Court will review antitrust suit against AT&T (June 23, 2008)

The Supreme Court has agreed to decide whether a company not obligated under antitrust law to sell to others at wholesale prices can be held liable for variations in its wholesale and retail price levels.

In 2003, several Internet service providers, including Linkline Communications Inc., filed suit against Pacific Bell Telephone Co., contending that the AT&T unit monopolized and attempted to monopolize the relevant DSL Internet services market, in violation of Section 2 of the Sherman Act, by, among other things, “creat[ing] a price squeeze by charging ISPs a high wholesale price in relation to the price at which defendants were providing retail services.”

Pacific Bell asked the U.S. District Court for the Central District of California to dismiss the case on the grounds that the U.S. Supreme Court’s 2004 decision in Verizon Comms. Inc. v. Law Offices of Curtis V. Trinko compelled judgment in its favor.

The district court denied that motion, holding that “because a price-squeeze claim is actionable under existing antitrust standards, and because the Ninth Circuit has upheld the viability of price-squeeze claims in the context of highly regulated industries, Trinko does not bar Plaintiffs’ price-squeeze claim.”

In September 2007, a three-judge panel on the United States Court of Appeals for the Ninth Circuit affirmed the district court ruling.

“Based on the record before us at this time, we are able to conclude that the district court was correct to deny the SBC Entities’ motion for judgment on the pleadings because linkLine’s allegation that the pricing scheme created an anticompetitive price squeeze states a potentially valid claim under § 2 of the Sherman Act.”

On June 23, 2008, the U.S. Supreme Court accepted the case for review.

Siding with AT&T in its appeal, the Solicitor General’s office argued that Section 2 of act does not permit the type of “price-squeeze” claim at issue in the case, and that the ruling below is contrary to Trinko.

In an unusual move, the Federal Trade Commission did not join the Justice Department in asking the court to review the case. In a brief, the FTC explained that it did not believe the case is “worthy of review at this time.”

“The holding of the Ninth Circuit is unquestionably correct, and indeed merely echoes what other courts of appeals have held on the narrow issue presented to the court below: that claims of a predatory price squeeze in a partially regulated industry remain viable after Trinko.”

Question presented: Whether Section 2 of the Sherman Antitrust Act permits a “price squeeze” claim if the defendant has no duty to deal.