Supreme Court Sides with AT&T in ‘Price Squeeze’ Case
AT&T didn’t violate antitrust laws when it set DSL prices high at wholesale and low at retail, the Supreme Court ruled Wednesday. The court reversed an appeals-court decision allowing a “price squeeze” claim against the carrier. Chief Justice John Roberts wrote the unanimous decision in Pacific Bell v. LinkLine. Justices John Stevens, David Souter and Ruth Ginsburg signed on to a concurrence by Stephen Breyer that differed narrowly with Roberts’ opinion.
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LinkLine and other Internet access providers sued the Pacific Bell unit of SBC, now part of AT&T, alleging that it tried to use the tactic to reduce DSL competition. Two federal courts said the price-squeeze allegations made a claim under section 2 of the Sherman Act -- despite a 2004 Supreme Court ruling in Verizon v. Trinko that Telecom Act network-sharing requirements can’t be enforced through antitrust law (CD Dec 9 p1).
The Supreme Court ruled in this case that a “price squeeze” doesn’t violate the Sherman Act if it’s done by a vertically integrated company that’s highly regulated at the wholesale level and has no antitrust duty to deal with competitors. “If there is no duty to deal at the wholesale level and no predatory pricing at the retail level, then a firm is certainly not required to price both of these services in a manner that preserves its rivals’ profit margins,” the ruling said. LinkLine “tried to join a wholesale claim that cannot succeed with a retail claim that cannot succeed, and alchemize them into a new form of antitrust liability never before recognized by this Court,” the court said. “We decline the invitation to recognize such claims. Two wrong claims do not make one that is right.”
The Supreme Court based its decision in part on Trinko, though that case didn’t involve a price-squeezing claim. “The reasoning of Trinko applies with equal force to price- squeeze claims,” the court said, because AT&T could have squeezed rivals’ profits “just as effectively by providing poor-quality interconnection service, as Verizon allegedly did in Trinko.”
AT&T applauded the decision. “We highly value our ISP customers, and believe we operated, and continue to operate, properly and fairly in setting wholesale and retail prices,” a company spokesman said.