In the past few weeks there has been much discussion about the recently concluded term of the U.S. Supreme Court and the judge nominated to be the next justice on the high court. Most discussion about the Court's recent term has neglected discussion of its most consequential case for telecommunications and broadband policy: AT&T v. linkLine Communications. A few important implications of the linkLine case worthy of note come to mind.
One might say that the linkLine ruling was especially important because of what the Supreme Court didn't do: open the door to a potentially vast array of new antitrust claims against industries regulated by the FCC. In linkLine, the Court declined to recognize new antitrust legal liabilities for telecommunications companies based on interconnection mandates derived from telecommunications law and FCC regulation. Instead, the Court made clear that antitrust law—in this case, Section 2 of the Sherman Act—forms the basis for antitrust causes of action. In particular, the Court refused to recognize a Section 2 "price-squeeze" claim against AT&T where merger conditions approved by the FCC require AT&T to provide wholesale DSL transport to competitors at a price no greater than AT&T's own retail price for customers. Since AT&T's obligations did not arise under antitrust standards, the Court rejected any antitrust claims in the case.
What the Supreme Court did do in linkLine was re-emphasize that antitrust statutes create antitrust liability, not telecommunications statutes. Significantly, the Court's linkLine ruling reaffirms and extends Verizon Communications v. Law Office of Curtis V. Trinko (2004). In Trinko, the Court held that the Telecom Act of 1996 did not create antitrust claims that go beyond existing antitrust standards. More specifically, the Court in Trinko also held that a complaint alleging breach of an incumbent LEC's duty under the Telecom Act of 1996 Act to share its network with competitors does not state a claim under Section 2 of the Sherman Act. In linkLine, the Court concluded that the Trinko's rationale applied to and thereby precluded the "prize squeeze" claim at issue in the case.
By refusing to entertain a "price squeeze" claim where no duty-to-deal (at the wholesale level) or predatory pricing (at the retail level) exists, the Supreme Court implicitly reaffirmed its commitment to a consumer welfare model for antitrust. In an amicus curiae brief submitted to the Supreme Court in linkLine, several law and economics scholars offered some crucial insights:
It is not possible to advocate consumer welfare with an antitrust rule that punishes a firm for failing to ensure its competitors' profitability. If linkLine stands, the lower courts will have put antitrust at war with itself to a degree not witnessed since the years before the Court’s conscious decision, three decades or more ago, to infuse antitrust law with greater economic rigor so that it might better advance consumer welfare.
The alternative to consumer-welfare maximization is the view that antitrust law is simply one more tool of industrial policy, and thus its application may permissibly compromise consumer welfare to advance the welfare of competitors.
Consistent with the latter concern expressed by the law and economics scholars, in linkLine the Supreme Court's expressly recognized the severe limitations of antitrust as an ongoing regulatory device. Echoing Trinko, the Court reiterated that it is "ill suited 'to act as a central planners identifying proper price, quantity and other terms of dealing.'"
In sum, the Court's refusal to read antitrust into telecommunications law staves off a tidal wave of new telecommunications regulation by litigation. The Court's reaffirmation of a consumer welfare model for antitrust, and its recognition that antitrust is not regulatory hook and apparatus for the judicial branch to set public policy provide an important backdrop that the new Administration must keep in mind as it contemplates carrying out its antitrust enforcement responsibilities. Any kind of ramped up antitrust enforcement efforts could only succeed by meeting the antitrust standards developed over the past few decades—standards that embody a more rigorous economic analysis tied to the advancement of consumer welfare.