERVAILING FACTORS
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`23.
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`Given the high barriers to entry in the retail mobile wireless service market, entry
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`or expansion of other firms is unlikely to occur in a timely manner or on a scale sufficient to
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`replace the competitive influence now exerted on the market by Sprint.
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`24.
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`Any efficiencies generated by this merger are unlikely to be sufficient to offset
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`the likely anticompetitive effects on American consumers in the retail mobile wireless service
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`market, particularly in the short term, unless additional relief is granted.
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`VI. JURISDICTION AND VENUE
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`25.
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`The United States brings this action, and the Court has subject matter jurisdiction
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`over this action, under Section 15 of the Clayton Act, 15 U.S.C. § 25, to prevent and restrain
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`Case 1:19-cv-02232-TJK Document 1 Filed 07/26/19 Page 9 of 13
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`Defendants Deutsche Telekom, Softbank, T-Mobile, and Sprint (“Defendants”) from violating
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`Section 7 of the Clayton Act, as amended, 15 U.S.C. § 18.
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`26.
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`The Plaintiff States bring this action under Section 16 of the Clayton Act, 15
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`U.S.C. § 26, to prevent and restrain the Defendants from violating Section 7 of the Clayton Act,
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`15 U.S.C. § 18. The Plaintiff States, by and through their respective Attorneys General, bring
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`this action as parens patriae on behalf of and to protect the health and welfare of their citizens
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`and the general economy of each of their states.
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`27.
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`T-Mobile and Sprint are engaged in, and their activities substantially affect,
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`interstate commerce. T-Mobile and Sprint sell mobile wireless service throughout the United
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`States. As parties to the Business Combination Agreement, which will have effects throughout
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`the United States, Deutsche Telekom and Softbank have submitted to the jurisdiction of the
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`United States. All four of the Defendants have consented to venue and personal jurisdiction in
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`this District.
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`28.
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`Venue is proper under Section 12 of the Clayton Act, 15 U.S.C. § 22, and 28
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`U.S.C. § 1391(b) and (c)(2), for Defendants T-Mobile and Sprint, and venue is proper for
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`Defendants Deutsche Telekom, a German corporation, and SoftBank, a Japanese corporation,
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`under 28 U.S.C. § 1391(c)(3).
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`VII. VIOLATION ALLEGED
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`29.
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`The merger of T-Mobile and Sprint likely would lessen competition substantially
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`in interstate trade and commerce in the relevant geographic market for retail mobile wireless
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`service, in violation of Section 7 of the Clayton Act, 15 U.S.C. § 18.
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`30.
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`Unless enjoined, the transaction likely would have the following effects in the
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`national retail mobile wireless market described above:
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`Case 1:19-cv-02232-TJK Document 1 Filed 07/26/19 Page 10 of 13
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`a.
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`b.
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`competition would be lessened substantially; and
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`prices likely would be higher, quality of service likely would be lower,
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`innovation likely would be lessened, and consumer choice likely would be
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`more restricted than in the absence of the merger.
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`VIII. REQUEST FOR RELIEF
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`31.
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`Plaintiffs request that this Court do the following:
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`a.
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`adjudge the combination of T-Mobile and Sprint’s mobile wireless
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`businesses to violate Section 7 of the Clayton Act, 15 U.S.C. § 18;
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`b.
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`permanently enjoin T-Mobile and Sprint from carrying out the Business
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`Combination Agreement dated April 29, 2018, or from entering into or
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`carrying out any agreement, understanding, or plan, the effect of which
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`would be to bring the mobile wireless businesses of T-Mobile and Sprint
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`under common ownership or control;
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`award Plaintiffs costs of this action; and
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`award Plaintiffs other relief as the Court may deem just and proper.
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`c.
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`d.
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`Dated this 26th day of July, 2019
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`Case 1:19-cv-02232-TJK Document 1 Filed 07/26/19 Page 11 of 13
`Case 1:19-cv-02232-TJK Document 1 Filed 07/26/19 Page 11 of 13
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`Respectfully subm' ed,
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`ATES OF AMERICA:
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` Makan Delra im
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`Assistant Attorney General for Antitrust
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` rederick S.
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`oung (
`Patricia C. Corcoran
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`Matthew R. Jones
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`Attorneys for the United States
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`US. Department of Justice
`Antitrust Division
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`450 Fifth Street NW, Suite 7000
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`Washington, DC 20530
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`Telephone: (202) 514-5 621
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`Facsimile: (202) 514—6381
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`Email: Frederick.Young@usdoj.gov
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`M Mr.
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`Bernard A. Nrgro, Jr. (D.C. Bar #412357)
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`Deputy Assistant Attorney General
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`Y?
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`Patricia A. Brink
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`Director of Civil Enforcement
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`4/.
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`. Bar #996525)
`David . Shaw (
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`Counsel to the Assistant Attorney General
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`at, % Lt
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`AndrewJ.
`. Robinson (DC. Bar #1003 748)
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`Counsel to the Assistant Attorney General
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` awrenc A. Reicher
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`Counsel to the Assistant Attorney General
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`flfljw
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`Scott Scheele (D.C. Bar #429061)
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`Chief, Telecommunications & Broadband Section
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`Aszstant Chief, Telecommunications & Broadband Section
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`Case 1:19-cv-02232-TJK Document 1 Filed 07/26/19 Page 12 of 13
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`FOR PLAINTIFF STATE OF KANSAS:
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`Derek Schmidt
`Attorney General
`State of Kansas
`120 S.W. 10th Avenue, 2nd Floor
`Topeka, Kansas 66612-1597
`(785) 296-2215
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`FOR PLAINTIFF STATE OF NEBRASKA:
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`Douglas J. Peterson
`Attorney General
`State of Nebraska
`2115 State Capitol
`Lincoln, Nebraska 68509
`(402) 471-3811
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`FOR PLAINTIFF STATE OF OHIO:
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`Dave Yost (0056290)
`Attorney General
`State of Ohio
`150 E. Gay St., 22nd Floor
`Columbus, Ohio 43215
`(614) 466-4328
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`Case 1:19-cv-02232-TJK Document 1 Filed 07/26/19 Page 13 of 13
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`FOR PLAINTIFF STATE OF OKLAHOMA:
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`Mike Hunter
`Attorney General of Oklahoma
`313 N.E. 21st Street
`Oklahoma City, Oklahoma 73105-4894
`(405) 521-3921
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`FOR PLAINTIFF STATE OF SOUTH DAKOTA:
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`Jason R. Ravnsborg
`Attorney General
`State of South Dakota
`1302 E. Highway 14, Suite 1
`Pierre, SD 57501-8501
`(605) 773-3215
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