SUPREME COURT DIVES INTO TRINKO ANTITRUST ISSUE
Attorneys for Verizon and a N.Y.C. law firm underwent almost continuous questioning by the U. S. Supreme Court Tues. as justices tackled the complex legal question of whether the Telecom Act’s network-sharing requirements could be enforced through antitrust law. It was hard to determine from the questioning where the justices stood but many of the questions focused on 2 issues: (1) Whether the Law Offices of Curtis Trinko had standing to sue Verizon in the first place. (2) Whether it was appropriate for “judges and juries” to settle Telecom Act disputes instead of the regulators designated by the Telecom Act’s interconnection regime.
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The oral argument began with justices frequently interrupting Verizon attorney Richard Taranto with questions about standing because the Trinko firm appeared to be an indirect customer of Verizon. Taranto told them he didn’t think Trinko had proper standing and AT&T would be a better plaintiff. However, he urged the justices to consider the merits anyway because the issue was so important. Donald Verrilli, attorney for Trinko, said on the standing question that there was precedent for such 3rd party suits.
The Trinko firm, a customer of AT&T for local phone service, filed an antitrust suit after its service was harmed as a result of AT&T’s difficulties in getting access to phone lines from Verizon. Trinko filed suit a day after Verizon entered a consent decree with the FCC that called for payment of $10 million to AT&T as a result of software problems that had contributed to the problems raised in the Trinko suit. Justice Ruth Bader-Ginsburg said she wondered whether Trinko could have had any other recourse since Verizon’s lack of service had resulted in “embarrassment and lost clients.”
The case is one of several that have been before U.S. Appeals Courts throughout the country, with differing decisions on whether a regulatory regime such as that set up by the Telecom Act also could be enforced in antitrust courts. CLECs have filed numerous antitrust suits against Bell companies seeking another route for forcing better access to incumbent facilities. In the Trinko case, the 2nd U. S. Appeals Court, N.Y., said antitrust remedies could be used to enforce the requirements of the Telecom Act. That ruling contradicted an earlier one by the 7th U.S. Appeals Court, Chicago, in Goldwasser v. Ameritech which said it wasn’t appropriate to enforce the Telecom Act in antitrust courts.
Taranto argued that allowing antitrust remedies for Telecom Act infractions would require expanding the scope of the Sherman Antitrust Act and urged the justices not to do that. The Telecom Act creates competition while the Sherman Antitrust Act protects competition that already has developed independently, he said. Taranto said the current boundaries of the Sherman Act and precedent set by the Supreme Court didn’t include situations such as the Telecom Act’s requirement for Bells to share their facilities with competitors. For example, he said, this is not a case of a company’s discriminating against a competitor by not selling the competitor something that’s sold to others. Verizon never sold its elements to others until compelled to by the Act, he said. “The question is, should the court create something new.”
In passing the Telecom Act, “Congress decided to create a new world, a regulatory scheme inhabited by experts,” regulators who, unlike “generalist judges and juries,” would make determinations not with “a sledge hammer but with a scalpel,” said Solicitor Gen. Theodore Olson, who supported the Verizon position. Olson said the Telecom Act required the affirmative action of opening of markets, which wasn’t the kind of action required under antitrust law.
Justice Stephen Breyer said he didn’t see an obvious antitrust issue between Verizon and indirect customers such as Trinko. “If Verizon went to customers [and in an attempt to undermine AT&T] said ‘you buy from us or you'll be sorry,’ then it might seem more direct antitrust action,” he said. “I don’t see that here.” Breyer said the “main obstacle in my mind” was whether questions of Telecom Act compliance were dealt with by regulators or “judges and juries throughout the country” with possibly different decisions.
There’s a “middle ground,” said Verrilli, that would see judges and juries deciding “something different -- if regulatory requirements are violated.” Chief Justice William Rehnquist asked whether that meant juries would determine compliance with the Telecom Act while Justice Antonin Scalia asked whether juries would determine whether TELRIC pricing was followed. Scalia also asked whether juries would determine if refusal to interconnect was an antitrust violation. Verrilli said it was significant that “regulators are not concerned” about such intrusions by antitrust courts. The FCC has indicated it believes its duties ought to be backed up by antitrust courts, he said.
Legg Mason analyst Blair Levin said the outcome “with the most immediate impact” would be the court’s granting the Bells a win by overturning the 2nd Circuit decision. The court also could rule a lack of standing, which would be a win for the Bells but “the question of whether they could be subject to antitrust claims from competitors would be unresolved.” A ruling against Verizon would send the case to trial, which wouldn’t necessarily mean Verizon would lose, but “it would expose the Bells to additional litigation, and if they eventually lose, to treble damages,” the analyst said.