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AT&T customers try to block merger with T-Mobile

A small group of AT&T customers is seeking arbitration hearings with AT&T under antitrust law in an attempt to stop the $39 billion merger with T-Mobile USA.

Marguerite Reardon Former senior reporter
Marguerite Reardon started as a CNET News reporter in 2004, covering cellphone services, broadband, citywide Wi-Fi, the Net neutrality debate and the consolidation of the phone companies.
Marguerite Reardon
4 min read

Talk about a David and Goliath story. The New York-based law firm of Bursor & Fisher is working with some AT&T customers in the hopes of blocking AT&T's proposed $39 billion acquisition of T-Mobile.

AT&T to buy T-Mobile

The firm is working on behalf of a small group of AT&T customers to demand arbitration from the company, which is the second largest wireless phone company in the U.S. and one of the biggest political contributors in the country. In its arbitration filings, Bursor & Fisher alleges that the deal between AT&T and T-Mobile would violate the Clayton Antitrust Act and harm competition in the wireless market. The firm has already signed up 11 AT&T customers, and it's soliciting more on its Web site: FightTheMerger.com. It filed the first arbitration demand Thursday in a 236-page document.

The main argument in the arbitration request is that the merger will lead to higher prices and diminished service, which would harm consumers. The customers are asking that the merger be blocked or at the very least that certain requirements be put on the merger, such as AT&T divesting some wireless spectrum and stopping its practice of entering into exclusive contracts with handset makers.

The Department of Justice and the Federal Communications Commission are already reviewing the merger. It's expected to take the agencies a year to complete their evaluation of the merger. The Justice Department in particular will be looking at potential antitrust claims while the FCC's main obligation is to ensure that the merger will serve the public interest, since the wireless licenses that AT&T and T-Mobile hold are regulated by the FCC. The FCC said this week that it has stopped the clock on its review as it obtains additional information from AT&T.

Scott Bursor, a partner at Bursor & Fisher, said his firm expects to file hundreds of these cases. While arbitration is typically used to dispute individual complaints, such as an erroneous charge on a bill, Bursor said he thinks the process can also be used for antitrust disputes, since class-action lawsuits are not available to AT&T customers.

"The law gives private parties the opportunity to sue in antitrust cases," Bursor said. "So we are using this arbitration process to help consumers, who are barred from filing class-action suits."

In its contracts, AT&T prohibits customers from suing the company directly or as part of a class-action lawsuit. A U.S. Supreme court decision in April upheld this practice. Instead, consumers must use an arbitration process. But consumers are also prohibited from filing arbitration as a group or class and instead must file claims individually, which is why Bursor has said the company will file hundreds of these claims.

And because each arbitration request is assigned to a separate judge, each case will be evaluated independently, which in theory could increase the chances of a beneficial outcome for the customers filing the complaint.

AT&T said in a statement that the arbitration process is not intended to hear class-action cases, such as the ones Bursor plans to file.

"The claims made by the Bursor & Fisher Law Firm are completely without merit," the company's statement said. "An arbitrator has no authority to block the merger or affect the merger process in any way. Our arbitration provision allows customers to resolve their individual disputes with AT&T in a prompt and consumer-friendly manner."

Bursor's firm has worked with wireless customers in the past on class-action suits over early-termination fees. His firm also sued AT&T over mobile-handset exclusivity. Michael Aschenbrener of Aschenbrener Law in Chicago, who has also brought class-action suits against wireless companies in the past, said that using the arbitration process to air antitrust complaints is unusual. So it's difficult to say if it will be effective. But he said at the very least it might get these consumers' concerns heard.

"Arbitration is a new approach in this context but necessary in light of recent anticonsumer Supreme Court precedent," he said. "Whether these consumers will be successful remains to be seen, but this demonstrates that consumers want to be heard and will be heard--no matter how much the courts and big businesses try to silence them."

These AT&T consumers involved in the arbitration are not the only ones opposed to AT&T's plan to buy T-Mobile. Sprint Nextel has also expressed its opposition. And this week, Senator Herb Kohl, who heads up a subcommittee on antitrust matters, asked regulators to block the deal.

Some states are also taking a closer look at the merger. California's Public Utility Commission is examining it. New York Attorney General Eric Schneiderman announced in March that his office would "undertake a thorough review of AT&T's acquisition of T-Mobile" and analyze the merger for "potential anticompetitive effects on consumers and businesses."

Meanwhile, AT&T has also garnered support from a number of groups. There are already governors in 26 states that have signed on to support the merger. And 76 members of Congress have also expressed their support for the merger.

AT&T said earlier this week during its earnings call that it is confident it will get the approval for the merger. And the company said it expects the deal to close in the first quarter of next year.