# Amicus Curiae Brief — Verizon Communications Inc. v. Law Offices of Curtis v. Trinko, LLP > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385014_0617%3A15 ## Record - **Collection:** Supreme Court brief - **Document type:** Amicus Curiae Brief - **Published:** January 1, 2004 - **Citation:** 540 U.S. 398 ## Text In The MAY 2 3 2003 Supreme Court of the Anited ates ¢ FICE OF TME ORERK VERIZON COMMUNICATIONS INC., Petitioner, v. LAW OFFICES OF CURTIS V. TRINKO, LLP, Respondent. Sd On Writ Of Certiorari To The United States Court Of Appeals For The Second Circuit ¢ BRIEF AMICUS CURIAE OF THE COMMONWEALTH OF VIRGINIA, THE STATES OF ALABAMA, DELAWARE, INDIANA, NEBRASKA, NEW HAMPSHIRE, OKLAHOMA AND UTAH IN SUPPORT OF PETITIONER o JERRY W. KILGORE Attorney General of Virginia WILLIAM H. HurRD State Solicitor MAUREEN RILEY MATSEN WILLIAM E. THRO Deputy State Solicitors JUDITH WILLIAMS JAGDMANN Deputy Attorney General Counsel of Record C. MEADE BROWDER, JR. Senior Assistant Attorney General SARAH OXENHAM ALLEN RAYMOND L. DOGGETT, JR. Assistant Attorneys General 900 East Main Street Richmond, Virginia 23219 (804) 786-2436 [Additional Counsel Listed On Inside Cover] OOOO COCKLE LAW BRIEF PRINTING CO. (800) 225-6964 OR CALL COLLECT (402) 342-2831 WILLIAM H. Pryor, JR. Attorney General of Alabama Office of the Attorney General 11 South Union Street Montgomery, Alabama 36130 (334) 353-3915 M. JANE BRADY Attorney General State of Delaware 820 North French Street Wilmington, Delaware 19801 (302) 577-8400 STEVE CARTER Attorney General of Indiana Indiana Government Center South Fifth Floor 302 West Washington Street Indianapolis, Indiana 46204 (317) 232-6201 JON BRUNING Attorney General of Nebraska Office of the Attorney General 2115 State Capitol Building Lincoln, Nebraska 68509 (402) 471-2683 PETER W. HEED Attorney General of New Hampshire Office of the Attorney General 33 Capitol Street Concord, New Hampshire 03301 (603) 271-3655 W.A. DREW EDMONDSON Attorney General of Oklahoma 2300 North Lincoln Boulevard Suite 112 Oklahoma City, Oklahoma 73105-4894 (405) 521-3921 MARK L. SHURTLEFF Attorney General of Utah Office of the Attorney General 236 State Capitol Salt Lake City, Utah 84114 (801) 538-1191 I. Il. TABLE OF CONTENTS Under Antitrust Principles Recognized by This Court, Respondent Fails to State a Claim .......... B. The Theories Relied Upon by the Second Circuit, Without More, Do Not Establish an Antitrust Violation. ..........................+. 1. Zven if the Essential Facilities Doc- trine Can Serve as the Basis for a Section 2 Monopolization Claim, the Traditional Elements of the Section 2 Claim Must Be Pled. .......................... 2. Allegations of a Dangerous Probabil- ity of Monopolizing a Second Market are Necessary to State a Monopoly Leveraging Claim. .........................s0++ IN PASSING THE TELECOMMUNICATIONS ACT OF 1996, CONGRESS INTENDED NEI- THER TO EXPAND NOR TO CONTRACT THE AVAILABILITY OF AN ANTITRUST CLAIM .... A. State and Federal Regulation is a Proper Consideration in Antitrust Analysis........ B. By Enacting the Telecommunications Act of 1996, Congress Built on the Tradi- tional Authority of States to Regulate Providers of Local Telephone Service ...... 8 11 11 TABLE OF CONTENTS - Continued TABLE OF AUTHORITIES Page Page C. The Decision of the Second Circuit is Unrea- em tory Oversight Established by Congress and Abcor Corp. v. AM Int'l, Inc., Could Hamper the States’ Ability to Fa- FD ee ee Se I Bie rcrccscsccecesesccnssssssccscssasssessssenes 4 Se a a ee Advanced Health-Care Servs. v. Radford : ORL, .cccccccccccccccccccccccccccccccccccccsoccossoccscossooes Community Hosp., CORSO AMIN ccceccccccccccncccescccccccscsccsscsssescssccsccssssseees 16 910 F.2d 139 (4th Cir. 1900)...................cccccsresssesssseesseees 4 Alaska Airlines v. United Airlines, 948 F.2d 536 (9th Cir. 1991)....................c cece 2,9, 10 Aspen Skiing Co. v. Highlands Skiing Corp., 8 ee 2, 4,5 Association for Intercollegiate Athletics for Women v. NCAA, | 735 F.2d 577 (D.C. Cir. 1964)............c.cscesssesssseseseseseeseees 9 AT&T v. Iowa Utils. Bd., Ee 5 Bell Atlantic-Maryland Inc. v. MCI, 240 F.3d 279 (4th Cir. 2001), vacated and remanded on other grounds, 535 U.S. 635 (2002) ......... 13 Blue Cross & Blue Shield United of Wisconsin v. Marshfield Clinic, en 3 City of Anaheim v. Southern California Edison Co., OU 7 Concord v. Boston Edison Co., eee 11 Eastman Kodak Co. v. Image Technical Servs., Inc., Se ey Ge ett icnetahiccintinennnnsicresntteinetanimnsgepianmeuneneaes 5 Fineman v. Armstrong World Industries, ee Pe Ce Ce rnreiemencnnsnnmmmen 9 iv TABLE OF AUTHORITIES — Continued Page In re: Bell Atlantic-New York Authorization Under Section 271 of the Communications Act to Provide In-Region, Interlata Service in the State of New York, 15 F-C.C.R. 5413 (Mar. 9, 2000) ...00.0......ccccceceesescereeseneeneneenees 14 M & M Med. Supplies & Serv. v. Pleasant Valley Hosp., 981 F.2d 160 (4th Cir. 1992) (en banc) ...............ccccceeeeeees 8 Matsushita Elec. Indus. Co. v. Zenith Radio Corp., Sn TT ssccniacaieaicendesiesesiieeiia cia icincenaetaralamanianinnrmaeinn 4 MCI Communications Corp. v. AT&T, of e 6, 11 MCI WorldCom Inc. v. Bell Atlantic-New York, 2000 WL 363378 (N.Y.PS.C. Feb. 11, 2000).................. 14 MCI WorldCom Inc. v. Bell Atlantic-New York, ~ 2000 WL 1531916 (N.Y.PS.C. Jul. 27, 2000)................. 14 Oiympia Equip. Leasing Co. v. Western Union Tel. Co., | 2 Papasan v. Allain, ns I anirniisisairesantnintaciietasiiesiiciniaeianiaatainniataiinintl 8 Southern Pac. Communications Co. v. AT&T, 740 F.2d 960 (D.C. Cir. 19B4).......cccccccccccccccsssscscsseeserseees 7 Spectrum Sports, Inc. v. McQuillan, inserts iieirneteniennninienlinninnininriitininniisinimiitinanael 3,8 United States v. E. I. DuPont de Nemours & Co., Se IE UTI csicincin inst ieiesineieieeatiaharericnmanaitatiiienitiamceanas 3 United States v. Grinnell Corp., a atid acnciataiiaitneteniintasesnieaiisihddtadiliiastaatiatiniia 3 ile SS Sb ———— NT eR re v TABLE OF AUTHORITIES - Continued Page Verizon Communications, Inc. v. FCC, CE 2 Willman v. Heartland Hosp. E., eee 8 STATUTES Se is UII insncnseninninrsininnnnesnsmatianninpinimesieeees 1, 13 Sy Se SIT cic ceersiniercnieenstcmnnteinniataniaieanaiainaiendastmamamenaets 2 en ictininrricinssinnndeinnnaemeiaiemneinnemenanesl 13 a es ST inecininrcsipenensinicnmemeniuceniesdeenininiieunadin 13 ye ee cicerennntetncnnnetnisiimnecnnsnnsnensninneniniamseasil 13 a ey ee carceneniintnictunanseniarmnanimnniniiiitatiennnsimeniel 13 Br le Se trcinisnstsrrennnredeenmensnmmsensansniinemmenaasimem 13 Pub. L. No. 104-104, 110 Stat. 56 (47 U.S.C. 151 et I iiticintintinrndiiianncanmspeniatscimnnniasiiiaeeninsniniiinemeasinta 12 OTHER AUTHORITIES 3 Phillip Areeda & Herbert Hovenkamp, Antitrust Bey STE inesnccstrncaiensiineniinimensasinnnebnestenietenesel 4, 6,8 3A Phillip Areeda & Herbert Hovenkamp, Antitrust ee eee cccrtincnienstesscennintecnemenennimiinmenel 6, 12 Robert Bork, The Antitrust Paradox (1978) ..............---+-+»: 4 Robert Pitofsky, Donna Patterson & Jonathan Hooks, The Essential Facilities Doctrine Under U.S. Antitrust Law, 70 Antitrust L.J. 443 (2002)................... 6 1 INTERESTS OF THE AMICI The States have significant responsibilities in both antitrust enforcement and enforcement of the regulatory scheme developed by the Telecommunications Act of 1996. The States, therefore, have a strong interest in promoting sound judicial decision-making in the application of antitrust law to activities undertaken pursuant to the Telecommunications Act of 1996 and in promoting the rational development of case law in this area. There are difficult legal issues inherent in subjecting incumbent providers of local telephone services to new duties to assist their competitors, while continuing their obligations under antitrust law. These difficulties counsel a cautious ap- proach which has been utterly forsaken by the decision of the Second Circuit. ¢ ARGUMENT I. UNDER ANTITRUST PRINCIPLES RECOGNIZED BY THIS COURT, RESPONDENT FAILS TO STATE A CLAIM. The Second Circuit’s opinion expands the duty of incumbent providers of local telephone service to assist competitors beyond the antitrust duties imposed on monopolists under Section 2 of the Sherman Act. Although the Telecommunications Act of 1996 (“the Act”) imposes new obligations on incumbent providers to open their markets to competition, it does not alter the applicability of the Sherman Act. Instead, Congress expressly provided that “nothing in this Act ... shall be construed to modify, impair, or supersede the applicability of any of the anti- trust laws.” 47 U.S.C. § 152 note. Thus, the elements of an 2 antitrust action remain the same. ihe Second Circuit’s opinion is problematic because it permits an antitrust claim to go forward absent factual allegations supporting all elements required under Section 2 of the Sherman Act. The Act provides that incumbent local exchange carriers must allow entering competitors to interconnect with incumbents’ telephone networks on terms to be worked out between the incumbents and the new entrants. State public utility commissions (“State Commissions”) are to arbitrate the agreements between the incumbents and their competitors, and the State Commissions have au- thority to set rates “that would subject both incumbents and entrants to the risks and incentives that a competitive market would produce.” Verizon Communications, Inc. v. FCC, 535 U.S. 467, 476 (2002). See also 47 U.S.C. 251(c). The duties imposed on a monopolist under the anti- trust laws, however, are different from the duties imposed on the incumbents under the Act. Under antitrust law, even a firm with monopoly power has no general duty to assist its rivals. Aspen Skiing Co. v. Highlands Skiing Corp., 472 U.S. 585, 600-01 (1985). See also Olympia Equip. Leasing Co. v. Western Union Tel. Co., 797 F.2d 370, 375-76 (7th Cir. 1986) (Posner, J.). In addition, a monopo- list that has obtained its position lawfully can reap the benefits of its success by dernanding whatever rates it can receive from the marketplace. Such conduct, standing alone, is not an antitrust violation. Alaska Airlines v. 3 United Airlines, 948 F.2d 536, 548-49 (9th Cir. 1991).’ As this Court has acknowledged: The law directs itself not against conduct which is competitive, even severely so, but against con- duct which unfairly tends to destroy competition itself. It does so not out of solicitude for private concerns but out of concern for the public inter- est. Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447, 458 (1993). A. The Traditional Elements of a Section 2 Claim In order for “monopolization” to be a violation of Section 2 of the Sherman Act, two elements must be shown: (1) the possession of monopoly power, defined as the power to control prices or exclude competition, United States v. E. I. DuPont de Nemours & Co., 351 U.S. 377, 391 (1956); and (2) deliberateness. United States v. Grinnell Corp., 384 U.S. 563, 570-71 (1966). The “deliberateness” element has been defined as “the willful acquisition or maintenance of [monopoly] power as distinguished from growth or devel- opment as a consequence of a superior product, business acumen, or historic accident.” Jd. (emphasis added). Deliber- ateness has also been described as “anticompetitive,” ' In stark contrast to the regulation of telephone rates by State Commissions, the antitrust laws specifically decline the responsibility of setting the rates that monopolists can charge. See Blue Cross & Blue Shield United of Wisconsin v. Marshfield Clinic, 65 F.3d 1406, 1413 (7th Cir. 1995) (“the antitrust laws are not a price-control statute or a public-utility or common-carrier rate-regulation statute”). 4 “predatory,” or “exclusionary.” 3 Phillip Areeda & Herbert Hovenkamp, Antitrust Law, 650c, at 69 (2d ed. 2002); Aspen Skiing, 472 U.S. at 602. The deliberateness element is absent when a monopo- list engages in conduct that disadvantages a competitor, but does so in pursuit of legitimate business objectives or to enhance efficiency. See, e.g., Aspen Skiing, 472 U.S. at 604-05; Abcor Corp. v. AM Int'l, Inc., 916 F.2d 924, 927 (4th Cir. 1990) (“A desire to increase market share or even to drive a competitor out of business through vigorous competition on the merits is not sufficient.”). The monopo- list who violates Section 2 is the one who adversely affects competition by engaging in economically irrational behav- ior. See, e.g., Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 589 (1986) (the sacrifice of short-term profits may be viewed by the predator as “an investment in future monopoly profits (where rivals are to be killed),” quoting Robert Bork, The Antitrust Paradox 145 (1978)); Advanced Health-Care Servs. v. Radford Community Hosp., 910 F.2d 139, 148 (4th Cir. 1990) (“If a plaintiff shows that a defendant has harmed consumers and competition by making a short-term sacrifice in order to further its exclusive, anti-competitive objectives, it has shown predation by that defendant.”). This Court’s opinion in Aspen Skiing further ex- plained that, in order for conduct to be “exclusionary,” it must do more than merely harm a smaller rival. It must impair competition in an “unnecessarily restrictive way.” 472 U.S. at 605. “If a firm has been ‘attempting to exclude rivals on some basis other than efficiency,’ it is fair to characterize its behavior as predatory.” Id. (quoting Bork, supra, at 138 (1978)). aa ~ PP ———— ee ee ee 7 — a 5 A monopolist does not have to cooperate with its rivals under the antitrust laws, unless the refusal to deal consti- tutes purposeful and anticompetitive conduct. Aspen Skiing, 472 U.S. at 600-01. In order for failure to cooperate with a rival to be “exclusionary” under Section 2, at a minimum it must occur without a legitimate business or efficiency reason and make no economic sense other than as an intentional effort to injure competition by preserving or acquiring higher monopoly profits. Jd. at 608, 610-11. See also Eastman Kodak Co. v. Image Technical Servs., Inc., 504 U.S. 451, 482-83 (1992). Respondent failed to allege exclusionary conduct in this case. The Second Circuit, however, decided that the amended complaint was sufficient to state a claim under either the essential facilities doctrine or a monopoly leveraging theory. Pet. App. 29a. Its decision, if upheld, would unreasonably expand the scope of antitrust law in the telecommunications context beyond any theory ap- proved by this Court, a result not contemplated by the Act and not necessary to enforce either the Act or antitrust law. B. The Theories Relied Upon by the Second Circuit, Without More, Do Not Establish an Antitrust Violation. 1. Even if the Essential Facilities Doctrine Can Serve as the Basis for a Section 2 Mo- nopolization Claim, the Traditional Ele- ments of the Section 2 Claim Must Be Pled. First, this Court has “never adopted” the essential facilities doctrine as a basis for liability in a Section 2 case. AT&T v. Iowa Utils. Bd., 525 U.S. 366, 428 (1999) (Breyer, 6 J., concurring in part and dissenting in part). In addition, the doctrine has been widely criticized by leading antitrust commentators. See, e.g., 3A Phillip Areeda & Herbert Ho- venkamp, Antitrust Law, 4 771c, at 173 (2d ed. 2002) (“the essential facility doctrine is both harmful and unnecessary and should be abandoned”); Robert Pitofsky, Donna Patterson & Jonathan Hooks, The Essential Facilities Doctrine Under U.S. Antitrust Law, 70 Antitrust L.J. 443, 443 (2002) (“If U. S. scholarship were the last word on the subject, one would be led to conclude that the essential facilities doctrine should be described narrowly or fully abandoned.”).’ Second, although respondent may have adequately pled the elements peculiar to an essential facilities claim,’ it still must allege all other elements of a Section 2 monopolization violation. As discussed above, a Section 2 violation requires “exclusionary” or “predatory” conduct by the monopolist. The essential facilities doctrine does not and should not be permitted to eliminate the need to allege deliberateness in order to state a Section 2 violation. See, e.g., 3 Areeda & Hovenkamp, supra, | 650c at 69. In addition, * There are four elements that are said to establish liability under the essential facilities doctrine: (1) control of the essential facility by a monopolist; (2) a competitor’s inability practically or reasonably to duplicate the essential facility; (3) the denial of the use of the facility to a competitor; and (4) the feasibility of providing the facility. MCI Communications Corp. v. AT&T, 708 F.2d 1081, 1132-33 (7th Cir. 1983). * The Second Circuit found that respondent did allege that AT&T's access to petitioner’s local loop was essential to AT&T's ability to compete in the local telephone service market and that it would be prohibitively expensive for it to create independent facilities. Pet. App. - 29a. —