Reply Brief — Milgo Electronic Corp. v. Western Electric Co.

ot “Wastemn. ELectaic: Company, Inc. and AMERICAN

i ane TELEPHONE & TELEGRAPH CoMPANY,

Respondents.

Reply of Petitioners to Respondents’ Statement.

‘Harorp L. JACKSON,

STANLEY R. Jones,

JACKSON & Jones Law CorpPorRATION,

_. Irvine Law Building, Suite 100,

17592 Irvine Boulevard,

Tustin, Calif. 92680,

' Attorneys for Petitioners.

~~ Wittram E. Sapowsk1,

_» . HELLIWBLL, MELRosE & DeWo r,

Ninth Floor, 1401. Brickell Avenue,

Miami, Florida 33131.

Lg a) Se eee a ee ey ois SO PRT Ye yon Wrae oem

SUBJECT INDEX

Page

Reply of Petitioners to Respondents’ Statement ...... ]

CI sielissiti Bie cie ccsnesigiecentoteatancconeribiatalenigaencobions 5

TABLE OF AUTHORITIES CITED

Cases - Page

Gordon v. New York Stock Exchange, 422 U.S.

ct, baad Ce NN METRO ACE TC OR 4

International Telephone and Telegraph Corporation

v. General Telephone & Electronics Corporation,

Civil Action No. 2754 (D. Hawaii, February 28,

+ | Geen dla datibiieastlennstiabiienaiisthandaniabneniastibinaoe ms

Macon Products Corporation v. American Tele-

phone & Telegraph Company, 359 F.Supp. 973

ae Ln pte Alea ASR ae aan :S

United States v. American Telephone & Telegraph

Company, Civil Action No. 74-1698 (D.D.C.

I, 0 NO ca ie

United States v. National Association of Securities

Dealers, 422 U.S. 694 (1975). ....:...0....cccekcecec-.ss. 4

Rules

Federal Rules of Civil Procedure, Rule 39(c) ........ 2

~

October Term, 1978

No. 78-269

MiLco ELECTRONIC CORPORATION and: INTERNATIONAL

COMMUNICATIONS CORPORATION,

e Pohl Petitioners,

Vs. : pepee iy

WESTERN ELECTRIC CoMPANY, INC. ‘and AMERICAN

TELEPHONE & TELEGRAPH CoMPANY,

Respondents. ,

Reply of Petitioners to Respondents’ Statement.

.,, Petitioners hereby reply to matters and arguments

first raised .by respondents. in response to the. petition.

Respondents ostensibly agree with the Court of Ap-

peals decision on Milgo’s petition for rehearing while

substantively failing to offer to. consent to a jury trial

on the equitable misuse issue, despite the suggestion

from the Court of. Appeals that such consent would

be an adequate safeguard of Milgo’s right to a jury

trial. Further, respondents have mischaracterized and

misapplied the cited recent district court decisions deal-

ing with antitrust immunity. Finally, respondents have

presented an incomplete picture with respect to the

district court decisions dealing with antitrust immunity

since it made no mention of Macon Products Corpora-

‘tion v. American Telephone & Telegraph Company,

359 F.Supp. 973 (C.D.Ca. 1973), or the decision

pare, Ware

in International Telephone and Telegraph Corporation

v. General Telephone & Electronics Corporation, Civil

Action No. 2754 (D. Hawaii, February 28, 1978),?

which are both very pertinent to the question of Western

Electric Company's (hereinafter Western) immunity.

In its response, respondents state that Milgo’s reason

for granting the writ based on its loss of its right

to a jury “is wholly lacking in merit” and “requires

no further discussion,” relying solely on the Court

of Appeals decision on Milgo’s petition for rehearing.

Milgo urges that such response evades the issue, particu-

larly the discussion by the Court of Appeals of possible

safeguards for Milgo’s constitutional right to a jury

trial.

The Court of Appeals stated that the trial judge

might order a jury trial on the DAA-misuse issue

with the consent of both parties, thereby clearly giving

respondents the opportunity to stipulate to a jury trial

on the DAA-misuse issue. The language of the Court

of Appeals clearly refers to Rule 39(c) of the Federal

Rules of Civil Procedure and is very similar to the

language of the rule.

However, respondents have made no effort to consent

to a jury trial on the DAA-misuse issue. In fact,

respondents have clearly indicated that no consent will

be forthcoming by their unyielding assertion of the

correctness of the decisions below, their assertion of

immunity,? and their regard om the jury trial issue

“requires no further discussion.”

"This decision is currently unreported, but is quite lengthy

and therefore, not attached.

- *%AT&T, through the reply of the Bell System respondents

in FCC Docket No. 19419, indicated at page 23 that since

the antitrust laws are not applicable in court proceedings

—3--

_ Therefore, the safeguards asserted by. the Court of

Appeals, and ostensibly adopted by respondents,.are

nc eros tne pamper

by respondents, is clearly beyond reach.

Further, respondents’ characterization of the state

of district court decisions dealing with antitrust ‘im-

munity is misleading. Contraty to respondents” asset-

tions, the decisional law most relevant to this «case

indicates that the balance tips in favor of no antitrust

immunity. Macon Products Corporation vy. American

Telephone and Telegraph Company, supra, and General

Telephone & Electronics Corporation, supra, both

held that communications common carriers are not

immune from the antitrust laws. As previously indicated,

these decisions were not mentioned by AT&T.

Moreover, the decisions relied upon by respondents

are inapposite and distinguishable. In particular such

decisions merely state conclusions of immunity without

a thorough analysis of the actual nature of the FCC

regulation and do not consider to what extent the

allegedly immune acts were required by the FCC, or

condoned by the Communications Act. Thus, such cases

failed to consider the practical nature and extent of

regulation.

However, a decision ethene to respondents in. United

States v. American Telephone & Telegraph Company,

Civil Action No. 74-1698 (D.D.C. September 11,

1978),° and therefore glossed over by pesca as

involving AT&T, the antitrust laws are not le in an

FCC proceeding. The cover sheet and page 2 of the Bell

System reply is attached as Appendix A.

*Judge Greene’s decision was entered subsequent to the

~— of the petition here involved. The cover page and. pages

© ‘Gio | 22 of Sedge Greene's decision are set forth..in

Appendix B.

a or a eS oe 4

being “erroneous”, sets forth the most cogent reasoning

of all the courts which considered whether communica-

tions common carriers are immune from the antitrust

laws. In that decision, the court set forth a thorough

analysis of the practical nature of FCC regulation,

and the relationship between such regulation and the

conduct alleged to be immune.

For example, the court stated at page 12:

~ “To carry that burden, defendants rely on the

Supreme Court decisions‘ discussed above which

found certain companies to be immune from the

antitrust laws based upon a degree of regulation

by government agencies which, as a practical mat-

ter, left them no choice but to follow the regula-

tory schemes and orders. But such regulation is

not present in this case.”

The court further stated at page 16:

“The statutory weaknesses, the sinieal ability of

the Commission to scrutinize all the tariffs sub-

mitted to it, and perhaps other factors (e.g., the

lack of adequate resources effectively to regulate

AT&T, a corporate giant), have produced the

result of a far less than pervasive or specific

regulation of the areas that are critical to this

case. In any event, whatever the reasons, it is

clear that regulation of defendants’ conduct has

not been such that this antitrust action should

disturb or interfere with it.” (Footnotes omitted.)

The rationale of the court is best summarized by refer-

ence to the court’s own words at page 19:

*The decisions referred to district court include

Gordon v. New York Stock Mi eney 422 U.S. 659 (1975),

and United States v. National Association of Securities Dealers,

422 U.S. 694 (1975).

shine

“In short, it would be a gross misconception of

the realities to equate the instant statutory scheme,

the relatively weak regulatory controls: which have

implemented that scheme, and defendants’ alleged _

activities which offend both the antitrust laws and

the regulatory purposes, with the kind of explicit

regulation endorsing industry conduct which the

Supreme Court has held in relatively few instances

to be inconsistent with antitrust enforcement.”

(Footnote omitted. )

Moreover, the court in United States v. American

Telephone and Telegraph Company, supra, recognized

the very fallacy involved in this case, namely that

Western cannot be immune since it is not regulated.

The court also pointed out that the challenged conduct

revolved around the relationship between AT&T,

Western, and Bell Labs and therefore could not be

immune.

In this case, Milgo similarly charges that the conduct

between AT&T, Western, and Bell Labs was violative of

the antitrust laws.

Conclusion.

Petitioners therefore urge that this Court issue the

requested writ as defined in the petition.

Respectfully submitted,

HAROLD L. JAcKson,

STANLEY R. Jones,

JACKSON & JoNES LAW CorPORATION,

Attorneys for Petitioners.

Co-Counsel:

WILLIAM E. SADowskKI,

HELLIWELL, MELROSE & DEWoLF.

poms eeeeeeee

APPENDIX A.

Reply of the Bell System Respondents.

Before the Federal Communications Commission,

Washington, D. C. 20554.

In the Matter of American Telephone and Telegraph

Company Long Lines Department (AT&T) Revisions

of Wide Area Telephone (WATS) Private Line Service

(PLS) Tariff F.C.C. No. 260 and The Western Union

Telegraph Company (Western Union) Revisions of

Tariff F.C.C. No. 254. Docket No. 19419.

Edgar Mayfield

Bennett Feigenbaum

William V. Catucci

Daniel P’ Behuniak

Room 3C110

Bedminster, New Jersey 07921

Alfred A. Green

195 Broadway

New York, New York 10007

Attorneys for Bell System Respondents

August 25, 1978

itil

oe, Wes

32. Thus, it is clear that what is “anticompetitive”

in the sense of unfairly or unjustifiably restricting the

competitive process depends upon what are the competi-

tive rules. In this proceeding these rules are not as

the antitrust courts conceive them for unregulated com-

panies but as the Commission has established them

for pervasively regulated telecommunications carriers.*

*The Supreme Court has recognized the inapplicability of

the antitrust laws to pervasively regulated conduct and to con-

duct which is effectively regulated under a standard which

is different from, and inconsistent with, the unidimensional com-

oo standard of the antitrust laws. See, e,g., Gordon v.

ew York Stock Exch., Inc., 422 U.S. 659 (1975); United

States v. National Ass’n of Sec. Dealers, Inc., 422 U.S. 694

(1975). And antitrust immunity has been specifically found

in several recent antitrust cases attacking the terms, implementa-

tion and enforcement of the tariffs governing interconnection

of customer-provided equipment and the requirement for pro-

tective connecting arrangements, one ge DAA’s, and also at-

tacking various pricing, marketing, and related activities of regu-

lated telecommunications carriers. See, e.g., Phonetele, Inc. v.

American Tel. & Tel. Co., 435 F. ee: 207 (C.D. Cal.

1977), appeal F neo Dasa Corp. v. General Tel. Co. of

Calif., 1977-2 Trade Cas. 4 61,610 (C.D. Cal. 1977) appeal

pending; Western Elec. Co. v. Milgo Electronic Corp., 1978-1

Trade Cas. 4 61,960 (S.D. Fla. 1976), appeal dismissed, 568

F.2d 1203 (Sth Cir. 1978); Essential Communications Sys.,

Inc. v. American Tel. & Tel. Co., 445 F. Supp. 1090 (D.N.J.

1978); Mobilfone v. Commonwealth Tel. Co., 1978-1 Trade

Cas. 4 61,873 3d Cir. 1978), aff’g 428 F. Supp. 131 (E.D.

P. 1977); Monitor Business Mach., Inc. v. -American Tel.

& Tel. Co., 1978-1 Trade Cas. | 62,030 (C.D. Cal. 1978);

Selectron, Inc. v. Pacific Northwest Bell Tel. Co., Civ. No.

76-965-BE (D. Ore., June 19, 1978). The principle that the

antitrust laws have been held inapplicable in a proceeding osten-

sibly brought under such laws make such laws a fortiori inap-

plicable to a proceeding brought under the Communications

Act.

ee

pa Wa

APPENDIX B.

Opinion.

United States District Court, for the District of Co-

lumbia.

United States of America, Plaintiff, v. American

Telephone & Telegraph Company; Western Electric

Co., Inc.; Bell Telephone Laboratories, Inc., Defend-

ants. Civil Action No. 74-1698.

Filed: Sept. 11, 1978.

The motions before the Court address the Court's

jurisdiction and they raise fundamental issues concern-

ing the discovery that should govern the future path

of this antitrust litigation. A recapitulation of the history

of this case will be helpful to an understanding of

these issues.

The complaint was filed on November 20, 1974.

It alleges violations of Section 2 of the Sherman Act,

15 U.S.C. § 2, by the American Telephone and Tele-

graph Company (AT&T),’ Western Electric Company,

*According to the government, AT&T is organized under

the laws of the State of New York, with the stock of Western

Electric, fifty per t of the stock of Bell Labs, and all

oT ed ke ae ek eee

as its principal assets. It is operati

major divisions: Long Lines and the General Departments. Long

Lines, which has a ificate of convenience and necessity

from the Federal Communications Commission, provides inter-

State telephone service, and files tariffs with the Commission

governing the terms, rates and conditions of its service. The

General Departments provide AT&T, Western Electric, Bell

Labs, and the Bell Operating Companies with various kinds

of ice and assistance. The General Departments have no

federal or state certificates of public convenience and they file

no tariffs.

an

Inc. (Western Electric),? and Bell Telephone Labora-

tories, Inc. (Bell Labs).* In sweeping language the

complaint alleges that an unlawful. combination and

conspiracy exists and has existed for many

—6—

been attempted has been the subject of intense contro-

versy.

The case was assigned to this Court on June 22,

1978. On July 6, 1978, the parties were directed

to file status memoranda on all outstanding issues,

and on August 21, 1978, argument was heard on

these matters."* While these issues arose in varying

procedural contexts, they may conveniently be discussed

under four headings: (1) jurisdiction, (2) the nature

of the plaintiff, (3) the government’s effort to secure

access to documents collected in several private antitrust

suits brought against defendants in other districts, and

(4) the future course of this action, including the

scheduling of proceedings and the authority of the

Magistrate and the Special Masters.

*Western Electric is the 12th largest individual ap yes

in the United States, with sales of over $7 billion. It owns

fifty per cent of the stock of Bell Labs, and it has at least

one wholly owned subsidiary. It is not regulated by any federal

or state regulatory authority. See pp. 12-14, infra.

*Bell Labs is owned in ge) AT&T and Western

Electric. It conducts and development, primarily for

AT&T, Western Electric, and Bell Operating Companies. Like

Western Electric, it is not regulated by any federal or state

regulatory authority. See pp. 12-14, infra.

Because of the illness and death of Judge Joseph C.

Waddy, to whom the case had originally been assigned, several

motions were reargued to this Court.

—

I

In all of their submissions to this Court, defendants

have vigorously and consistently raised the jurisdictional

issue. They insist that an irreconcilable conflict exists —

between the antitrust laws and the regulatory scheme

established by the relevant statutes,’’ that when there

is such a conflict the antitrust laws must give way,

and that therefore the Court lacks jurisdiction over

this action. While in many respects defendants’ conten-

tions constitute rearguments of matters rejected

by Judge Waddy in his order of November 24, 1976,

in view of the importance of this issue, and since

a claim of lack of jurisdiction may be raised and

entertained at any time (Rule 12(h)(3), F.R.Civ.P.),

I have independently considered the jurisdictional issues.

Upon such reconsideration, I concur with Judge Wad-

dy’s conclusion that regulation by the Federal Com-

munications Commission and state regulatory bodies

does not immunize defendants from this antitrust action.

Telecommunications carriers clearly do not enjoy

an express statutory immunity from antitrust enforce-

ment with respect to the activities here involved. While

Congress has not hesitated in so many words to exempt

the practices of other industries from the antitrust

laws,” and while it has statutorily exempted some

‘Principally the Communications Act of 1934, 47 U.S.C.

§ 151, et seq.

18E.g., insurance (McCarran-Ferguson Act, i5 U.S.C. §

1012); air transportation (Federal Aviation Act, 49 U.S.C.

§ 1384); export trade associations (Webb-Pomerene Act, 15

U.S.C. § 62); surface transportation (Reed-Bulwinkle Act of

1948, 49 U.S.C. § 56(9)).

sella

activities of telephone companies from those laws,’

it has not done so with respect to the conduct which

is the subject matter of this complaint. Likewise, defend-

ants have cited nothing in the legislative history of

the statutes regulating the telecommunications industry

which would lead to the conclusion that an antitrust

immunity was contemplated when those statutes were

enacted. Thus, if the Court lacks jurisdiction, it could

only be because defendants enjoy an immunity by

implication, resulting from an incompatibility between

the antitrust laws and the statutes which regulate the

telecommunications industry.

The problem created by the tension between the

antitrust laws and economic regulation has been long

recognized. See, e.g., United States v. Trans-Missouri

Freight Association, 166 U.S. 290 (1879); 2 A. Kahn,

The Economics of Regulation: Principles and Institu-

tions 1, 4-5 (1971). Broadly speaking the antitrust

laws are rooted in the proposition that the public

interest is best protected by competition, free from

artificial restraints such as price-fixing and monopoly.”

The theory of regulation, on the other hand, presupposes

that with respect to certain areas of economic activity

1°47 U.S.C. §§ 221(a) and 222(c)(1) exempt certain FCC-

approved consolidations and mergers of telephone companies.

The antitrust laws are a “comprehensive charter of eco-

nomic liberty” (Northern Pac. R. Co. v. United States, 356

U.S. 1, 4 (1958)) whose goals have been described in many

ways, from the advancement of consumer welfare (Bork,

The Antitrust Paradox (1978), pp. 50-66) to the more radical

objective of the diffusion of power in economic decision-making

(A. Neale, The Antitrust Laws of the USA (2d ed. 1970),

pp. 427-432; and Mr. Justice Douglas’ dissent in United States

v. Columbia Steel Co., 334 U.S. 495, 536 (1948). See also,

P. Areeda and D. Turner, Antitrust Law, vol. 1, par. 103,

et seq. (1978).

oe

the judgment of expert agencies may produce results

superior to those of the marketplace,” and that for

this reason competition in a particular industry will

not necessarily serve the public interest.” Because |

of these divergent objectives, it could be, and has

been, argued that whenever the Congress has established

a scheme of regulation through an independent com-

mission, it must be deemed to have determined that

the antitrust laws should not apply to the industry

‘thus being regulated. That, however, is not the law.

The Supreme Court has repeatedly noted that “re-

peals of the antitrust laws by implication from a regula-

tory statute are strongly disfavored, and have only

been found in cases of plain repugnancy betweei the

antitrust and regulatory provisions.” Otter Tail Power

Co. v. United States, 410 U.S. 366, 373 (1973),

quoting United States v. Philadelphia Natioral Bank,

374 U.S. 321 (1963). Accord, Federal Maritime Com-

mission v. Seatrain Lines, Inc., 411 U.S. 726, 733

(1973); Merrill Lynch, Pierce, Fenner & Smith v.

Ware, 414 U.S. 117, 126 (1973); Carnation Co. v.

Pacific Westbound Conference, et al., 383 U.S. 213,

217-8 (1966); Silver v. New York Stock Exchange,

373 U.S. 341, 357-8 (1963); United States v. Borden

Co., 508 U.S. 188, 198-9 (1939).

Regulated industries “are not per se exempt from

the Sherman Act” (Georgia v. Pennsylvania R. R.

*tHowever, regulatory agencies sometimes seek to achieve

their objectives, at least in part, through the fostering of com-

petition.

22This may be so because the market is one of natural

monopoly, in that it is incapable effectively to support more

than one firm, or because of other economic, public policy,

or political reasons.

ae

Co., 324 US. 439, 456 (1945)),™% and they are

not necessarily exempt even if the conduct complained

of in an antitrust context has been expressly approved

by the agency charged with regulating the particular

industry.

In United States v. Radio Corporation of America,

358 U.S. 334 (1959), a decision by the Federal Com-

munications Commission specifically approving an ex-

change of television stations was asserted as a defense

to an antitrust divestiture action. The Supreme Court

rejected that contention, holding, as Mr. Justice Harlan

expressed it in his concurring summary of the Court’s

decision (358 U.S..at 353), “a Commission determina-

tion of ‘public interest, convenience, and necessity’ can-

not either constitute a binding adjudication upon any

antitrust issues that may be involved in the Commis-

sion’s proceeding or serve to exempt a licensee pro

tanto from the antitrust laws. . . .”* See also Cali-

The antitrust laws apply notwithstanding regulation in such

industries as the production of natural gas (California v. Federal

Power Commission, 369 U.S. 482 (1962)); generation and

transmission of electric power (Otter Tail Power Co. v. United

States, supra); national banking (United States v. Philadelphia

National Bank, supra); securities and commodities exchanges

(Silver v. New York Stock Exchange, supra; Ricci v. Chicago

Mercantile Exchange, 409 U.S. 289 (1973)); and broadcasting

(United States v. Radio Corporation of America, 358 US.

334 (1959)).

**If the law were otherwise, the specific statutory immunity

granted, for example, to telephone companies with respect to

certain FCC-approved mergers (see Note 19, supra), would

be redundant and unnecessary. See Wilderness Society v. Morton,

156 U.S. App. D.C. 121, 479 F.2d 842, 856 (1973), cert.

denied, 411 U.S. 917 (1973); National Railroad Passenger

Corp. v. National Association of Railroad Passengers, 414 USS.

453 (1974).

fornia v. Federal Power Commission, 369 U.S. 482

(1962); United States v. Philadelphia National Bank,

supra; Otter Tail Power Co. v. United States, supra.”

These principles have been applied to the area of

jurisdiction of the Federal Communications Commission

(United States v. Radio Corporation of America, supra)

and to telephone companies specifically. E.g., Industrial

Communications Systems, Inc. v. Pacific Tel. & Tel.,

505 F.2d 152, 156 (9th Cir. 1974); International

Tel. & Tel. v. General Telephone & Electronics Corp.,

351 F. Supp. 1153, 1182 (D. Hawaii, 1972), affd.

in part and rev'd. in part, 518 F.2d 913, 918-20

(9th Cir. 1975); Macon Products Corp. v. Am. Tel.

& Tel. Co., 359 F. Supp. 973 (C.D. Cal. 1973).

Regulated conduct is, however, deemed to be immune

by implication from the antitrust laws in two” rela-

tively narrow instances: (1) when a regulatory agency

has, with congressional approval, exercised explicit au-

thority over the challenged practice itself (as distin-

guished from the general subject matter) in such

Otter Tail involved a District Court decree which required

an electric power utility company to remedy its anc (rust viola-

tions by establishing certain power interconnections. ia

to the company’s argument that by reason of the Federal

Power Act it was not subject to the antitrust laws, the

Court stated that, absent a direct conflict between the federal

judicial decree and an order of the Federal Power Commission

concerning specific interconnections, antitrust jurisdiction was

not ousted. “It will be time enough to consider whether the

antitrust remedy may override the power of the [Federal Power]

Commission under § 202(b) as, if, and when the Commission

denies the interconnection and the District Court nevertheless

undertakes to direct it” (410 U.S. at 377).

*°The two categories are not clearly distinct, and they some-

times merge in their analysis and application.

a Se

a way that antitrust enforcement would interfere with

regulation (Pan American World Airways v. United

States, 371 U.S. 269 (1963); Gordon v. New York

Stock Exchange, 422 U.S. 659 (1975); United States

v. National Association of Security Dealers, 422 US.

694 (1975)), and (2) when regulation by an agency

over an industry or some of its components or practices

is so pervasive that Congress is assumed to have deter-

mined competition to be an inadequate means of vindi-

cating the public interest. Otter Tail Power Co. v.

United States, supra, 410 U.S. at 373-78; United States

v. National Association of Security Dealers, supra;

Silver v. New York Stock Exchange, supra.

Gordon v. New York Stock Exchange, supra, upon

which defendants heavily rely, and United States v.

National Association of Security Dealers (NASD),

supra, decided the same day, are the most recent Su-

preme Court expressions on the kind of analysis that

must be applied in determining when an antitrust suit

will lie against a member of a regulated industry.

Gordon was an action brought by small investors

who challenged a system of fixed stock exchange com-

mission rates sanctioned by the SEC. In its decision,

the Court reaffirmed what it had held many times

before: that repeal of the antitrust laws is not favored;

that repeal will be implied only where there is a plain

repugnancy between antitrust and regulatory provisions

and then only to the minimum extent necessary; that

in the absence of regulatory supervision there can be

no conflict; and that both the presence of a pervasive

regulatory scheme and the existence of regulatory action

under a specific regulatory provision are factors in

finding a repeal of the antitrust laws by implication

ae.

(422 U.S. at 682-689). The Court then went on to

find regulation by the SEC to be such regulatory action,

and section 19(b)(9) of the Securities Exchange Act

of 1934, 15 U.S.C. § 785(b), which grants to the

Commission review power over the fixing of commission

rates, to be such a specific regulatory provision. _

The Court indicated that in making that determina-

tion it was heavily influenced by two factors: (1)

by granting to the SEC permission to approve the

fixing of commission rates after the Court’s decision

in United States v. Trenton Potteries Co., 273 U.S.

392 (1927) (which had held this kind of rate fixing

to be a per se violation of the Sherman Act), the Con-

gress had made a deliberate choice to give the agency

the authority to supervise self-regulation with respect

to commission rate fixing (422 U.S. at 681, 685),

and (2) the Commission had “taken an active role

in review of proposed rate changes during the last

15 years” (422 U.S. at 685). Thus it concluded (422

U.S. at 681),

The statutory provision authorizing regulation, §

19(b)(9), the long regulatory practice, and the

continued congressional approval illustrated by the

new legislation, point to one, and only one, con-

clusion. The Securities Exchange Act was intended

by Congress to leave the supervision of the fixing

of reasonable rates of commission to the SEC.

Interposition of the antitrust laws, which would

bar fixed commission rates as per se violations

of the Sherman Act, in the face of positive SEC

action, would preclude and prevent tiie operation

of the Exchange Act as intended by Congress

and as effectuated through SEC regulatory activity.

Implied repeal of the antitrust laws is, in fact,

aia

necessary to make the Exchange Act work as

it was intended; failure to imply repeal would

render nugatory the legislative provision for regu-

latory agency supervision of exchange commission

rates.

Similarly, in NASD, supra, the Court held that verti-

cal restrictions in secondary market activities designed

to maintain prices in brokerage transactions of specified

mutual fund shares were precisely among the kinds

of restrictions on competition that Congress might have

thought were “necessitated by the unique problems

of the mutual fund industry . . .” (422 U.S. at 729)

when it enacted section 22(f) of the Investment Com-

pany Act of 1940, 15 U.S.C. §80a-1 et seq. With

respect to the alleged horizontal combination and con-

spiracy to prevent the growth of a secondary dealer

market in the purchase and sale of mutual fund shares,

the Court found the SEC’s exercise of regulatory author-

ity to be so pervasive as to confer an implied immunity.

The Court heid “fatal” to the government’s complaint

that the SEC had consistently and for nearly 35 years

approved the restrictive agreements to which the activi-

ties the antitrust action sought to curb were ancillary

(422 U.S. 733-4), and it found significant the SEC’s

urging that its authority would be seriously compro-

mised if the agreements were deemed actionable under

the Sherman Act (422 U.S. at 729).”

2'Hughes Tool Co. v. Trans World Airlines, Inc., 409 US.

363 (1972), and Pan American World Airways v. United

States, supra, also relied o defendants in this p ie

involved similar! he gral repultary schemes. In Hughes T:

the Court f allenged transactions fell precisely

within the detailed Lp Pwd me administrative treatment estab-

lished Congress in section 408 of the Federal Aviation

Act of 1958, 49 U.S.C. § 1378, and that, inasmuch as the

Civil Aeronautics Board had issued an order under that section

—

Thus, the inquiry in this case must focus upon

(1) whether the activities which are the subject of

this complaint were required or approved by the Federal

Communications Commission pursuant to explicit statu- _

tory authority, in a way that is incompatible with

antitrust enforcement, and (2) whether these activities

are being so “pervasively” regulated that an immunity

from antitrust action must be assumed. In my judgment,

these questions must be answered in the negative.

We do not start with a clean slate, neatly balancing

whether there should or should not be antitrust juris-

diction. The complaint alleges serious violations of

the Sherman Act, and if the government is able to

prove these allegations, it follows that a substantial

violation of that fundamental charter of American eco-

nomic life has occurred. The burden is on defendants

to demonstrate that they or their practices were intended

to be exempt or immune from the broad mandate

of the Act. To carry that burden, defendants rely

on the Supreme Court decisions discussed above which

found certain companies to be immune from the anti-

trust laws based upon a degree of regulation by govern-

ment agencies which, as a practical matter, left them

no choice but to follow the regulatory schemes and

orders. But such regulation is not present in this case.

At the outset, it must be noted that two of the

defendants in the instant action, Western Electric and

Bell Labs, are not subject to direct regulation by the

approving them, the transactions were immunized from the

antitrust laws by section 414 of the Act, 49 U.S.C. § 1384.

Similarly, in Pan American Airways, the Court held that. section

411 of the Federal Aviation Act of 1948, 49 U.S.C. § 1381,

had granted to the CAB the very jurisdiction (over unfair

competition in air traffic) that was at the heart of the antitrust

complaint.

sili ies

Federal Communications Commission ai all. Defend-

ants’ assertion that “each of the general charges of

alleged conduct . . . relates to matters which are

within the jurisdiction of the regulatory agencies” (Sta-

tus Memorandum, p. 5), is contradicted by the more

precise and more accurate statement of the Federal

Communications Commission (Memorandum as amicus

curiae, filed December 30, 1975, pp. 21-25) that it

“has no direct regulatory responsibility for . . . Western

Electric and Bell Laboratories,” although it may in-

directly affect them through its determinations of the

reasonableness of expense and rate base items claimed

by AT&T. See Smith v. Illinois Bell Telephone Co.,

282 U.S. 133 (1930). Legislative history over the

years shows that congressional concern over AT&T’s

intra-corporate structure never matured beyond direct-

ing the Federal Communications Commission to con-

duct a study. Once that study was completed (Federal

Communications Commission, Report on the Investiga-

tion of the Telephone Industry in the United States,

H.R. Doc. No. 340, 76th Cong., Ist Sess. (1939)),

Congress took no further action, nor was the Com-

mission given authority to take further action.

Consequently, it has been the Federal Communica-

tions Commission’s consistent position that it has no

authority to alter, regulate, or otherwise to interfere

with AT&T’s internal structure, including its relation-

ships with Western Electric and Bell Labs. See Federal

Communications Commission, Report on the Investi-

gation of the Telephone Industry in the United States,

supra, at 487-589; Consent Decree Program of the

Department of Justice, Hearings before the Antitrust

Subcommittee of the House Committee on the Judiciary,

niles

85th Cong., 2d Sess. Part II-Vol. II (1958); Con-

sent Decree Program of the Department of Justice,

Hearings before the Antitrust Subcommittee of the

House Committee of the Judiciary, 85th Cong., 2d |

Sess. Part II-Vol. III (1958); Antitrust Problems

of the Space Satellite Communications System, Hearings

before the Subcommittee on Antitrust and Monopoly

of the Senate Committee on the Judiciary, 87th Cong.,

2d Sess. 281 (1962); AT&T Charges for Interstate

Telephone Service (Phase II) 64 FCC.2d 1 (1977),

pp. 15, 18, 20, 27; and see International Tel. &

Tel. Co. v. General Telephone & Electronics Corp.,

518 F.2d 913 (9th Cir. 1975). Beyond broad general

statements, defendants have cited nothing to the con-

trary. In view of this history, it is difficult to see

on what basis Western Electric, Bell Labs, or the

relationships involving them, could be considered im-

mune from the antitrust laws on any theory.

AT&T’s Long Lines Department and the Bell Oper-

ating Companies are in a somewhat different posture,

28A letter dated November 30, 1955, from Chairman

George C. McConnaughey of the Federal Communications Com-

mission to the Attorney General, introduced at the 1958 hearings,

states that “the operations of Western, including its prices and

profits, are, of course, not subject to direct control by any

regulatory authority.” Consent Decree Program of the Depart-

ment of Justice, supra, vol. II at 2233-34.

**Bernard Strassburg, Chief of the Telephone Division of

the Federal Communications Commission, testified in those

hearings that the Commission lacks the authority to directly

regulate Western Electric. Consent Decree Program of the De-

partment of Justice, supra, vol. III at 3446, 3543-44.

Chairman Newton N. Minow of the Federal Communica-

tions Commission testified before the Committee in 1962 that

“we have no statutory authority to regulate the prices charged

by Western Electric for its equipment sales to the American

Telephone & Telegraph Co.” Antitrust Problems of the Space

Satellite Communications System, supra at 283.

oo

for they are subject to FCC regulation in a variety

of ways, and the Commission has to a substantial

extent exercised this authority. See, e.g., Specialized

Common Carrier Services, 29 FCC.2d 870, 31 FCC.2d

1106 (1971), affd. sub nom., Washington Utilities

and Transportation Commission v. Federal Communica-

tions Commission, 513 F.2d 1142 (9th Cir. 1975),

cert. denied sub nom., National Association of Regu-

latory Utility Commissioners v. Federal Communica-

tions Commission, 423 U.S. 836 (1975); MCI Com-

munications Corp. v. Am. Tel. & Tel. Co., 496 F.2d

214 (3rd Cir. 1974). But there-is nothing in either

the Communications Act or the related statutes to

suggest that, with respect to the activities and relation-

ships” which are significant to this case, Congress

intended to vest in the Federal Communications Com-

mission such pervasive regulatory authority as to over-

ride antitrust considerations, nor is there anything to

indicate that the antitrust laws are incompatible with

the operation of these regulatory statutes as intended

by the Congress.

The situation here is thus considerably different from

that presented in Gordon v. New York Stock Exchange,

supra.” In Gordon the Supreme Court said that the

antitrust laws could net be applied where the Congress

had given the Securities and Exchange Commission

S1F.g., relationships with private mobile radio systems, radio

common carriers, miscellaneous common carriers, specialized

common carriers, and manufacturers and sellers of. terminal equip-

ment for communications systems.

%2The distinction is significant inasmuch as Gordon, and

its companion case United States v. National Association of

Security Dealers, represent the outer limits of the Supreme

Court’s application of the implied immunity doctrine. Other

Supreme Court law is even more hospitable to the antitrust

laws and less apt to imply an immunity.

— on

exclusive jurisdiction to supervise the fixing of rates

of commission for transactions on the stock exchanges

and where the Securities and Exchange Commission

had in fact exercised that jursdiction. By contrast, .

the Federal Communications Commission has not been

granted exclusive jurisdiction over what may be called

the interconnection areas,“ but by statute shares that

jursdiction with the courts. 47 U.S.C. § 406."

More importantly, the regulatory charter of the Com-

mission itself, while broad in many respects, is at

the same time relatively weak. For example, telephone

tariffs—a primary regulatory tool—become effective

upon filing by the carrier after 90 days notice without

the necessity for Commission scrutiny or approval (47

U.S.C. § 203(b)(1)); a carrier may file a new or

revised tariff at any time (47 U.S.C. § 204); and

the power of the Commission to suspend a tariff is

limited to a five-month maximum (47 U.S.C. § 204).

The weakness of the regulatory scheme is reinforced

by a volume of tariff filings beyond the capacity of

the Commission to handle. During the 12-month period

from September 1974 through August 1975, the Com-

mission received 1,371 tariff filings totaling 11,491

%8In addition to certain claimed violations with respect to

manufacturing, research, and sales and purchases of the fruits

of manufacturing and research, much of this suit involves de-

fendants’ alleged failure to allow various types of entities to

interconnect.

Section 406 provides that “the district courts of the United

States shall have jurisdiction . . . [of allegations of] any

violation, 7. a carrier subject to this chapter which prevent

the relator from receiving service in interstate or foreign com-

munication by wire or radio, or in interstate or foreign transmis-

sion of energy by radio, from said carrier at the same charges,

or upon terms or conditions as favorable as those given by

said carrier for like communication or transmission under sim-

ilar conditions to any other persons.” See also, 47 U.S.C.

§§ 207, 407, 414.

pages, and because of this volume, it was able to

investigate only a small percentage of the tariffs. Thus,

it is not surprising that the Commission has concluded

that “rate filings generally proceed from the carrier’s

independent judgment. . . .” Memorandum of FCC,

filed December 30, 1975, pp. 19-20.

The statutory weaknesses, the general inability of the

Commission to scrutinize all the tariffs submitted to

it, and perhaps other factors (e.g., the lack of adequate

resources effectively to regulate AT&T, a corporate

giant),** have produced the result of a far less than

pervasive or specific regulation of the areas that are

critical to this case. In any event, whatever the reasons,

it is clear that regulation of defendants’ conduct has

not been such that this antitrust action would disturb

or interfere with it.”

The FCC—unlike, for example, the SEC in the

stock exchange cases—has consistently taken the posi-

tion that antitrust enforcement through court action

is not precluded in this area,*” In the Matter of Amend-

ment of Subpart F of Part 1 of the Commission's

Rules, 42 FCC 905, 906, 910-912 (1959); In the

Matter of the Applications of the Connecticut Water

Co. & Woolridge Bros., Inc., 25 FCC 1367, 1378

*5See, e.g., Business Week, Why the Justice Department

Took AT&T to Court, (Nov. 30, 1974) pp. 68-70.

**Even when the regulation is “pervasive,” and the poe

conduct attacked in an antitrust suit is

immunity will be found only if the antitrust y eoniilicts

with rather than complements the enforcement efforts of the

ee agency. Mt. Hood Stages, Inc. v. Greyhound Corp.,

555 F.2d 687 (9th Cir. 1977), vacated and remanded on

other grounds, 46 U.S.L.W. 4719 (June 19, 1978).

tk Cee: SE Se eee

legislation is entitled to considerable wei See Red Lion

Broadcasting Co. v. FCC, 395 U.S. 367 1 9).

ensill Gece

(1958). In its memorandum filed with the Court. in

this case on December 30, 1975, the Commission noted

(p. 27):

To the Commission’ s knowledge, no court has ©

ruled that the regulatory jurisdiction of the FCC

and/or state agencies has ousted entirely the anti-

trust jurisdiction of the district courts. Several

courts have expressly rejected that argument, and

have held that primary jurisdiction referral is the

appropriate accommodation . . . The Commission

has accepted primary jurisdiction referrals in many

cases, has resolved the issues referred for its con-

sideration, and has certified back the results

for the courts’ ultimate determination . . . This

procedure has satisfactorily accommodated the reg-

ulatory requirements, and the Commission believes

it to be preferable to total ouster of the antitrust

courts.

Among the considerations it cited in support of

its position, the Commission stressed, inter alia, that,

while under section 214 of the Communications Act,

47 U.S.C. § 214, it has exclusive market entry author-

ity, antitrust actions not only do not necessarily conflict

With that authority, but might even complement it

in appropriate circumstances; the courts and the Com-

mission have concurrent responsibilities, but when there

is a conflict, the doctrine of primary jurisdiction™

is adequate to resolve the matter; the Commission

has never considered its authority over equipment inter-

connection to displace the antitrust laws; and even

with respect to tariffs, since, as noted supra, they

often become effective without Commission scrutiny

38See note 45, infra.

—20—

or approval, the courts appropriately exercise antitrust

jurisdiction.”

An examination of the complaint in this proceeding

against the implied immunity doctrine and its philo-

sophic underpinnings verifies the Commission’s con-

clusion.“ The allegations of the complaint describe

The Commission conelons, Owe, that en it has

prescribed or se cally approved a tariff, its judgment must

control (FCC Memo of December 30, 1975, p. 20).

“"While the district court decisions are not entirely con-

sistent in this area, the better-reasoned cases likewise support

these conclusions. In Jarvis v. Am. Tel. & Tel., Civ. 74-

1674 (D.D.C. August 7, 1978), Judge Robinson of this Court

held that Commission regulation of interconnection and tariffs

over this defendant is not so pervasive that regulatory control

should be deemed inconsistent with the application of the antitrust

laws. See also, Industrial Comm. Sys. Inc. v. Pac. Tel. &

Tel. Co., 505 F.2d 152, 156 (9th Cir. 1974); Macon Products

Corp. v. Am. Tel. & Tel. Co., 359 F. Supp. 973, 976 (C.D.

Cal. 1973). Despite defendants’ contention that Jarvis is in

error (Defendants’ Reply to Supplemental Response for the

United States), the decision is consistent with both the Supreme

Court’s and the Feeral Communications Commission’s views.

See Cantor v. Detroit Edison Co., 428 U.S. 579 (1976);

Georgia v. Pennslyvania R. R. Ca., 324 U.S. 439, 454-460

(1945); Response of Federal Communications Commission in

Am. Tel. & Tel. Co. v. United States, No. 77-1009 (D.C.

Cir.), p. 18. The decisions cited by defendants in this regard

are inapposite. Western Electric Co. v. Milgo Electronics Corp., .

1978-1 Trade Cases, No. 61,960 (S.D. Fla. 1976), appeal

dismissed, 508 F.2d 1203 (Sth Cir. 1978), involved a question

of standing, the court noting only that because of a recent

administrative ws pe instituted by the FCC, certain paragraphs

a i —_ not be > ae before the court.

In Citizens Utilities Co. v. Am. Tel. Tel. Co., 1978-1

Trade Cases, No. 61,959 (N.D. Cal. 1977), the court dismissed

a sixteen-year old antitrust case for want of prosecution, stating

by way of dictum that dismissal might also be warranted on

exclusive or —s jurisdiction grounds becausé the FCC was

the proper forum for the subject matter (division of revenues

within telephone ind ). In Data Corp. v. General Tele-

phone Co. of California, 1977-2 Trade Cases No. 61,610 (C.D.

Cal. 1977), the court dismissed the complaint because of the

peculiar subject matter, but expressly disavowed holding “that

the telephone companies may never be sued under the antitrust

laws,” citing Judge Waddy’s opinion in the instant case. Moni-

tor Business Machines, Inc. v. Am. Tel. & Tel. Co., 1978-1

op ie

conduct that quite obviously was not stimulated by

regulatory supervision or coercion; it is of a character

that reflects defendants’ business judgment that its prof-

its might be maximized if potential competitors were .

discouraged from entering the various markets AT&T

controls. See Federal Maritime Commission v. Seatrain

Lines, Inc., supra, 411 U.S. at 733; Otter Tail Power

Co. v. United States, supra, 410 U.S. at 374; Silver

v. New York Stock Exchange, supra.

According to the complaint,“ defendants have chosen

to engage in a variety of predatory activities designed

to shut out potential competitors from the telecommuni-

cations markets, including the denial to competing en-

tities of interconnection privileges with AT&T’s mo-

nopoly facilities; unlawful rate adjustments in response

to competition; refusal to permit telephone customers

to provide their own terminal equipment and to. inter-

connect it to AT&T’s network; and perpetuation of

various production and marketing practices designed

to curb competition. There is absolutely nothing to

Suggest that Congress expected the Commission to re-

quire or approve, or that the Commission did require

or approve any of these practices. These activities

not only violate the antitrust laws but they are also

inconsistent with the purpose of the regulation, or

at the very least they are not required or encouraged

either by regulatory theory or by regulatory action.

Trade Cases, No. 62,610 (C.D. Cal. 1978), and Phonetele

Inc. v. Am. Tel. & Tel. Co., 435 F. Supp. 207 (C.D. Cal.

1977), both involved relatively narrow interconnection areas

which the courts found to have been extensively regulated

by the Federal Communications Commission. In short, all of

these cases are distinguishable on their facts. To the extent

that some language in the opinions may differ from the con-

clusion reached here, like Judge Robinson in Jarvis, I decline

to follow them.

*1See pp. 1-2, supra.

—22—

In such a posture, the abstract philosophical dif-

ferences between regulation and competition will hardly

serve to oust the antitrust laws from their normal

- function and effect. The purpose of the implied im-

munity rule is to eliminate adherence to antitrust stand-

ards when there are irreconcilable differences between

the antitrust laws and federal regulatory statutes.”

But the antitrust laws cannot be held hostage to a

supposed irreconcilability between antitrust and regula-

tory enforcement when no such irreconcilability exists

in fact, nor can the alleged unlawful actions fo defend-

ants be deemed protected from the Sherman Act by

the cloak of generalized regulation of AT&T by the

Commission.

In short, it would be a gross misconception of the

realities to equate the instant statutory scheme, the

relatively weak regulatory controls which have imple-

mented that scheme, and defendant’s alleged activities

which offend both the antitrust laws and the regulatory

purposes, with the kind of explicit regulation endorsing

industry conduct which the Supreme Court has held

in relatively few instances to be inconsistent with anti-

trust enforcement.”

42Immunity will be implied only if necessary to make the

regulatory statutes work, “and even then — to the minimum

extent er Gordon v. New York St Exchange, supra,

422 U.S. at 685.

Additionally, it is not insignificant that, even with respect

to that portion of defendants’ activities which the Commission

does regulate, only the courts ee complete relief. The

Commission has little authority to vindicate injury to competitors;

there is no statutory provision authorizing it to order divestiture;

and it is unable to adopt remedies designed to foreclose future

anticompetitive conduct. See generally, Am. Tel. & Tel.

Co. v. FCC, 487 F.2d 865, 881 (2d Cir. 1973); Nader

v. FCC, 172 US. App: D.C. 1, 520 F.2d 182, 206 (1975);

cf. Hewitt-Robins v. Freight-Ways, Inc., 371 U.S. 84 (1962);

but see, General Telephone Co. of the Southwest v. United

ee

tees

tee

a See

There is another, alternative basis for reaching the

same conclusion. This complaint alleges a broad con-

spiracy to monoplize various aspects: of the telecom-

munications industry through a symbiotic relationship —

among AT&T, Western Electric, Bell Labs, and. the

Bell Operating Companies (see p. 2, supra). -Even

if it be assumed, arguendo, that the Commission exer-

cised explicit regulatory authority over only some seg-

ments of the activities challenged in the complaint,

it does not follow that defendants are immune from

antitrust liability even with respect to them. Defendants’

purpose is alleged to be the monopolization of the

telecommunications service and equipment market, and

the bulk of their conduct, including that revolving

around Western Electric and Bell Labs, cannot under

any reasonable view be regarded as immune from anti-

trust enforcement by virtue of regulation. In that cir-

cumstance, the remainder of the challenged conduct

is likewise subject to antitrust consideration, both be-

cause it constitutes a means for achieving an uniawful

end (California Motor Transport v. Trucking Un-

limited, 404 U.S. 508, 515 (1972)), and because

it represents one facet of a larger monopolistic scheme.

See Carnation Co. v. Pacific Westbound Conference,

383 U.S. 213, 222 (1966); Continental Ore Co. v.

Union Carbide & Carbon Corp., 370 U.S. 690 (1962);

Ricci v. Chicago Mercantile Exchange, 409 U.S. 289,

316 (1973) (Marshall, Jr., dissenting).

According to the government (Brief in Am. Tel.

& Tel. Co. v. United States, No. 77-1109 (D.C. Dir.),

States, 449 F.2d 846 (Sth Cir. 1971). Congress could ha

be deemed by implication to have conferred immunity on aman

such as these defendants when the effect of its assumed action

would be to insulate the alleged antitrust violators from effective

sanctions or relief.

a, ) i

pp. 5-6), defendants dominate three markets—long dis-

tance transmission, equipment manufacturing, and local

franchise monopolies—and they use the leverage from

‘their control. of each to defend and support their

monopoly position in the other two. It is precisely

in this kind of situation, that the doctrine of primary

jurisdiction is most useful,“* and this Court is fully

prepared to refer appropriate issues to the FCC under

that doctrine (see note 45, infra). But it would subvert

the purposes of the antitrust laws totally to sever from

the case and to refer to the Commission some of

the issues on the theory that it has exclusive juris-

diction when the consequence of such a referral would

be that a significant portion of what is alleged to

be one comprehensive, integrated, and mutually support-

ing conspiracy could never be considered by the courts.

See Georgia v. Pennsylvania Railroad Co., 324 US.

439 (1945). This would then leave the courts with

a truncated antitrust action—a result that would stand

the principle of careful non-interference between legiti-

mate regulatory and antitrust enforcement on its head.

While it is not necessary here to rely directly upon

these “comprehensive monopoly” principles in adjudi-

cating the jurisdictional issue, they provide additional

and alternative support for the conclusion that antitrust

jurisdiction has not been ousted by the regulatory

scheme.

For these reasons, the Court rejects defendants’ con-

tention that the Court lacks antitrust jurisdiction over

the matters alleged in the complaint. However, in the

event that it should subsequently appear after the issues

have been crystallized—e.g., after discovery has been

“4See Mr. Justice Brennan’s dissent in Pan American World

Airways v. United States, supra, 371 U.S. at 331-2.

ae ees ae MA PAS ET Se TO A I ar

Seere tat weer

A

—

completed—that with respect to some of defendants’

conduct the Commission has special expertise or there

may be a conflict between antitrust enforcement and

regulation, the issues relating to ‘such conduct will be ©

referred to the Commission under the doctrine of pri-

mary jurisdiction.“ But there is no basis for defend-

ants’ continued insistence that the jurisdictional issue**

is not settled’ or that, until it. is settled in

**While the term “primary jurisdiction” has been widely

used, including by the U.S. Supreme Court, it deserves some

clarification. A referral under that doctrine does not oust

a court of jursidiction; it merely serves as a means for request-

ing a regulatory agency to make preliminary factual and legal

determinations while reserving to the court the authority to

decide the ultimate questions. Judge Waddy’s opinion of No-

vember 24, 1976 concluded that some of the issues herein

might be referred to the FCC under that doctrine. It is clear

from Ricci v. Chicago Mercantile Exchange, supra, that such

a referral is appropriate particularly where there is a need

to resolve possible conflicts een the objectives of the antitrust

laws and the regulatory standards, and where an adjudication

of such issues bythe regulatory body will be of material

aid in the ultimsie decision of the antitrust issues. It is my

intention, as it was Judge Waddy’s, to make such appropriate

references.to the FCC. According to the Commission (Memo-

randum as amicus curiae, p. 29) issues which substantially

affect the following matters should be referred to it under

the principle of primary jurisdiction: (1) entry ‘into or exit

from a communications carrier market; (2) FCC orders requir-

ing interconnection; and (3) tariff provisions which the Com-

mission has approved or precluded. It would be premature

at this point to conclude the extent to which these conditions

exist with respect to particular issues in this case, or whether

there may be other matters appropriate for referral to the

Commission.

**7.e., the issue of whether or not the Commission has ex-

clusive jurisdiction.

‘'Throughout their status memoranda, defendants assert that

there must be “a prompt determination of the jurisdictional

issue” (Reply Memorandum, p. 3), that the means to expedite

this case is to have “an early and definitive resolution of

the fundamental jurisdictional issue that overhangs all of the

proceedings in this case” (Reply Memorandum, p. 49), and

that the Court will have to resolve “once and for all whether—

and, if so, the extent to which—it has jurisdiction” (emphasis

supplied) (Status Memorandum, p. 47) ).

nits

their favor, it is not possible to proceed with

this case in a way that is fair to both parties.

The issue was decided against defendants by Judge

Waddy, and his decision was not disturbed either by

the U.S. Court of Appeals or the U.S. Supreme Court.

Upon careful reconsideration, this Court again reaches

the conclusion that it has jurisdiction of this action

and that no part of this case is within the exclusive

jurisdiction of the Federal Communications Commis-

sion.**

II

Defendants have submitted a proposed order pro-

viding that “the plaintiff in this case is the government

of the United States of America including all of the

departments, agencies, bureaus, and other subdivisions

thereof from which defendants have sought recovery.”

‘The effect of this order, if adopted by the Court,

would be to subject all agencies and departments of

the government to discovery under Rule 34 of the

Federal Rules of Civil Procedure. The Department

of Justice argues that only it is a party, and that

discovery from other government agencies and depart-

ments must proceed under the more restrictive pro-

visions of Rule 45, F.R.Civ.P. The question that

is raised by these opposing positions is “who is the

plaintiff?” .

It should be noted at the outset that some discovery

has been and is being secured to a limited extent

from government agencies other than

‘8For that reason defendants’ proposed Pretrial Order No.

9 which would limit discovery to the jurisdictional issues seriatim,

followed in each instance by further briefing and court review,

is denied.

Rin ewe SN