United States: Circuit Split Exists on Antitrust Immunity Issue

A recent decision by the Court of Appeals for the Second Circuit has created uncertainty about an important antitrust doctrine and could open the door to antitrust litigation against incumbent local phone companies ("ILECs").

The case is Law Offices of Curtis V. Trinko v. Bell Atlantic Corp., Docket No. 01-7746, June 20, 2002. The appeal stemmed from a class action brought on behalf of a class made up of local phone service customers who received their service from competitive local exchange carriers (CLECs) rather than from the incumbent carrier, Bell Atlantic (which is now Verizon). In other words, the class was composed of customers of Bell Atlantic’s competitors. The plaintiff, a firm that received its local phone service from AT&T, claimed that it was damaged as a result of Bell Atlantic allegedly failing to provide CLECs equal access to its network. Among other claims, the plaintiff alleged violations of both the Communications Act and Section 2 (monopolies) of the Sherman Act.

In reversing the District Court’s dismissal of the antitrust claim, the Second Circuit rejected the notion that the 1996 Act provided "implicit immunity" from antitrust litigation. While noting that it is well within the province of Congress to provide statutory immunity from the antitrust laws, the Court found no such immunity present in the 1996 Act. Said, the Court:

In other words, the Second Circuit drew a distinction between suits brought under the antitrust laws and those brought under the 1996 Telecommunications Act, rejecting the "...theory that specific legislation meant to encourage competition necessarily takes precedence over the general antitrust laws."

Thus, while a plaintiff could not bring an antitrust claim merely by alleging that the carrier had violated the interconnection provisions of the Telecommunications Act, 47 U.S.C. 251, "there is no requirement that an allegation that otherwise states an antitrust claim must not rely on allegations that might also state a claim under another statute."

Applying that principle, the Court noted that the plaintiff’s complaint may have successfully described conduct that would support an antitrust claim under such theories as the essential facilities doctrine or monopoly leveraging—even though some of "...this conduct might also violate section 251."

The decision departed abruptly from the Seventh Circuit’s ruling in Goldwasser v. Ameritech, 222 F.3d 390 (7^th Cir. 2000). In that case, the Court held that because the 1996 Telecommunications Act mandated affirmative obligations on incumbent carriers, the Act took precedence over the general antitrust laws. The Court focused on the fact that the Act’s local competition provisions imposed "more specific and far reaching" obligations than those contained in the antitrust laws—which, unlike the Act, do not require monopolists to affirmatively help their competitors. Further, the Court specifically rejected a claim based on the essential facilities doctrine—finding such a claim "inextricably linked" to claims under the 1996 Act.

The Trinko decision applies to suits brought by consumers. It is unclear whether it would apply to lawsuits brought by CLECs against ILECs. And the Court noted in a footnote that it did not decide that issue. Indeed, in rejecting Goldwasser, the court focused on the consumer-protection aspects of the antitrust laws: "Because this plaintiff has no remedy under the Telecommunications Act for a violation of subsections (b) and (c) of section 251 .... the antitrust laws are the only place it has a remedy for damage caused by the allegedly anti-competitive behavior described in the amended complaint."

Trinko also seems to distinguish between suits seeking damages and those seeking injunctive relief. While not deciding the issue, it indicated that suits seeking injunctive relief might prove more troublesome in terms of conflicts with the Telecommunications Act. And the court expressed the hope that courts will exercise restraint because of the "strong possibility that injunctive relief could have the unintended consequence of disrupting the regulatory scheme."

The Court’s call for "particular judicial restraint" may be a bit of wishful thinking. It is far from clear whether courts can be counted upon to exercise such restraint. What is clear, however, is that the Second Circuit’s recent decision has created a split among the Circuits that will probably need to be resolved by the Supreme Court.