Source: http://www.leagle.com/decision/2004938540US398_1928/VERIZON%20COMMUNICATIONS%20INC.%20v.%20LAW%20OFFICES%20OF%20TRINKO
Timestamp: 2017-06-27 07:10:32
Document Index: 762965235

Matched Legal Cases: ['§ 251', '§ 251', '§ 2', '§ 2', '§ 2', '§ 2', '§ 251', '§ 2', '§ 2', '§ 2', '§ 251', '§ 251', '§ 4', '§ 4', '§ 4']

VERIZON COMMUNICATIONS INC. v. LAW OFFICES OF TRINKO | 540 U.S. 398 (2004) | Leagle.com
540 U.S. 398 (2004)
VERIZON COMMUNICATIONS INC. v. LAW OFFICES OF TRINKO
Citing Case 540 U.S. 398 (2004)
SCALIA, J., delivered the opinion of the Court, in which REHNQUIST, C. J., and O'CONNOR, KENNEDY, GINSBURG, and BREYER, JJ., joined. STEVENS, J., filed an opinion concurring in the judgment, in which SOUTER and THOMAS, JJ., joined, p. 416.
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.
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).
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.
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.
The specific nature of what the 1996 Act compels makes this case different from Aspen Skiing in a more fundamental way. In Aspen Skiing, what the defendant refused to provide to its competitor was a product that it already sold at retail—to oversimplify slightly, lift tickets representing a bundle of services to skiers. Similarly, in Otter Tail Power Co. v. United States, 410 U.S. 366 (1973), another case relied upon by respondent, the defendant was already in the business of providing a service to certain customers (power transmission over its network), and refused to provide the same service to certain other customers. Id., at 370-371, 377-378. In the present case, by contrast, the services allegedly withheld are not otherwise marketed or available to the public. The sharing obligation imposed by the 1996 Act created "something brand new"—"the wholesale market for leasing network elements." Verizon Communications Inc. v. FCC, 535 U. S., at 528. The unbundled elements offered pursuant to § 251(c)(3) exist only deep within the bowels of Verizon; they are brought out on compulsion of the 1996 Act and offered not to consumers but to rivals, and at considerable expense and effort. New systems must be designed and implemented simply to make that access possible—indeed, it is the failure of one of those systems that prompted the present complaint.3
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.
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.
Even if the problem of false positives did not exist, conduct consisting of anticompetitive violations of § 251 may be, as we have concluded with respect to above-cost predatory pricing schemes, "beyond the practical ability of a judicial tribunal to control." Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 223 (1993). Effective remediation of violations of regulatory sharing requirements will ordinarily require continuing supervision of a highly detailed decree. We think that Professor Areeda got it exactly right: "No court should impose a duty to deal that it cannot explain or adequately and reasonably supervise. The problem should be deemed irremedia[ble] by antitrust law when compulsory access requires the court to assume the day-to-day controls characteristic of a regulatory agency." Areeda, 58 Antitrust L. J., at 853. In this case, respondent has requested an equitable decree to "[p]reliminarily and permanently enjoi[n] [Verizon] from providing access to the local loop market . . . to [rivals] on terms and conditions that are not as favorable" as those that Verizon enjoys. App. 49-50. An antitrust court is unlikely to be an effective day-to-day enforcer of these detailed sharing obligations.4
The 1996 Act is, in an important respect, much more ambitious than the antitrust laws. It attempts "to eliminate the monopolies enjoyed by the inheritors of AT&T's local franchises." Verizon Communications Inc. v. FCC, 535 U. S., at 476 (emphasis added). Section 2 of the Sherman Act, by contrast, seeks merely to prevent unlawful monopolization. It would be a serious mistake to conflate the two goals. The Sherman Act is indeed the "Magna Carta of free enterprise," United States v. Topco Associates, Inc., 405 U.S. 596, 610 (1972), but it does not give judges carte blanche to insist that a monopolist alter its way of doing business whenever some other approach might yield greater competition. We conclude that respondent's complaint fails to state a claim under the Sherman Act.5
Respondent would unquestionably be such a "person" if we interpreted the text of the statute literally. But we have eschewed a literal reading of § 4, particularly in cases in which there is only an indirect relationship between the defendant's alleged misconduct and the plaintiff's asserted injury. Associated Gen. Contractors of Cal., Inc. v. Carpenters, 459 U.S. 519, 529-535 (1983). In such cases, "the importance of avoiding either the risk of duplicate recoveries on the one hand, or the danger of complex apportionment of damages on the other," weighs heavily against a literal reading of § 4. Id., at 543-544. Our interpretation of § 4 has thus adhered to Justice Holmes' observation that the "general tendency of the law, in regard to damages at least, is not to go beyond the first step." Southern Pacific Co. v. Darnell-Taenzer Lumber Co., 245 U.S. 531, 533 (1918).
I would not go beyond the first step in this case. Although respondent contends that its injuries were, like the plaintiff's injuries in Blue Shield of Va. v. McCready, 457 U.S. 465, 479 (1982), "the very means by which . . . [Verizon] sought to achieve its illegal ends," it remains the case that whatever antitrust injury respondent suffered because of Verizon's conduct was purely derivative of the injury that AT&T suffered. And for that reason, respondent's suit, unlike McCready, runs both the risk of duplicative recoveries and the danger of complex apportionment of damages. The task of determining the monetary value of the harm caused to respondent by AT&T's inferior service, the portion of that harm attributable to Verizon's misconduct, whether all or just some of such possible misconduct was prohibited by the Sherman Act, and what offset, if any, should be allowed to make room for a recovery that would make AT&T whole, is certain to be daunting. AT&T, as the direct victim of Verizon's alleged misconduct, is in a far better position than respondent to vindicate the public interest in enforcement of the antitrust laws. Denying a remedy to AT&T's customer is not likely to leave a significant antitrust violation undetected or unremedied, and will serve the strong interest "in keeping the scope of complex antitrust trials within judicially manageable limits." Associated Gen. Contractors, 459 U. S., at 543.
FootNotes * Briefs of amici curiae urging reversal were filed for the Commonwealth of Virginia et al. by Jerry W. Kilgore, Attorney General of Virginia, William H. Hurd, State Solicitor, Maureen Riley Matsen and William E. Thro, Deputy State Solicitors, Judith Williams Jagdmann, Deputy Attorney General, C. Meade Browder, Jr., Senior Assistant Attorney General, and Sarah Oxenham Allen and Raymond L. Doggett, Jr., Assistant Attorneys General, and by the Attorneys General for their respective States as follows: William H. Pryor, Jr., of Alabama, M. Jane Brady of Delaware, Steve Carter of Indiana, Jon Bruning of Nebraska, Peter W. Heed of New Hampshire, W. A. Drew Edmondson of Oklahoma, and Mark L. Shurtleff of Utah; for BellSouth Corp. et al. by Stephen M. Shapiro, John E. Muench, Jeffrey W. Sarles, Marc Gary, Marc W. F. Galonsky, and William M. Schur; for the Communications Workers of America by Patrick M. Scanlon, Andrew D. Roth, and Laurence Gold; for the Telecommunications Industry Association by Donald I. Baker; for United Parcel Service, Inc., et al. by Drew S. Days III, W. Stephen Smith, Beth S. Brinkmann, Paul T. Friedman, and Peter M. Kreindler; for the United States Telecom Association by William T. Lake, James F. Rill, James W. Olson, and Michael T. McMenamin; and for the Washington Legal Foundation by Steven G. Bradbury, Daniel J. Popeo, and David A. Price.
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).
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).