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Loyola University Chicago

Institute for Consumer Antitrust Studies

School of Law

The Next Big Thing in Antitrust

 

THE NEXT BIG THING IN ANTITRUST

 
Spencer Weber Waller
Professor and Director
Institute for Consumer Antitrust Studies
Loyola University Chicago School of Law

Although the Supreme Court has not taken many important antitrust cases in recent years, this is all about to change. The circuit courts are split as to the extremely important issue of the relationship between the antitrust laws and the 1996 Telecommunications Act. What has emerged is a series of cases in which consumers or competitors have challenged the behavior of incumbent telephone companies which allegedly have delayed or defeated new competition through illegal means. In case after case, the incumbent monopolist allegedly has frustrated new entry by either refusing to fully interconnect with the new competitor or discriminating in various ways against the new entrant (and its customers). The courts then wrestle with the issue of whether the Telecommunications Act provides the sole administrative remedies for the alleged violations or whether the antitrust laws also apply with their separate treble damage and injunctive remedies. This is an important and difficult issue because the Telecommunications Act imposed new duties on incumbent telephone companies not previously required under the antitrust laws and created an elaborate series of administrative rights and remedies for violations without explicitly addressing what additional remedies would be available under the antitrust laws.

The issue was first raised in the Goldwasser case in the 7th Circuit in 2000.1 Goldwasser was a consumer class action alleging that Ameritech had violated some 20 different provisions of the 1996 Telecommunications Act which delayed or blocked new entry in local phone service in a five state area. The complaint alleged that these regulatory violations constituted unlawful monopolization under Section 2 of the Sherman Act.

Goldwasser held that merely alleging a violation of the Telecommunication Act was not sufficient to state a claim under the Sherman and Clayton Act. As Goldwasser itself noted, merely alleging that a defendant with monopoly power violated the Food & Drug Act, the employment discrimination statutes, or health and safety regulations does not automatically equate with an antitrust violation.2 Fair enough. It is hard to argue that a monopolist violates the antitrust laws automatically when its employees violate some statutory duty. A monopolization claim normally involves the allegation and proof that the defendant acquired or maintained its monopoly power through exclusionary or predatory means, something other than competition on the merits.

In Goldwasser it was debatable whether the plaintiffs did allege the traditional elements of a monopolization claim beyond just violations of the regulatory provisions of the 1996 Act. Without having perused the record, it appears the plaintiffs at least alleged that the regulatory violations were part of a larger plan to unlawfully monopolize the local phone market and that the defendant engaged in the denial of an essential facility (access to the local loop) which is a traditional antitrust violation separate from any accompanying regulatory violation. The Seventh Circuit itself affirmed liability on such an essential facilities theory against a background of violations of earlier regulatory schemes more than twenty years ago in the MCI case.3

The real problem with Goldwasser comes in some of broader language that suggests that a violation of the Telecommunications Act can never be an antitrust violation. In one place, Goldwasser states: "The 1996 Act is, in short, more specific legislation that must take precedence over the general antitrust laws, where the two are covering precisely the same field."4 Later cases has seized on this language and held that a violation of the Telecommunications Act can never be part of an antitrust violation no matter how the complaint otherwise alleges the elements of monopolization or attempted monopolization.

This is plainly just wrong. "Never" is never the right answer. The 1996 Telecommunications Act is replete with statutory references and legislative history setting forth its intent to introduce competition in the telecommunications market. Moreover, the Act contains an antitrust savings clause which specifically preserves the application of the antitrust laws neither enlarging it nor diminishing its role in comparison to pre-1996.

More recently, the tide had turned. Both the Second Circuit and the Eleventh Circuit have held that suits by competitors and consumers may precede where they allege more than just a regulatory violation and otherwise include all the traditional elements of an antitrust violation.5 Most observers believe the Supreme Court will take certiorari on one of these cases or one of the series of cases which will follow in the next few months. Let's hope if the Court does, that it reaches the conclusion supported by history and common sense that implied immunities to the antitrust laws are disfavored; Congress affirmatively preserved the role of antitrust in telecommunications; and where competition has failed, a plaintiff may proceed where it can allege the traditional elements of an antitrust violation. Nothing in the 1996 Telecommunications Act calls for any different result.

The promise of competition in local telephone service is still largely unfulfilled. Without a vigorous application of the antitrust laws, the competition that Congress intended will have frustrated, not just by recalcitrant incumbent monopolists, but by the courts themselves.


ENDNOTES

    Goldwasser v. Ameritech Corp., 222 F.3d 390 (7th Cir. 2000).

    Id. at 400.

    MCI Telecommunications Corp. v. AT&T Corp., 708 F.2d 1081
    (7th Cir.), cert.denied, 464 U.S. 891 (1983).

    222 F.3d at 401.

    Law Offices of Curtis V. Trinko v. Bell Atlantic Corp., 305 F.3d 89
    (2nd Cir. 2002); Covad Communications Co. v. Bellsouth Corp.,
    299 F.3d 1272 (11th Cir. 2002).

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