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A federal judge has refused to dismiss a class action lawsuit accusing the nation’s four largest wireless providers of conspiring to fix prices for text messages. The ruling is a significant victory for cell phone consumers as a similar antitrust class action was dismissed last year.
The text message class action lawsuit accuses Verizon Wireless, AT&T Inc., Sprint Nextel Corp. and T-Mobile USA of conspiring to set prices at 10 cents a message, then colluding to increase text message prices by 5 cent increments to 20 cents a message.
The double price increase — which occurred over a nearly three-year period — caught the eye of Congress in 2008 and prompted Sen. Herb Kohl, chairman of the Antitrust Subcommittee in the Senate Judiciary Committee, to send a letter to the big four wireless providers to demand they account for the dramatic price increase for text messages.
“Some industry experts contend that these increased rates do not appear to be justified by any increases in the costs associated with text messaging services, but may instead be a reflection of a decrease in competition, and an increase in market power, among your four companies,” Kohl said in the letter.
“Will consumers continue to see similar price increases for this and many other wireless services that they have come to increasingly depend on, such as Internet connections and basic voice service?” he asked.
Of course, AT&T, Verizon, Sprint and T-Mobile deny they colluded to increase text message pricing, insisting that text-by-text pricing plans are such a minute part of their businesses that any attempt to do so would be pointless. Cell phone users are rarely pay-per-use customers (they comprise less than 1-percent of Verizon’s customers, according to Verizon’s executive vice president), and instead prefer to purchase bundled plans that include unlimited text messages or 200 text messages a month for $5, for example.
The cell phone carriers succeeded in having a prior text message price-fixing class action dropped in December 2009, but the attorney representing the plaintiffs was allowed to refile the case after she found information that a trade association, of which all four wireless providers were members, had held committee discussions on text-message prices.
A status hearing on the new text message price-fixing class action lawsuit will be held May 18.
Updated January 6th, 2010
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