The U.S. Supreme Court continued its streak of handing victories to antitrust defendants today as it dealt a death blow to "price squeeze" claims. Pacific Bell Telephone Co. v. linkLine Communications, Inc., No. 07-512 (U.S. Feb. 25, 2009).
The plaintiffs provided digital subscriber line (DSL) service at retail, But, because they didn't have their own network, they bought access to the equipment necessary to furnish the service from an outfit that did, Pacific Bell, which did business as AT&T. These networkless DSL suppliers accused AT&T of violating Sherman Act section 2, which deems unlawful any single-firm conduct that unreasonably restrains trade by monopolizing or trying to monopolize a market. They said, among other things, that AT&T "squeezed" them into penury by charging them a too-high wholesale price for network access while billing a too-low retail price to AT&T DSL customers. The poor fellows couldn't make a profit!
The 5-4 majority held that the district court and Ninth Circuit both erred in concluding that the price-squeezees stated a viable antitrust claim. "In Verizon Communications Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 410 (2004)," Chief Justice Roberts noted for the Court, "we held that a firm with no antitrust duty to deal with its rivals at all is under no obligation to provide those rivals with a 'sufficient' level of service." linkLine, slip op. at 3. As AT&T likewise lacked an "antitrust duty" to deal with plaintiffs, it could deal with him however it pleased antitrust-wise, including by charging them confiscatory prices for network access.
On the retail end of the price squeeze, the Court observed, precedents foreclosed antitrust scrutiny of low prices unless they fell below an appropriate measure of cost. Thus the Court said it said in Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 222-24 (1993). linkLine, slip op. at 4. The competing DSL merchants hadn't alleged below-cost pricing to retail customers and thus couldn't complain about that pincer of the squeezing unit either.
The majority dispatched the price squeeze theory in a few pages and might've stopped there. But it went on to share ruminations on "[i]nstitutional concerns" about courts' regulating markets and the absence of a "safe harbor" for pricing behavior of aspiring monopolists. linkLine, slip op. at 12 & 13.
Justices Breyer, Ginsburg, Souter, and Stevens concurred in the judgment only. They noted that the plaintiffs conceded error on the price squeeze claim and asked only for a remand to consider a new "predatory pricing" claim. And they criticized the majority for needlessly answering "hypothetical questions".
Blawgletter suspects that the tag line for linkLine will come on a neat three-word package: "no antitrust duty", a phrase that doesn't appear in Trinko or any other Court decision. No duty to do this, no duty to do that. And we imagine that The Current Majority will not decide a single case in which they conclude that a section 2 defendant violated any "antitrust duty" whatever.
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