Source: https://www.law.cornell.edu/supct/html/02-682.ZO.html
Timestamp: 2019-04-22 08:20:19+00:00

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305 F.3d 89, reversed and remanded.
The Telecommunications Act of 1996, Pub. L. 104104, 110 Stat. 56, imposes certain duties upon incumbent local telephone companies in order to facilitate market entry by competitors, and establishes a complex regime for monitoring and enforcement. In this case we consider whether a complaint alleging breach of the incumbents duty under the 1996 Act to share its network with competitors states a claim under §2 of the Sherman Act, 26 Stat. 209.
Petitioner Verizon Communications Inc. is the incumbent local exchange carrier (LEC) serving New York State.	Before the 1996 Act, Verizon,1 like other incumbent LECs, enjoyed an exclusive franchise within its local service area. The 1996 Act sought to uproo[t] the incumbent LECs monopoly and to introduce competition in its place. Verizon Communications Inc. v. FCC, 535 U.S. 467, 488 (2002). Central to the scheme of the Act is the incumbent LECs obligation under 47 U.S.C. § 251(c) to share its network with competitors, see AT&T Corp. v. Iowa Utilities Bd., 525 U.S. 366, 371 (1999), including provision of access to individual elements of the network on an unbundled basis. §251(c)(3). New entrants, so-called competitive LECs, resell these unbundled network elements (UNEs), recombined with each other or with elements belonging to the LECs.
Verizon, like other incumbent LECs, has taken two significant steps within the Acts framework in the direction of increased competition. First, Verizon has signed interconnection agreements with rivals such as AT&T, as it is obliged to do under §252, detailing the terms on which it will make its network elements available. (Because Verizon and AT&T could not agree upon terms, the open issues were subjected to compulsory arbitration under §§252(b) and (c).) In 1997, the state regulator, New Yorks Public Service Commission (PSC), approved Verizons interconnection agreement with AT&T.
Second, Verizon has taken advantage of the opportunity provided by the 1996 Act for incumbent LECs to enter the long-distance market (from which they had long been excluded). That required Verizon to satisfy, among other things, a 14-item checklist of statutory requirements, which includes compliance with the Acts network-sharing duties. §§271(d)(3)(A) and (c)(2)(B). Checklist item two, for example, includes nondiscriminatory access to network elements in accordance with the requirements of §251(c)(3). §271(c)(2)(B)(ii). Whereas the state regulator approves an interconnection agreement, for long-distance approval the incumbent LEC applies to the Federal Communications Commission (FCC). In December 1999, the FCC approved Verizons §271 application for New York.
Part of Verizons UNE obligation under §251(c)(3) is the provision of access to operations support systems (OSS), a set of systems used by incumbent LECs to provide services to customers and ensure quality. Verizons interconnection agreement and long-distance authorization each specified the mechanics by which its OSS obligation would be met. As relevant here, a competitive LEC sends orders for service through an electronic interface with Verizons ordering system, and as Verizon completes certain steps in filling the order, it sends confirmation back through the same interface. Without OSS access a rival cannot fill its customers orders.
tronic Ordering Systems in New York (June 20, 2000), http://www.fcc.gov/eb/News_Releases/bellatlet.html (all Internet materials as visited Dec. 12, 2003, and available in the Clerk of Courts case file).	The next month the PSC relieved Verizon of the heightened reporting requirement. Order Addressing OSS Issues, MCI Worldcom, Inc. v. Bell Atlantic-New York, Nos. 00C0008, 00C0009, 99C0949, 2000 WL 1531916 (N. Y. PSC, July 27, 2000).
, and has systematically failed to inform [competitive LECs] of the status of their customers orders. Id., at 39, ¶21. The complaint set forth a single example of the alleged failure to provide adequate access to [competitive LECs], namely the OSS failure that resulted in the FCC consent decree and PSC orders. Id., at 40, ¶22. It asserted that the result of Verizons improper behavior with respect to providing access to its local loop was to deter potential customers [of rivals] from switching. Id., at 47, ¶57, 35, ¶2. The complaint sought damages and injunctive relief for violation of §2 of the Sherman Act, 15 U.S.C. § 2 pursuant to the remedy provisions of §§4 and 16 of the Clayton Act, 38 Stat. 731, as amended, 15 U.S.C. § 15 26. The complaint also alleged violations of the 1996 Act, §202(a) of the Communications Act of 1934, 48 Stat. 1064, as amended, 47 U.S.C. § 151 et seq., and state law.
The District Court dismissed the complaint in its entirety. As to the antitrust portion, it concluded that respondents allegations of deficient assistance to rivals failed to satisfy the requirements of §2. The Court of Appeals for the Second Circuit reinstated the complaint in part, including the antitrust claim.	305 F.3d 89, 113 (2002). We granted certiorari, limited to the question whether the Court of Appeals erred in reversing the District Courts dismissal of respondents antitrust claims. 538 U.S. 905 (2003).
To decide this case, we must first determine what effect (if any) the 1996 Act has upon the application of traditional antitrust principles. The Act imposes a large number of duties upon incumbent LECsabove and beyond those basic responsibilities it imposes upon all carriers, such as assuring number portability and providing access to rights-of-way, see 47 U.S.C. § 251(b)(2), (4). Under the sharing duties of §251(c), incumbent LECs are required to offer three kinds of access. Already noted, and perhaps most intrusive, is the duty to offer access to UNEs on just, reasonable, and nondiscriminatory terms, §251(c)(3), a phrase that the FCC has interpreted to mean a price reflecting long-run incremental cost. See Verizon Communications Inc. v. FCC, 535 U.S., at 495496.	A rival can interconnect its own facilities with those of the incumbent LEC, or it can simply purchase services at wholesale from the incumbent and resell them to consumers. See §§251(c)(2), (4). The Act also imposes upon incumbents the duty to allow physical collocationthat is, to permit a competitor to locate and install its equipment on the incumbents premiseswhich makes feasible interconnection and access to UNEs. See §251(c)(6).
That Congress created these duties, however, does not automatically lead to the conclusion that they can be enforced by means of an antitrust claim. Indeed, a detailed regulatory scheme such as that created by the 1996 Act ordinarily raises the question whether the regulated entities are not shielded from antitrust scrutiny altogether by the doctrine of implied immunity. See, e.g., United States v. National Assn. of Securities Dealers, Inc., 422 U.S. 694 (1975); Gordon v. New York Stock Exchange, Inc., 422 U.S. 659 (1975). In some respects the enforcement scheme set up by the 1996 Act is a good candidate for implication of antitrust immunity, to avoid the real possibility of judgments conflicting with the agencys regulatory scheme that might be voiced by courts exercising jurisdiction under the antitrust laws. United States v. National Assn. of Securities Dealers, Inc., supra, at 734.
Congress, however, precluded that interpretation. Section 601(b)(1) of the 1996 Act is an antitrust-specific saving clause providing that nothing in this Act or the amendments made by this Act shall be construed to modify, impair, or supersede the applicability of any of the antitrust laws. 110 Stat. 143, 47 U.S.C. § 152 note. This bars a finding of implied immunity. As the FCC has put the point, the saving clause preserves those claims that satisfy established antitrust standards. Brief for United States and the Federal Communications Commission as Amici Curiae Supporting Neither Party in No. 027057, Covad Communications Co. v. Bell Atlantic Corp. (CADC), p. 8.
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; that would be equally inconsistent with the saving clauses mandate that nothing in the Act modify, impair, or supersede the applicability of the antitrust laws. We turn, then, to whether the activity of which respondent complains violates preexisting antitrust standards.
The complaint alleges that Verizon denied interconnection services to rivals in order to limit entry.	If that allegation states an antitrust claim at all, it does so under §2 of the Sherman Act, 15 U.S.C. § 2 which declares that a firm shall not monopolize or attempt to monopolize. Ibid. It is settled law that this offense requires, in addition to the possession of monopoly power in the relevant market, the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident. United States v. Grinnell Corp., 384 U.S. 563, 570571 (1966). The mere possession of monopoly power, and the concomitant charging of monopoly prices, is not only not unlawful; it is an important element of the free-market system. The opportunity to charge monopoly pricesat least for a short periodis what attracts business acumen in the first place; it induces risk taking that produces innovation and economic growth. To safeguard the incentive to innovate, the possession of monopoly power will not be found unlawful unless it is accompanied by an element of anticompetitive conduct.
Firms may acquire monopoly power by establishing an infrastructure that renders them uniquely suited to serve their customers. Compelling such firms to share the source of their advantage is in some tension with the underlying purpose of antitrust law, since it may lessen the incentive for the monopolist, the rival, or both to invest in those economically beneficial facilities. Enforced sharing also requires antitrust courts to act as central planners, identifying the proper price, quantity, and other terms of dealinga role for which they are ill-suited. Moreover, compelling negotiation between competitors may facilitate the supreme evil of antitrust: collusion. Thus, as a general matter, the Sherman Act does not restrict the long recognized right of [a] trader or manufacturer engaged in an entirely private business, freely to exercise his own independent discretion as to parties with whom he will deal. United States v. Colgate & Co., 250 U.S. 300, 307 (1919).
However, [t]he high value that we have placed on the right to refuse to deal with other firms does not mean that the right is unqualified. Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585, 601 (1985). Under certain circumstances, a refusal to cooperate with rivals can constitute anticompetitive conduct and violate §2. We have been very cautious in recognizing such exceptions, because of the uncertain virtue of forced sharing and the difficulty of identifying and remedying anticompetitive conduct by a single firm. The question before us today is whether the allegations of respondents complaint fit within existing exceptions or provide a basis, under traditional antitrust principles, for recognizing a new one.
over the long run by harming its smaller competitor. Id., at 608.
Aspen Skiing is at or near the outer boundary of §2 liability. The Court there found significance in the defendants decision to cease participation in a cooperative venture. See id., at 608, 610611. The unilateral termination of a voluntary (and thus presumably profitable) course of dealing suggested a willingness to forsake short-term profits to achieve an anticompetitive end. Ibid. Similarly, the defendants unwillingness to renew the ticket even if compensated at retail price revealed a distinctly anticompetitive bent.
The refusal to deal alleged in the present case does not fit within the limited exception recognized in Aspen Skiing. The complaint does not allege that Verizon voluntarily engaged in a course of dealing with its rivals, or would ever have done so absent statutory compulsion. Here, therefore, the defendants prior conduct sheds no light upon the motivation of its refusal to dealupon whether its regulatory lapses were prompted not by competitive zeal but by anticompetitive malice. The contrast between the cases is heightened by the difference in pricing behavior. In Aspen Skiing, the defendant turned down a proposal to sell at its own retail price, suggesting a calculation that its future monopoly retail price would be higher. Verizons reluctance to interconnect at the cost-based rate of compensation available under §251(c)(3) tells us nothing about dreams of monopoly.
be denied where a state or federal agency has effective power to compel sharing and to regulate its scope and terms. P. Areeda & H. Hovenkamp, Antitrust Law, p. 150, ¶773e (2003 Supp.). Respondent believes that the existence of sharing duties under the 1996 Act supports its case. We think the opposite: The 1996 Acts extensive provision for access makes it unnecessary to impose a judicial doctrine of forced access. To the extent respondents essential facilities argument is distinct from its general §2 argument, we reject it.
Finally, we do not believe that traditional antitrust principles justify adding the present case to the few existing exceptions from the proposition that there is no duty to aid competitors. Antitrust analysis must always be attuned to the particular structure and circumstances of the industry at issue. Part of that attention to economic context is an awareness of the significance of regulation. As we have noted, careful account must be taken of the pervasive federal and state regulation characteristic of the industry. United States v. Citizens & Southern Nat. Bank, 422 U.S. 86, 91 (1975); see also IA P. Areeda & H. Hovenkamp, Antitrust Law, p. 12, ¶240c3 (2d ed. 2000). [A]ntitrust analysis must sensitively recognize and reflect the distinctive economic and legal setting of the regulated industry to which it applies. Concord v. Boston Edison Co., 915 F.2d 17, 22 (CA1 1990) (Breyer, C. J.) (internal quotation marks omitted).
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, and it will be less plausible that the antitrust laws contemplate such additional scrutiny. Where, by contrast, [t]here is nothing built into the regulatory scheme which performs the antitrust function, Silver v. New York Stock Exchange, 373 U.S. 341, 358 (1963), the benefits of antitrust are worth its sometimes considerable disadvantages. Just as regulatory context may in other cases serve as a basis for implied immunity, see, e.g., United States v. National Assn. of Securities Dealers, Inc., 422 U.S., at 730735, it may also be a consideration in deciding whether to recognize an expansion of the contours of §2.
The FCCs §271 authorization order for Verizon to provide long-distance service in New York discussed at great length Verizons commitments to provide access to UNEs, including the provision of OSS. In re Application by Bell Atlantic New York for Authorization Under Section 271 of the Communications Act To Provide In-Region, InterLATA Service in the State of New York, 15 FCC Rcd. 3953, 39894077, ¶¶82228 (1999) (Memorandum Opinion and Order) (hereinafter In re Application). Those commitments are enforceable by the FCC through continuing oversight; a failure to meet an authorization condition can result in an order that the deficiency be corrected, in the imposition of penalties, or in the suspension or revocation of long-distance approval. See 47 U.S.C. § 271(d)(6)(A). Verizon also subjected itself to oversight by the PSC under a so-called Performance Assurance Plan (PAP). See In re New York Telephone Co., 197 P. U. R. 4th 266, 280281 (N. Y. PSC, 1999) (Order Adopting the Amended PAP) (hereinafter PAP Order). The PAP, which by its terms became binding upon FCC approval, provides specific financial penalties in the event of Verizons failure to achieve detailed performance requirements. The FCC described Verizons having entered into a PAP as a significant factor in its §271 authorization, because that provided a strong financial incentive for post-entry compliance with the section 271 checklist, and prevented   backsliding.  In re Application 39583959, ¶¶8, 12.
The regulatory response to the OSS failure complained of in respondents suit provides a vivid example of how the regulatory regime operates. 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 §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 found Verizon in violation of the PAP even earlier, and 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. Under the best of circumstances, applying the requirements of §2 can be difficult because the means of illicit exclusion, like the means of legitimate competition, are myriad. United States v. Microsoft Corp., 253 F.3d 34, 58 (CADC 2001) (en banc) (per curiam). Mistaken inferences and the resulting false condemnations are especially costly, because they chill the very conduct the antitrust laws are designed to protect.	Matsushita Elec. Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 594 (1986). The cost of false positives counsels against an undue expansion of §2 liability. One false-positive risk is that an incumbent LECs failure to provide a service with sufficient alacrity might have nothing to do with exclusion. Allegations of violations of §251(c)(3) duties are difficult for antitrust courts to evaluate, not only because they are highly technical, but also because they are likely to be extremely numerous, given the incessant, complex, and constantly changing interaction of competitive and incumbent LECs implementing the sharing and interconnection obligations. Amici States have filed a brief asserting that competitive LECs are threatened with death by a thousand cuts, Brief for New York et al. as Amici Curiae 10 (internal quotation marks omitted)the identification of which would surely be a daunting task for a generalist antitrust court. Judicial oversight under the Sherman Act would seem destined to distort investment and lead to a new layer of interminable litigation, atop the variety of litigation routes already available to and actively pursued by competitive LECs.
1. In 1996, NYNEX was the incumbent LEC for New York State. NYNEX subsequently merged with Bell Atlantic Corporation, and the merged entity retained the Bell Atlantic name; a further merger produced Verizon. We use Verizon to refer to NYNEX and Bell Atlantic as well.
2. Order Directing Improvements To Wholesale Service Performance, MCI Worldcom, Inc. v. Bell Atlantic-New York, Nos. 00C0008, 00C0009, 2000 WL 363378 (N. Y. PSC, Feb. 11, 2000); Order Directing Market Adjustments and Amending Performance Assurance Plan, MCI Worldcom, Inc. v. Bell Atlantic-New York, Nos. 00C0008, 00C0009, 99C0949, 2000 WL 517633 (N. Y. PSC, Mar. 23, 2000); Order Addressing OSS Issues, MCI Worldcom, Inc. v. Bell Atlantic-New York, Nos. 00C0008, 00C0009, 99C0949, 2000 WL 1531916 (N. Y. PSC, July 27, 2000); In re Bell Atlantic-New York Authorization Under Section 271 of the Communications Act to Provide In-Region, InterLATA Service In the State of New York, 15 FCC Rcd. 5413 (2000) (Order); id., at 5415 (Consent Decree).
3. Respondent also relies upon United States v. Terminal Railroad Assn. of St. Louis, 224 U.S. 383 (1912), and Associated Press v. United States, 326 U.S. 1 (1945). These cases involved concerted action, which presents greater anticompetitive concerns and is amenable to a remedy that does not require judicial estimation of free-market forces: simply requiring that the outsider be granted nondiscriminatory admission to the club.
4. The Court of Appeals also thought that respondents complaint might state a claim under a monopoly leveraging theory (a theory barely discussed by respondent, see Brief for Respondent 24, n. 10). We disagree. To the extent the Court of Appeals dispensed with a requirement that there be a dangerous probability of success in monopolizing a second market, it erred, Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447, 459 (1993). In any event, leveraging presupposes anticompetitive conduct, which in this case could only be the refusal-to-deal claim we have rejected.
5. Our disposition makes it unnecessary to consider petitioners alternative contention that respondent lacks antitrust standing. See Steel Co. v. Citizens for Better Environment, 523 U.S. 83, 97, and n. 2 (1998); National Railroad Passenger Corporation v. National Assn. of Railroad Passengers, 414 U.S. 453, 456 (1974).

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