U.S. High Court Rules in Favor of Verizon
Local telephone companies may have to share their lines with competitors, but antitrust laws don’t force them to bend over backward to help rivals serve their customers, the U.S. Supreme Court ruled Tuesday.
The court rejected a customer’s complaint that Verizon Communications Inc. was furthering its monopoly in local service by failing to help AT&T; Corp. deliver service on Verizon lines. The customer, a lawyer in New York, can’t sue under antitrust laws just because Verizon violated the federal Telecommunications Act of 1996, the court said.
That decision could lead lower courts to throw out most of the nearly three dozen antitrust lawsuits filed against Verizon, SBC Communications Inc. and other Baby Bells, said John Thorne, Verizon’s deputy general counsel. Verizon faces 13 such suits and SBC 15.
The high court justices ruled that the 1996 telecommunications law, intended to break up local phone monopolies and promote competition, didn’t give Verizon, SBC and other Bells immunity from conventional antitrust actions, as some Bell lawyers had argued.
New York-based Verizon is the nation’s largest local phone company. In California, it is second to SBC, serving many of the coastal communities in Southern California.
Both companies have argued vociferously that the rates they can charge competitors to rent their lines and equipment are too low.
Under the 1996 law, the Bells had to open their markets to competition and lease their equipment to rivals to get approval to offer long distance. In exchange for allowing rivals on their lines, the Bells were permitted to sell long-distance service.
James D. Ellis, general counsel for SBC, California’s dominant local carrier, said the decision freed the company from “frivolous lawsuits” and allowed it to focus more on new products.
Organizations representing consumers and competitors were disappointed.
“It will make the process of deciding to bring a case quite a bit more challenging,” said Michael McNeely, a lawyer for Consumers Union, which supported the customer who filed the complaint, Curtis V. Trinko. “It ups that ante on what you have to prove.”
Jonathan Askin of the Assn. for Local Telecommunications Services said the local loop to homes was an “essential facility,” and that without fair access to it, “the Bell cartel will always be able to wield monopoly control.”
“In our view, the decision is not surprising,” said James Kirkland, general counsel for DSL provider Covad Communications Group Inc., which filed a brief supporting Trinko.
Kirkland said the decision shouldn’t affect two antitrust suits that Covad has filed, alleging that Verizon and BellSouth Corp. illegally furthered their monopoly positions in digital subscriber line service. Those actions, he said, are based on conventional antitrust rules.
Trinko declined to comment on the decision, and his lawyer was unavailable.
Trinko’s law firm was an AT&T; customer, receiving service on lines AT&T; leased from Verizon. Trinko claimed that Verizon discriminated against AT&T; customers by providing them worse service than it provided to its own customers.
He claimed this violated both the 1996 act and the Sherman Antitrust Act of 1890, which prohibits monopolies from aggressively defending their monopoly positions.
A federal district court ruled that Trinko had no grounds to sue because he wasn’t a direct customer of Verizon.
A U.S. 2nd Circuit Court of Appeals panel reinstated the Sherman Act claims. Verizon appealed to the Supreme Court.
Verizon’s alleged failure to provide AT&T; adequate access to its lines may be a violation of the 1996 telecom law, Justice Antonin Scalia wrote for the majority Tuesday, but that doesn’t mean that Verizon broke antitrust laws.
Just as “the 1996 act preserves claims that satisfy existing antitrust standards, it does not create new claims that go beyond existing antitrust standards,” Scalia wrote.
Having a monopoly isn’t unlawful “unless it is accompanied by an element of anticompetitive conduct.”
In this case, he said in the majority opinion, there was no evidence showing Verizon’s motivation was to further its monopoly position.
Trinko’s complaint led to investigations by the Federal Communications Commission and the New York Public Services Commission, the high court opinion noted. In the federal case, Verizon paid a $3-million fine. In the state case, it made a $10-million payment.
