The four major US wireless operators have been handed a legal defeat by the US Court of Appeals for the Seventh Circuit, which ruled in favor of a lower district court decision allowing a class action lawsuit against the companies’ text messaging services to proceed. The complaint, filed originally with the U.S. District Court for the Northern District of Illinois, alleges that Verizon Wireless, AT&T Mobility, T-Mobile USA, and Sprint Nextel have colluded since 2005 to fix industry-wide pricing in the market for text message services. Noting that text message prices prior to 2005 ranged anywhere from five cents to fifteen cents depending on the carrier, the class action plaintiffs claim that the four carriers agreed to set a common price of ten cents per message that year. The rate was later increased to 20-cents per message across the board. (At the same time, statistics show that text message transmission costs declined industry-wide by 65%.) Adding that the carriers’ membership in wireless association CTIA and in the Wireless Internet Caucus (WIC) leadership council provided them with the opportunity to engage in collusive behavior, the plaintiffs told the court: “it is implausible to think that each defendant was able to independently arrive at the same exact price increase to the same exact penny within similar timeframes considering the extensive exchanges of information engaged in by the defendants pertinent to messaging revenue, billing and delivery.” While admitting that the case lacks a “smoking gun,” Seventh Circuit Judge Richard A. Posner disagreed with the carriers’ argument that the circumstantial evidence presented by the class action litigants is insufficient under the standards set by the U.S. Supreme Court in Bell Atlantic Corp. v. Twombly. Observing that, like Twombly, the case at hand concerns “parallel behavior” and “alleges facts that are equally consistent with an inference that the defendants are conspiring and an inference that the conditions of their market have enabled them to avoid competing without having to agree not to compete,” Posner decreed that the class action complaint “alleges a conspiracy with sufficient plausibility to satisfy the pleading standard of Twombly.” As such, Posner concluded that the district court “was right to rule that the . . . complaint provides a sufficiently plausible case of price fixing to warrant allowing the plaintiffs to proceed to discovery.” A spokeswoman for the class action litigants applauded the ruling as “significant” and as one that “will help keep the courthouse doors open to plaintiffs in well founded antitrust and other federal suits.”
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Appeals court allows class action suit on text message rates to proceed
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