SUPREME COURT REVERSES TRINKO RULING ON NETWORK SHARING
The U.S. Supreme Court overturned a lower court ruling that had subjected the Telecom Act’s network-sharing requirements to enforcement through antitrust law. In a unanimous decision Tues. written by Justice Antonin Scalia, the court said the Telecom Act actually was “more ambitious than the antitrust laws” because it attempted to eliminate monopolies rather than “merely to prevent unlawful monopolization” as called for in the Sherman Antitrust Act. Scalia said the court had found no “implied immunity” from antitrust enforcement in the Act but “just as the 1996 Act preserves claims that satisfy existing antitrust standards, it does not create new claims that go beyond existing antitrust standards.”
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Justice John Stevens, joined by Justices David Souter and Clarence Thomas, concurred in the decision, saying the plaintiff, a N.Y. law firm, didn’t have standing in the first place. “I would not go beyond the first step in this case,” Stevens wrote. He said the suit should have been brought by AT&T or another CLEC. “AT&T, as the direct victim of Verizon’s alleged misconduct, is in a far better position than [Trinko] to vindicate the public interest in enforcement of the antitrust laws,” Stevens said.
The case involved a suit by the Law Offices of Curtis Trinko against Verizon. Trinko had alleged Verizon’s lack of proper service to AT&T, Trinko’s service provider, had harmed the law firm’s business. The 2nd U.S. Appeals Court, N.Y., ruled in favor of Trinko, a decision that placed it in conflict with an earlier decision 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. More than 30 other suits raising antitrust questions on how well the Bells had met their requirements under the Telecom Act were pending in federal dist. courts throughout the country, and challenges to 3 appeals court decisions had been pending at the Supreme Court while it weighed the Trinko case.
“This is a good day,” Verizon Senior Vp John Thorne said. He said the ruling reinforced Verizon’s “good record” of meeting the Telecom Act’s requirements of sharing facilities with rivals: “We're very proud of our performance under the ‘96 act.” SBC Gen. Counsel James Ellis praised the court “for striking the right balance” between antitrust laws and “the unique regulatory obligations imposed by the 1996 Telecom Act.” He said “instead of having to divert financial and human resources defending ourselves against frivolous lawsuits, SBC can go about its business of accelerating the deployment of innovative technologies.”
ALTS Gen. Counsel Jonathan Askin said the decision “makes it that much more difficult for competitors to obtain access to the local loop and directly conflicts with Congress’s intent to ensure that the antitrust laws apply to the local telecom marketplace.” He said ALTS would seek congressional action to “clarify when antitrust laws apply” to Bell actions. CompTel/Ascent Alliance CEO Russell Frisby said the competitive association was “disappointed” but didn’t think the ruling would “foreclose the ability of competitive service providers to pursue antitrust actions against the Bell companies, though under narrower circumstances than we believe warranted.” Added Frisby: “We warn the Bells to not interpret this decision as a license to continue providing inferior, uneconomically priced wholesale services in an effort to squeeze competitors out of the market.”
Rep. Conyers (D-Mich.), ranking minority member of the Judiciary Committee, said he was “disheartened” by the Supreme Court decision, saying it “dealt a serious blow to competition in the telecommunications industry.” Conyers said he, then-Chmn. Henry Hyde (R-Ill.) and other members of the Judiciary Committee “spent countless hours drafting the 1996 Telecommunications Act to preserve a role for the Department of Justice in enforcing the antitrust laws of this industry.”
House Commerce Committee Chmn. Tauzin (R-La.) said he hoped the decision would “put an end to frivolous lawsuits seeking to delay full implementation of the [Telecom Act].” He said the Act “established a very comprehensive regime” for Bell sharing of facilities: “As the Supreme Court recognized, while the Act does not provide an implied immunity from the antitrust laws, the Act also does not expand the antitrust laws and the grounds upon which an antitrust suit can succeed.”
Scalia said Verizon’s “alleged insufficient assistance in the provision of service to rivals is not a recognized antitrust claim under this court’s existing refusal-to-deal precedents.” In addition, he said, “we do not believe that traditional antitrust principles justify adding the present case to the few exceptions from the proposition that there is no duty to aid competitors.” He added: “One factor of particular importance is the existence of a regulatory structure designed to deter and remedy anticompetitive harm. Where such a structure exists, the additional benefit to competition provided by antitrust enforcement will tend to be small.”
Scalia said “the regulatory response” to the failure of Verizon’s operations support systems (OSS) -- the event that triggered Trinko’s problem -- offered “a vivid example” of the ability of “the regulatory regime” to take action when Bell misbehavior was alleged: “When several competitive LECs complained about deficiencies in Verizon’s servicing of orders, the FCC and PSC responded. The FCC soon concluded that Verizon was in breach of its sharing duties under Sec. 251(c), imposed a substantial fine and set up sophisticated measurements to gauge remediation, with weekly reporting requirements and specific penalties for failure. The PSC… imposed additional financial penalties and measurements with daily reporting requirements. In short, the regime was an effective steward of the antitrust function… Against the slight benefits of antitrust intervention here, we must weigh a realistic assessment of its costs.”
TIA said it was pleased with the ruling because it had become concerned about “the ‘essential facilities’ and ‘monopoly leveraging’ principles announced by the [2nd Circuit] and immediately embraced in more than a dozen copycat cases in other circuits.” TIA said it feared application of those antitrust principles “would chill investment” by Bells and CLECs. The court rejected arguments that antitrust remedies were needed to assure access to facilities considered essential and to deter the Bells from using their monopoly power to limit entry.