Explore the intricacies of customer disclosures in M&A transactions through a case study of a 2013 acquisition in Maryland’s cellular phone market. Learn from the pitfalls of insufficient transparency and the legal consequences that followed. Gain insights into FCC approval processes and the importance of communicating post-closing alterations to customers.
M&A Stories
December 29, 2023
In the realm of mergers and acquisitions, it is essential to recognize the obligation to inform customers about planned post-closing alterations that might impact them. A case in point revolves around a 2013 acquisition involving a target and buyer in Maryland’s cellular phone market.
Both entities, specializing in cellular phones and services, operated on distinct networks—the target on CDMA and the buyer on GSM and LTE. The buyer’s acquisition plan, announced on July 12, 2013, entailed continuing the operation of non-CDMA phones through their GSM network while decommissioning the target’s CDMA network.
Crucially, the plan to decommission the CDMA network was not disclosed publicly. The FCC approval process, initiated in August 2013 and finalized on March 18, 2014, saw the target continuing to sell CDMA-only phones without informing consumers of the impending changes. This lack of transparency extended to at least 50,000 phones sold before approval and an additional 1,500 post-approval.
Six years later, Maryland accused the target of deceptive trade practices, asserting insufficient disclosures regarding the CDMA network’s decommissioning. The state ordered a $3.25 million penalty and customer refunds. In the subsequent legal proceedings, the appellate court sided with Maryland.
Case Reference: In the Matter of the Petition Of Cricket Wireless, LLC, and AT&T, Inc.., No. 416, September Term, 2022 Appellate Court of Maryland (September 5, 2023).
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