Supreme Court Set to Decide on Review of Antitrust Ruling

The U.S. Supreme Court is expected to decide soon whether or not to review an appeals court ruling that already has paved the way for widespread antitrust litigation against the Baby Bells.

The nation’s highest court, which is inundated with thousands of petitions every year to review appellate court decisions, could decide as early as Friday whether to review the case, a lawyer involved in the case said.

In June the U.S. Court of Appeals for the Second Circuit recognized the right of competitive phone companies and consumers to sue the incumbent operators for antitrust damages, diverging from a former appeals court ruling in the Seventh Circuit.

Verizon Communications Inc., the country’s largest local phone company, has filed for an appeal to the Supreme Court in the potentially precedent-setting case, Bell Atlantic vs. Trinko.

During the past few years judges throughout the country have tossed out antitrust suits filed against the Bells, citing an appeals court ruling, Goldwasser vs. Ameritech, that found plaintiffs could not litigate an antitrust suit based on their allegations.

John Thorne, senior vice president and deputy general counsel of Verizon, said the Seventh Circuit ruled the incumbent operators are under no duty “to affirmatively assist our rivals.”

“I believe there would be no antitrust obligation to help our rivals in the ways these people have ever questioned because the antitrust laws just don’t require that,” Thorne said.

Moreover, if the government already has enacted a host of regulations under the Telecommunications Act of 1996, “There is no need to extend antitrust to duplicate what the regulators are already doing,” Thorne said.

Antitrust statutes are designed to block monopolistic behavior and attempts at such behavior, and the Justice Department and the Federal Trade Commission have the government authority to investigate antitrust violations.

The Bells have settled a few antitrust suits, though the terms of the settlement agreements have not been disclosed and they were not large enough to lead to major changes in alleged anticompetitive behavior, according to Glenn Stover, senior counsel, Hanson Bridgett Marcus Vlahos & Rudy.

However, Roy Katriel, of The Katriel Law Firm, said Pacific Bell settled an antitrust case with Covad Communications Co. for hundreds of millions of dollars, although the actual terms of the settlement agreement were not disclosed.

Furthermore, the Trinko case has emboldened antitrust lawyers, resulting in dozens of antitrust cases against the Bells in the last six months. Verizon’s Thorne said he has counted more than 30 cases.

Katriel is litigating a class action antitrust suit, which was filed three years ago, against Pacific Bell on behalf of 700,000 DSL subscribers. The lawyer charges that Pac Bell thwarted broadband competition, resulting in higher prices to consumers than if free market prices had prevailed.

In an interview last week, Stover said competitive phone companies must unite and pull their resources together if they hope to win a huge antitrust suit against the Bells.

“It would require a $1 billion judgment or something in that range to convince the Bells” to change their behavior, the attorney said.

But Rebecca Dick, a senior attorney at Swidler Berlin and a former director of Civil Non-Merger Enforcement in the Antitrust Division of the Justice Department, said a number of small cases “should cause them [Bells] to modify their behavior going forward.”

“You shouldn’t underestimate the influence of a lot of little cases,” she said.

Katriel said the outcome of his class action antitrust suit, if successful, could make a difference. Plaintiffs can recover triple damages in an antitrust case.

“Naturally we believe our case given its merits and the number of subscribers involved has the potential to make a meaningful difference,” he said, though he declined to discuss the amount of any damages that could be recovered. 

Katriel also said it would be difficult to certify a class action suit against the Bells on behalf of competitive phone operators because there is a view among courts that the companies have conflicting interests.

Even if the courts were to accept such a case, it could take years and years to litigate – and a mountain of money. In 1974 the Justice Department filed its antitrust suit against AT&T Corp., alleging anticompetitive behavior stemming from an original case MCI filed against old Ma Bell. The settlement was not reached until 1982, but it resulted in the divestiture of the Bell system.

Michael Pelcovits, principal of Microeconomic Consulting & Research Associates, said some state regulators have discussed the possibility of splitting up parts of the Bells into separate subsidiaries, dividing the competitive parts of the business from the areas much harder to replicate, such as the control and operation of the local loop.

But one lawyer said producing such a result would not be simply a matter of rounding up a bundle of cash and attorneys: the amount of evidence would be a key component of a successful case, and plaintiffs could not justify wrongdoing in one Bell territory, such as Verizon’s, based on evidence in another region, such as SBC’s, the attorney said.

“I think it’s very unlikely that a state commission which has the interest of its consumers at heart or a judge . would do something that would so disrupt the business as to try to separate it into more pieces," Verizon’s Thorne said.

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