(CN) – The U.S. Supreme Court on Wednesday unanimously rejected an antitrust lawsuit accusing AT&T of predatory price-squeezing in the DSL market. The justices backed the Department of Justice’s view that AT&T had no duty to deal with independent service providers, a position the Federal Trade Commission opposed.
In 2003, linkLine Communications sued AT&T for allegedly charging independent Internet service providers (ISPs) wholesale prices that were so high that the ISPs couldn’t compete with AT&T’s retail prices. Competitors said they were 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 wanted AT&T to deal on their terms. The department said AT&T had no antitrust duty to provide wholesale services in the first place.
The FTC, however, argued on linkLine’s behalf, stating 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.”
The high court sided with the DOJ and AT&T, saying AT&T can’t be sued for price-squeezing when it had no duty to deal with linkLine and other ISPs.
The ruling reverses a 2007 9th Circuit holding that linkLine’s price-squeezing claims against AT&T were viable under federal antitrust law.
The 9th Circuit’s dissent, written by Judge Gould, argued that linkLine’s complaint never met the predatory pricing requirements set by the Supreme Court in Brooke Group v. Brown & Williamson Tobacco Corp.
The plaintiffs later agreed that their price-squeeze claims must meet the Brooke Group requirements, and urged the high court to vacate the 9th Circuit’s ruling and remand, so they could amend their complaint to allege a Brooke Group claim.
“In other words,” Chief Justice Roberts wrote, “plaintiffs are no longer pleased with their initial theory of the case, and ask for a mulligan to try again under a different theory.”
But the high court refused to dismiss the case as moot, saying “it is not clear that the plaintiffs have unequivocally abandoned their price-squeeze claims.”
Roberts then rejected the idea that AT&T had to abide by the ISPs terms.
“If AT&T had simply stopped providing DSL transport service to the plaintiffs, it would not have run afoul of the Sherman Act. Under these circumstances, AT&T was not required to offer this service at the wholesale prices the plaintiffs would have preferred.”
Justice Breyer wrote a concurring opinion, joined by Justices Stevens, Souter and Ginsburg.