Tuesday, January 13, 2004 - The Progress & Freedom Foundation Blog

Verizon v. Trinko: The Limits of Antitrust

When I first wrote an essay on Verizon v. Trinko, I kept wondering - with all these interesting issues, which ones will the Court actually decide? Today's answer: Almost all. More important, it got them right.

The case arose in the shadow of the 1996 Telecommunications Act, which requires that Baby Bells like Verizon provide a variety of services to competing companies (CLECs) at regulated prices. CLECs and retail customers (like Trinko) have supplemented the regulatory remedies by filing treble damage antitrust actions against Baby Bells, alleging that deficiencies in performing these obligations constituted illegal refusals to deal with a competitor. The petition raised diverse questions - standards for monopolist's conduct, the interplay between the antitrust and the 1996 Act, and even plaintiff's standing to sue.

Trinko represented the Court's first opportunity to address these issues, and it found for Verizon on nearly every ground. First, the Court (per Justice Scalia) found that 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." It explained that duties to deal with competitors should be "exceptions" adopted "very cautious[ly]," since they can interfere with procompetitive conduct and are difficult for courts to administer. (This treatment was somewhat reminiscent of the Court's approach to predatory pricing claims.)

Second, the Court emphasized that the 1996 Telecommunications Act is "much more ambitious than the antitrust laws" in seeking "to eliminate ... monopolies." The Act and its implementing regulations therefore greatly reduced the potential for antitrust harm. The majority also cited the difficulties that a court would face in evaluating behavior and implementing remedies in this dynamic marketplace. And three more justices separately concurred, arguing that Trinko lacked standing to sue under the antitrust laws.

Teasing out implications for Section 2 analysis will keep scholars busy. But of more immediate interest is how this will affect the resolution of the various sister cases that have been awaiting this decision. Here the implications seem doubly clear. The Court refused to extend liability for refusals to deal to cover the alleged activity citing both substantive antitrust doctrine and the existence of a "more ambitious" regulatory system. Most importantly, it made this determination "on the pleadings," permitting dismissal without costly discovery. Plaintiffs are likely to be hard pressed to maintain antitrust actions under these standards.

posted by @ 3:27 PM | General