The opinion of the court was delivered by: Ellen Segal Huvelle United States District Judge
These are antitrust cases between competing mobile wireless carriers. Before the Court are motions to dismiss lawsuits which Sprint and Cellular South brought to enjoin AT&T's proposed acquisition of T-Mobile. AT&T and T-Mobile move for dismissal pursuant to Federal Rule of Civil Procedure 12(b)(6), arguing that Sprint's and Cellular South's complaints fail to adequately allege that the merger would cause them "antitrust injury," and therefore that they lack the "antitrust standing" required to seek injunctive relief under § 16 of the Clayton Act, 15 U.S.C. § 26.*fn1
Plaintiff Sprint Nextel Corporation ("Sprint") is the third largest national provider of mobile wireless services, with 50 million wireless customers. (Sprint Compl. ¶ 96.) In 2010, Sprint "accounted for 15 percent of all mobile wireless services revenues." (Id.) Plaintiffs Cellular South, Inc., and its wholly owned subsidiary Corr Wireless Communications, L.L.C. (collectively, "Cellular South" unless otherwise stated), are regional carriers operating a wireless network that "serves more than 887,000 customers located in Mississippi, Tennessee, Alabama Florida, and other surrounding states." (Cellular South Compl. ¶¶ 1, 21.)
Defendant AT&T Mobility, L.L.C. ("AT&T"), the wholly owned subsidiary of defendant AT&T, Inc., is the second largest national carrier,*fn2 with 95 million customers. (Sprint Compl. ¶¶ 15, 94.) In 2010, AT&T "accounted for 32 percent of all mobile wireless services revenues." (Id. ¶ 94.) Defendant T-Mobile USA, Inc. ("T-Mobile"), the wholly owned subsidiary of defendant Deutsche Telekom AG, is the fourth largest national carrier, with 34 million customers. (Sprint Compl. ¶¶ 16, 97.) In 2010, T-Mobile "accounted for 12 percent of all mobile wireless services revenues." (Id. ¶ 97.)
On March 20, 2011, AT&T entered into a stock purchase agreement to
acquire T-Mobile and to merge the two companies' mobile wireless
services businesses. Five months later, the United States brought suit
to enjoin the acquisition, alleging that its effect would "be
substantially to lessen competition, or to tend to create a monopoly"
in violation of § 7 of the Clayton Act. 15 U.S.C. § 18.*fn3
Sprint and Cellular South filed the present suits in the
subsequent weeks,*fn4 and defendants moved to dismiss
The Court heard argument on defendants' motions on October 24, 2011. Having considered the parties' positions and the relevant legal principles, the Court will grant the motions except as to plaintiffs' claims regarding mobile wireless devices, and Cellular South's roaming claim insofar as it relates to Corr Wireless.
I. GOVERNING LEGAL PRINCIPLES
Section 16 of the Clayton Act authorizes private parties to seek injunctive relief to protect "against threatened loss or damage by a violation of the antitrust laws." 15 U.S.C. § 26. While the statute's text is broad, providing for suits by "[a]ny person, firm, corporation, or association," id., courts have limited its reach to those plaintiffs that allege a threat of "antitrust injury." Cargill, Inc. v. Monfort of Colo., Inc., 479 U.S. 104, 113 (1986).
Antitrust injury is injury "of the type the antitrust laws were designed to prevent and that flows from that which makes the defendants' acts unlawful." Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489 (1977). Accordingly, a private antitrust plaintiff must allege more than threatened loss or damage that is merely "causally linked" to the defendant's anticompetitive behavior. Id. The plaintiff must additionally allege that its threatened injury "reflect[s] the anticompetitive effect either of the [antitrust] violation or of anticompetitive acts made possible by the violation." Id. Thus, even if a threatened injury is "causally related to an antitrust violation," it "will not qualify as 'antitrust injury' unless it is attributable to an anticompetitive aspect of the practice under scrutiny." Atl. Richfield Co. v. USA Petroleum Co., 495 U.S. 328, 334 (1990).
The antitrust injury requirement aligns antitrust suits brought by private parties "'with the purposes of the antitrust laws, and prevents abuses of those laws' by claimants seeking to halt the strategic behavior of rivals that increases, rather than reduces competition." NicSand, 507 F.3d at 449--50 (quoting HyPoint Tech., Inc. v. Hewlett-Packard Co., 949 F.2d 847, 877 (6th Cir. 1991)). "It ensures that the harm claimed by the plaintiff corresponds to the rationale for finding a violation of the antitrust laws in the first place, and it prevents losses that stem from competition from supporting suits by private plaintiffs . . . ." Atl. Richfield Co., 495 U.S. at 342.
When the Supreme Court first articulated the requirement in Brunswick, for example, it held that plaintiffs seeking treble damages for alleged antitrust violations under § 4 of the Clayton Act, 15 U.S.C. § 15, had not established antitrust injury where they sought to recover for "profits they would have realized had competition been reduced" but for the defendant's pro- competitive activities. 429 U.S. at 488. The Court did not dispute that plaintiffs had suffered injury-in-fact. Emphasizing that the antitrust laws "were enacted for 'the protection of competition not competitors,'" however, the Court held that it would be "inimical to the purposes of [those] laws to award damages" for injuries a competitor suffered from increased competition. Id. (quoting Brown Shoe Co. v. United States, 370 U.S. 294, 320 (1962)).
In Cargill, the Court applied the same principle in extending the antitrust injury requirement to suits for injunctive relief under § 16. See 479 U.S. at 109--13. Monfort of Colorado, then the country's fifth-largest beef packer, sued to enjoin the acquisition of Spencer Beef, the number three beef packer, by Excel Corporation, the number two beef packer. Id. at 106. In its complaint, Monfort "alleged that the acquisition would 'violat[e] [§] 7 of the Clayton Act because the effect of the proposed acquisition may be substantially to lessen competition or tend to create a monopoly.'" Id. at 107 (first alteration in the original). Monfort further alleged that the acquisition would "result in a concentration of economic power in the relevant markets" that would allow the merged entity to bid up the cost of inputs and cause a drop in market prices, such that Monfort was threatened with a profit loss. Id. at 107 (internal quotation marks omitted).
Finding Monfort's complaint "of little assistance" in "determining what Monfort alleged the source of its injury to be," id. at 113, the Court nonetheless was able to discern two distinct theories of injury that Monfort alleged: first, conventional price competition, and second, predatory pricing.*fn6 The Court concluded that neither theory supported Monfort's claim to antitrust injury. Id. at 114--19.
As to the first theory, the Court reasoned:
Brunswick holds that the antitrust laws do not require the courts to protect small businesses from the loss of profits due to continued competition, but only against the loss of profits from practices forbidden by the antitrust laws. The kind of competition that Monfort alleges here, competition for increased market share, is not activity forbidden by the antitrust laws. It is simply, as petitioners claim, vigorous competition. To hold that the antitrust laws protect competitors from the loss of profits due to such price competition would, in effect, render illegal any decision by a firm to cut prices in order to increase market share. The antitrust laws require no such perverse result, for "[i]t is in the interest of competition to permit dominant firms to engage in vigorous competition, including price competition."
Id. at 116 (alteration in the original) (quoting Arthur S. Langerderfer, Inc. v. S.E. Johnson Co., 729 F.2d 1050, 1057 (6th Cir. 1984)). As in Brunswick, where the Court did not question that plaintiff suffered lost profits, the Cargill Court accepted plaintiff's allegations of threatened injury-in-fact as sufficient. Nonetheless, the Court concluded that "the threat of loss of profits due to possible price competition following a merger does not constitute a threat of antitrust injury." Id. at 116--17.
The Court then turned to Monfort's second claim of antitrust injury: the threat that Excel would engage in predatory pricing. Id. at 117. The Court stated that predatory pricing "is a practice that harms both competitors and competition" and recognized that, in theory at least, losses threatened by predatory pricing constitute an injury of the type the antitrust laws were designed to prevent. Id. at 117--18 ("Predatory pricing is thus a practice 'inimical to the purposes of [the antitrust] laws,' Brunswick, [429 U.S. at 488], and one capable of inflicting antitrust injury.") (first alteration in the original). However, the Court concluded that Monfort had failed to properly press this claim before the district court, and that even if it had, it likely would not have succeeded given characteristics specific to the market it faced. Id. at 118--19 & n.15.
The Supreme Court's analysis in Cargill is instructive as to both the principles underlying the concept of antitrust injury and the method of inquiry it demands. Determining whether a private party has standing to sue under § 16 of the Clayton Act requires a careful assessment of the connection between the threatened loss or damage, on the one hand, and the reason defendants' proposed conduct is allegedly illegal on the other. As the Court clarified in Atlantic Richfield:
Conduct in violation of the antitrust laws may have three effects, often interwoven: In some respects the conduct may reduce competition, in other respects it may increase competition, and in still other respects effects may be neutral as to competition. The antitrust injury requirement ensures that a plaintiff can [succeed] only if the loss stems from a competition-reducing aspect or effect of the defendant's behavior. 495 U.S. at 343--44.
Methodologically, then, assessing antitrust injury at the pleadings stage of a § 16 suit requires two distinct inquiries. First, does plaintiff's complaint allege a threatened injury-in-fact? Second, does the threatened injury result from an anticompetitive aspect of defendant's proposed conduct, i.e., that which would make the transaction illegal under the antitrust laws? A plaintiff has sufficiently pleaded a claim to antitrust injury only if its complaint satisfies both inquiries*fn7 under the conventional Federal Rule of Civil Procedure 8(a) pleading standards that govern "'in all civil actions.'" Ashcroft v. Iqbal, 556 U.S. 662, ---, 129 S.Ct. 1937, 1953 (2009) (quoting Fed. R. Civ. P. 1); see Bell Atl. Corp. v. Twombly, 550 U.S. 544, 554--58, 570 (2007).*fn8
The Court's analysis, however, is not confined to the discrete question of whether Sprint and Cellular South have sufficiently alleged antitrust injuries. Antitrust injury is but one factor to be considered in assessing whether private plaintiffs have standing to sue under the antitrust laws. In Associated General Contractors of California, Inc. v. California State Council of Carpenters, 459 U.S. 519 (1983), the Supreme Court described other factors relevant to determining whether a plaintiff seeking treble damages pursuant to § 4 of the Clayton Act has antitrust standing: "the directness of the injury, whether the claim for damages is 'speculative,' the existence of more direct victims, the potential for duplicative recovery and the complexity of apportioning damages." Andrx Pharm., 256 F.3d at 806 (citing Associated Gen. Contractors, 459 U.S. at 542--45); accord Daniel v. Am. Bd. of Emergency Med., 428 F.3d 408, 443 (2d Cir. 2005).
To be sure, "many of these other factors are not relevant to the standing inquiry under § 16," Cargill, 479 U.S. at 110 n.5, and therefore have no application here. The antitrust standing inquiry under § 16 is "less demanding" than that under § 4 because § 16 "provides for injunctive relief, not treble damages," and therefore "the risk of duplicative recovery or the danger of complex apportionment that pervades the analysis of standing under [§] 4 is not relevant to the issue of standing under [§] 16." Palmyra Park Hosp., 604 F.3d at 1299--1300 (internal quotation marks omitted); accord Adams v. Pan Am. World Airways, Inc., 828 F.2d 24, 26 (D.C. Cir. 1987).
Ultimately, "[t]he extent to which [factors other than antitrust injury] apply when plaintiffs sue for injunctive relief depends on the circumstances of the case," and "the weight to be given the various factors will [also] necessarily vary" depending on the context. Daniel, 428 F.3d at 443. Of particular relevance here is the fact that courts assessing the viability of a § 16 plaintiff's claim to antitrust injury on the pleadings have considered whether the plaintiff's allegations are too speculative to be allowed to proceed.*fn9 Indeed, "Section 16's requirement of 'threatened injury,' 15 U.S.C. § 26, dovetails with Article III's requirement that in order to obtain forward-looking relief, a plaintiff must face a threat of injury that is both 'real and immediate, not conjectural or hypothetical.'" In re New Motor Vehicles Canadian Exp. Antitrust Litig., 522 F.3d 6, 14 (1st Cir. 2008) (some internal quotation marks omitted) (quoting O'Shea v. Littleton, 414 U.S. 488, 494 (1974)).*fn10 Thus, although § 16 of the Clayton Act protects "against threatened loss or damage by a violation of the antitrust laws," 15 U.S.C. § 26 (emphasis added), and although § 7 "was intended to arrest the anticompetitive effects of market power in their incipiency," FTC v. Procter & Gamble Co., 386 U.S. 568, 577 (1967), the Act does not authorize suits by those whose allegations of threatened injury amount to little more than conjecture.
With these principles in mind, the Court turns to Sprint's and Cellular South's claims to antitrust standing and, in particular, antitrust injury. For purposes of this inquiry only, the Court assumes that AT&T's proposed acquisition of T-Mobile would violate § 7 of the Clayton Act, and focuses instead on whether plaintiffs have sufficiently alleged a threatened loss or damage stemming from an aspect or effect of the proposed acquisition that would make it illegal.*fn11
Sprint and Cellular South allege threatened injuries that stem from both horizontal and vertical aspects of AT&T's proposed acquisition of T-Mobile. That is to say: as participants in a number of different markets, wireless carriers are related both horizontally and vertically. In certain markets, the carriers compete with each other to sell outputs, and in other markets, they compete to purchase inputs. Such relationships are deemed horizontal in that they pit carriers against carriers, acting in parallel as either sellers or buyers.*fn12 (Where the carriers compete as sellers, the proposed acquisition raises monopoly concerns. Where they compete as buyers of inputs, the anticompetitive form is monopsony.*fn13 ) In yet other markets, the wireless carriers buy and sell services to and from each other, and are therefore vertically related.*fn14 In this complex and constantly evolving industry, markets are interconnected and the carriers play multiple roles simultaneously. The Court will address plaintiffs' claims regarding the horizontal effects of the proposed acquisition before turning to their vertical claims, although it recognizes that this distinction is not always clear-cut.
Assuming the truth of the facts that the plaintiffs allege, the Court describes each relevant market and assesses the plaintiffs' claims of antitrust injury in it. "To survive a motion to dismiss, the pleadings must suggest a plausible scenario that shows that the pleader is entitled to relief." Jones v. Horne, 634 F.3d 588, 595 (D.C. Cir. 2011) (alterations and internal quotation marks omitted). Plaintiffs' complaints must therefore "contain sufficient factual matter, accepted as true, to state a claim" to antitrust standing "that is plausible on its face." Iqbal, 129 S.Ct. at 1949 (internal quotation marks omitted). In particular, "[a] 'naked assertion' of antitrust injury, the Supreme Court has made clear, is not enough; an antitrust claimant must put forth factual 'allegations plausibly suggesting (not merely consistent with)' antitrust injury." NicSand, 507 F.3d at 451 (quoting Twombly, 550 U.S. at 557).
AT&T, T-Mobile, Sprint, and Cellular South are primarily competing wireless carriers: they compete horizontally to sell wireless services and a broad array of wireless devices, including basic mobile phones, smartphones (e.g., Android phones, BlackBerry phones, the Apple iPhone), tablets (e.g., the Samsung Galaxy Tab, the BlackBerry PlayBook, the Apple iPad), and other products that access their voice and data networks.*fn15 In addition to competing horizontally in the output market, the carriers compete horizontally in the input market, as purchasers of wireless devices: they attempt to secure the most desirable devices for their respective networks so they can sell them to customers. The carriers also compete horizontally as ...