Major wireless carriers named in class action over text messaging fees

Steve Gonzalez Oct. 16, 2008, 9:00am

A class action suit filed against every major wireless telephone provider alleges conspiracy to fix, raise, maintain, or stabilize prices of text messaging services sold in the United States.

Matthew R. Bakay filed suit in the Southern District of Illinois on Oct. 6 against AT&T Inc., AT&T Mobility L.L.C., Sprint Nextel Corporation, Verizon Wireless, Verizon Communications, Inc., Vodafone Group PLC, T-Mobile International AG, and T-Mobile USA, Inc., on behalf of all individuals and entities that purchased text messaging services directly from the defendants.

Bakay claims he and class members paid artificially inflated prices for text messaging services causing them to suffer antitrust injuries to their business or property.

He brings the suit under Sections 4 and 16 of the Clayton Act, 15 U.S.C. §§ 15 and 26, to recover treble damages and costs of suit, including reasonable attorneys' fees.

Bakay is represented by Paul Weiss of Chicago, Richard Burke of St. Louis and Kevin Hoerner of Belleville.

According to the complaint, text messaging allows users to communicate without using their mobile phone plan minutes and without logging on to their electronic mail providers making it a widely used form of communications.

"Indeed, according to some estimates, twice as many people use text messaging as those who use electronic mail," the complaint states.

Bakay alleges the market for wireless services in the United States has grown highly concentrated which "facilitates pricing coordination and enables cartel members to monitor the pricing of other cartel members."

According to Bakay, costs to the cellular phone provider associated with transmitting text messages, which are generally small files, are minimal and have not increased appreciably since 2005.

"Increases in the prices for text messaging services charged by Defendants are therefore not justified by increases in the costs associated with providing those services, and are more likely the product of collusion among Defendants," the complaint states.

According to the complaint, wireless subscribers paid more for the text messaging services they purchased than they would have paid under conditions of free and open competition.

"Defendants, through various devices and techniques of secrecy, affirmatively and fraudulently concealed the existence of the unlawful combination, contract, agreement, and conspiracy," the complaint states.

Bakay seeks to certify a class of "all individuals or entities (excluding governmental entities, Defendants, Defendants' co-conspirators, other sellers of text messaging services, and the present and former parents, predecessors, subsidiaries and affiliates of the foregoing) who purchased text messaging services in the United States directly from any of Defendants or their co-conspirators, or any present or former parent, subsidiary, or affiliate thereof, at any time during the period from January 1, 2005 until the present."

Bakay claims the size and geographic locations of the class which is in the tens of thousands makes joinder impracticable.

Bakay argues his claims give rise to questions of law or fact common to the class including:

  • Whether Defendants engaged in a combination or conspiracy among themselves to fix, raise, maintain, and/or stabilize the prices of text messaging services;

  • The identity of the participants in the conspiracy;

  • The duration of the conspiracy;

  • The nature and character of the conduct by Defendants and their co-conspirators in furtherance of the conspiracy;

  • Whether the alleged conspiracy was in violation of Section 1 of the Sherman Act;

  • Whether the conduct of Defendants and their co-conspirators caused injury to the business and property of the class;

  • The effect of Defendants conspiracy on the prices of text messaging services sold in the United States during the class period; and

  • The appropriate measure of damages sustained by class members.

    Bakay is seeking an order certifying the case as a class action and a judgment in favor of the class members for three times the amount of damages sustained, costs of the suit and attorneys fees.

    The case was originally assigned to District Judge Michael Reagan, however, he recused himself and the case was randomly assigned to District Judge William Stiehl who also recused himself on Oct. 15.

    The case is now assigned to J. Phil Gilbert in Benton.

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