FTC Refuses to Back Justice Dept. Support of AT&T Squeeze on DSL

     WASHINGTON (CN) – The Federal Trade Commission stood its ground, refusing to join the Department of Justice in urging the U.S. Supreme Court to reject claims against AT&T alleging monopoly power over the DSL market. “There is no apparent justification … for turning back 60 years of case law that embraces price-squeeze claims under the Section 2 of the Sherman Act,” the FTC said in a statement.

     The FTC acknowledged that its position signaled a break from its usual partnership with the DOJ in making Supreme Court recommendations, but maintained that the “theory of price squeeze retains a significant role against anticompetitive unilateral conduct in a case like this and should not be summarily dismissed.”
     For its part, the department filed an amicus brief strongly pressing the justices to reverse a 9th Circuit holding that linkLine’s price-squeeze claims against Pacific Bell, doing business as AT&T, were viable under federal antitrust law.
     In 2003, linkLine sued AT&T for allegedly charging independent Internet service providers (ISPs) wholesale prices that were so high that the ISPs could not compete with the prices AT&T charged consumers for retail DSL services. Competitors claim they are forced to lease wholesale “DSL transport” from AT&T, because the telecommunications giant owns most of the infrastructure required for DSL service, including local telephone lines.
     The DOJ backed AT&T’s argument that the price-squeeze claim amounts to a refusal-to-deal claim – in other words, ISPs are upset that AT&T refused to deal on their terms. The department claims AT&T had no antitrust duty to provide wholesale services in the first place.
     “A defendant that has no duty to deal with rivals by definition has no duty to deal with them on particular terms that would permit them to compete,” the amicus brief states.
     The FTC voted 3-0 not to endorse this argument, saying the 9th Circuit’s ruling was “unquestionably correct.”
     Both the FTC and the DOJ cited precedent in Anaheim v. Southern California Edison Co., issued by the 9th Circuit, and the Supreme Court’s Verizon v. Law Offices of Curtis V. Trinko LLP to support their positions.
     Despite its departure from the administration’s view, the FTC said it has frequently cooperated with the solicitor general in amicus briefs and “likely will continue to do so.”

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