Dr. Axel Spies

USA: Telecom Act verdrängt nicht allgemeines Kartellrecht

On June 20, 2002 the United States Court of Appeals for the Second Circuit in New York revived a class action antitrust lawsuit brought by customers of a competitive carriers ("CLECs"), addressing a problem that is virulent in other countries as well.

This is the first Appeals Court decision to confirm that the 1996 U.S. Telecommunications Act did not displace the application of the antitrust laws to local telephony, a conclusion called into question by the earlier Seventh Circuit decision in Goldwasser v. Ameritech (http://www.ca7.uscourts.gov/op3.fwx?yr=98&num=1439&Submit1=Request+Opinion). Antitrust litigation remains a potent weapon for CLECs harmed by anti-competitive actions of incumbents ("ILECs").

The Plaintiff bought its local phone service from AT&T and claimed that Verizon's refusal to provide AT&T with "equal access" had left it with a choice between accepting inferior service or transferring its business to the incumbent Verizon. This conduct, plaintiff alleged, violated both the 1996 Act and the antitrust laws. The trial court dismissed the action. It characterized the claims as merely stating violation of the 1996 Act. Citing the Goldwasser decision, the trial court held that such allegations did not state an antitrust claim.

The 2nd Circuit Court reversed. The antitrust portion of its opinion, presaged by the brief on behalf of the CLEC counterclaimant in Ohio Bell v. CoreComm now pending in federal court in Ohio, pointedly distinguished the holding of Goldwasser and rejected broader dicta that appeared to preclude virtually all CLEC interconnection claims against ILECs. The Second Circuit thereby clarified what had become a point of confusion in several lower court decisions. It rejected the notion that the Telecom Act had displaced the antitrust laws in markets for local telephone services. The Goldwasser decision, although often misinterpreted, stands for the narrow proposition that an allegation of violations of the 1996 Act does not, in and of itself, state a claim under the antitrust laws because the 1996 Act, in many respects, imposes obligations on ILECs beyond those imposed by the antitrust laws. The 2nd Circuit easily distinguished Goldwasser on this point, holding that the plaintiff had stated an antitrust claim under "a number of theories," including monopoly leveraging and the essential facilities doctrine.

The Goldwasser decision also went beyond its holding and stated, in dicta, that allegations that an ILEC refused to interconnect to a CLEC on reasonable terms were "inextricably linked" to the Telecom Act and therefore could not state an antitrust claim. In contrast, the 2nd Circuit held that an allegation's viability under another law had no bearing on whether it also stated an antitrust claim.

The 2nd Circuit Court held that the only relevant issue posed by the Telecom Act is whether it impliedly repeals the antitrust laws with respect to local telephone service. The court concluded that because there is no "plain repugnancy" between the antitrust and telecom statutes, there is no implied repeal. Indeed, the Court of Appeals found, the fact that the same conduct might violate both statutes shows that the two are "in synch."

The Goldwasser court also suggested that the antitrust laws "add nothing" to the regulatory scheme erected by the Telecom Act. Rejecting this as well, the 2nd Circuit noted that the consumer plaintiff had no remedy under the Telecom Act, despite allegedly having suffered antitrust injury from the incumbent's anticompetitive conduct in a market where it was a customer.

ILECs have already emphasized the conflict between the two Courts of Appeals opinions, perhaps in an effort to pave the way for Supreme Court review of the new decision. They have also highlighted a footnote in the 2nd Circuit opinion that distinguishes antitrust actions brought by competitors. That footnote merely leaves for another day the argument that allowing a CLEC to pursue an antitrust claim about violation of its interconnection agreement could enable it to "avoid the regulatory process." The footnote, however, simply makes the point that some different considerations may apply in those cases. Nothing in the decision suggests that the 2nd Circuit would dismiss an antitrust case brought by a CLEC under appropriate circumstances. And the court's rejection of the notion of potential conflict between the two laws applies equally to customer and competitor suits.

The new "Trinko" decision will be scrutinized by courts hearing the numerous pending CLEC antitrust cases. Trinko may also generate some additional suits by CLEC plaintiffs who have been deterred from filing until now by Goldwasser. Verizon may seek "en banc" reconsideration and/or review by the U.S. Supreme Court. Whether the high court would take the case is less clear. Appeals of similar cases are pending in three other circuits, and the Supreme Court might prefer to have the benefit of their decisions before addressing these issues.

Decision: Law Offices of Curtis v. Trinko, L.L.P.: http://csmail.law.pace.edu/lawlib/legal/us-legal/judiciary/second-circuit/test3/01-7746.opn.html.

RA Dr. Axel Spies, Swidler, Berlin, Shereff, Friedman, LLP. Washington DC.

MMR 2002, Heft 8, XVIII