Amicus Curiae Brief — Verizon Communications Inc. v. Law Offices of Curtis v. Trinko, LLP

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Supreme Court, U.S

FILED

No. 02-682

VERIZON COMMUNICATIONS, INC.,

Petitioner,

LAW OFFICES OF CURTIS V. TRINKO, LLP,

Respondent.

ON WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE SECOND CIRCUIT

BRIEF OF AMICUS CURIAE AMERICAN

ANTITRUST INSTITUTE IN SUPPORT OF

RESPONDENT

ALBERT A. FOER, JONATHAN L. RUBIN

PRESIDENT Counsel of Record

AMERICAN ANTITRUST LAW OFFICE OF

INSTITUTE JONATHAN L. RUBIN

2919 Ellicott Street, N.W. 1717 K Street, N.W.

Suite 1000 Suite 600

Washington D.C. 20008 Washington, D.C., 20036

(202) 276-6002 (202) 415-0616

Question Presented for Review

Did the Court of Appeals err in reversing the District

Court’s dismissal of respondent’s antitrust claims?

Table of Contents

I. RESPONDENT'S ANTITRUST CLAIM IS

COGNIZABLE NOTWITHSTANDING THE

REGULATORY SCHEME ESTABLISHED

INTHE TELECOMMUNICATIONS ACT OF

PUP Sabececccccccecccccccccccccceccccce

A. The 1996 Act Does Not Insulate

Petitioner's Conduct from Antitrust

tt hice eeeeeeaseeteeeeecee

B. The 1996 Act Expands the Scope of

Competition and also an Incumbent’s

Duty to Refrain from Anticompetitive

i i ieee dese baebooees

C. Concurrent Application of the 1996

Act and the Antitrust Laws Will

Promote the Transition to

PL cceeececeeseeecocceess

D. Respondent's Claim Will Have No

Effect on the Scope of Affirmative

Duties Required of a Monopolist

Under Existing Antitrust Principles .. .

E. Reformulating the Pleading or Proof

Requirements of a Section 2 Claim

Based on the Essential Facilities or

Monopoly Leveraging Doctrines Is

SES, ccvccccucdéecdecebedeese

Il. THE AMENDED COMPLAINT ALLEGES A

VIOLATION OF SECTION 2 OF THE

A. The Amended Complaint Articulates

the Elements of a Claim Under

Section 2 of the Sherman Act .........

B. There Can Be No Legitimate

Economic Rationale for the Breach of

a Statutorily Mandated

Interconnection Agreement ..........

Table of Authorities

Cases:

Advanced Cardiovascular Systems, Inc. v. Scimed Life

Systems, Inc., 988 F.2d 1157 (Fed. Cir., 1993) .. 6

Alaska Airlines, Inc. v. United Airlines, Inc., 948 F.2d 536

a le 21

Aspen Skiing Company v. Aspen Highlands Skiing

Corporation, 472 U.S. 585 (1985) ........ 21, 25

AT&T Corp. v. Iowa Utils. Bd., 525 U.S. 366 (1999) .. 28

Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477

Tt dintcteiened6eeeé6basvevdsnnee dates 29

California Motor Transport Co. v. Trucking Unlimited, 404

inne kt tie eee cegeenenets 7

California v. FPC, 369 U.S. 482 (1962) ..... eilinwa tits 7

Cavalier Telephone, LLC. v. Verizon Virginia, Inc. _____ F.

3d __, No. 02-1337, 2003 WL 21153305 (4 Cir.,

SE ee 8

Conley v. Gibson, 355 U.S. 41 (1957) ............ 7, 27

Covad Communications Co. v. Bell Atlantic Corp., 201

F.Supp.2d 123 (D.D.C., 2002) ....... 6, 8, 12, 13

Covad Communications Co. v. BellSouth Corp., 299 F.3d

1272 (11™ Cir.), reh’g den., 314 F.3d 1272 (2002) ..

Pee ee ee eT TTT TT TTT TT TTT TTT 8, 11, 15

Eastman Kodak Co. v. Image Technical Services, Inc., 504

EE eee Pe oe Ere 24

General American Tank Car Corp. v. El Dorado Terminal

es ns ecnseeéseacseeess 9

Goldwasser v. Ameritech Corp., 222 F.3d 390 (7 Cir., 2000)

puabecboscéébecees 8, 10, 13, 14, 15, 16, 19, 24

Gordon v. New York Stock Exchange, Inc., 422 U.S. 659

DP abGaluactedcedeknnennesevkeseses +e 8

Hartford Fire Insurance Co. v. California, 509 U.S. 764

tt bibpih i dekektvenenduedeseesosevecs 7

Hinshon v. King & Spalding, 467 U.S. 69 (1984) ...... 6

Hospital Building Co. v. Trustees of Rex Hospital, —s

Dt isbpetckucedadnadhonecesbetenesn

Hughes Tool Company v. Trans World Airlines, Inc., 409

WE SED GGG cc cc cccccedecccesccceseces 8

Keogh v. Chicago & N.W. Ry. Co., 260 U.S. 156 (1922) ...

WITTTITITITITIT TTT TTT 9, 10

Long Lake Energy Corporation v. Niagara Mohawk Power

Corporation, 700 F.Supp. 186 (S.D.N.Y., 1988) 18

Maryland & Virginia Milk Producers Ass'n v. U.S., 362

ee Se ddedaescececdccecowesetocce 7

Matsushita Electric Industries Co. v. Zenith Radio Corp.,

Ge ED bcevcceneodeséas 22, 23, 24

McClain v. Real Estate Bd. of New Orleans, Inc., 444 U.S.

DD decackdtcdtcausnnededduccudicde 7

MetroNet Services Corporation v. USWest Communications,

325 F.3d 1086 (9 Cir., 2003) ............ 8, 11

Nat Gerimedical Hosp. & Gerontology Center v. Blue Cross

of Kansas City, 452 U.S. 378 (1981) .......... 7

Nat? Railroad Passenger Corp v. Natl Ass’n of Railroad

Passengers, 414 U.S. 453 (1974) ............. 7

Otter Tail Power Co. v. U.S., 410 U.S. 366 (1973). 7, 10, 21

_ Pan American World Airways, Inc. v. U.S.,.371 U.S. 296

Dt sdducekiccesdetaddesbioteseubesets 7

Phonetele, Inc. v. American Telephone and Telegraph

Company, 664 F.2d 716 (9™ Cir.,1981) ..... 9, 10

Ricci v. Chicago Merc. Exch., 409 U.S. 289 (1973) ..... i)

Silver v. New York Stock Exchange, 373 U.S. 341 (1963)

sanecenbedeebassdeneeececcendvesoen 8, 16

Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447 (1993)

ond oveddeasieuuasaeddasbadsaneus 23, 24, 25

Square D Co. v. Niagara Frontier Tariff Bureau, Inc., 476

ee GED Seeveddducdecodeseucr 9, 10, 11

Swierkiewicz v. Sorema N. A., 534 U.S. 506 (2002) ... 27

Town of Concord, Ma. v. Boston Edison Co., 915 F.2d 17 (1"

Cir., 1990), cert. denied, 499 U.S. 931 (1991)

WETTTITITITIITTI TTT TTT 9, 10, 11, 12

U.S. Navigation Co., Inc. v. Cunard S.S. Co., Lid., 284 U.S.

GIO GND cc cccccccdccccccevcceccccoceese 7

United States v. Aluminum Co. of America, 148 F.2d 416

PP BE nick cededdesusndescasunke 24

United States v. Borden, Co., 308 U.S. 188 (1939). ... 16

United States v. Griffith, 334 U.S. 100 (1948) ....... 23

United States v. Grinnell Corp., 384 U.S. 563 (1966) .. 24

United States v. Philadelphia National Bank, 374 U.S. 321

Dt schigedbuecekeseasdésenvusesancents 7

United States v. Radio Corp. of America, 358 U.S. 334

Dt séstendoakane seas esesetsunsends 7,11

United States v. Western Pacific R. Co., 352 U.S. 59 (1956)

jeddvbedesssslcbssidtessddecdeossbedeoe's 9

Statutes:

Clayton Act, 15 U.S.C. § 15(a).......... 2. cee eee 3

REE a = 27

ED oil od wd Deeenatseaneed 6, 13

Sherman Act, 15 U.S.C.§2............2.2206- passim

The Telecommunications Act of 1996, Pub.L. 104-104, 110

Stat. 56 (1996), codified at 47 U.S.C. § 151 et seq.

Other materials:

141 Cong. Rec. $18586-01 (daily ed. December 14, 1995)

(statement of Sen. Leahy) ................. 15

142 Cong. Rec. H1145-06 (daily ed. February 1, 1996)

(statement of Rep. Conyers) ............... 15

142 Cong. Rec. S687-01 (daily ed. February 1, 1996)

(statement of Sen. Thurmond).............. 15

H.R.Conf.Rep. No. 104-458 (1996) ................ 12

Joint Explanatory Statement of the Committee of

Conference, H.R. Conf. Rep. No. 104-458, S. Rep. No.

104-230, at 201 (1996) .................... 14

Bork, R., The Antitrust Paradox (1978) ............ 25

Foer, AA. & D.L. Moss, Electricity in Transition:

Implications for Regulation and Antitrust, 24 Energy

a ale ee sie eas 2

Pitofsky, R., D. Patterson and J. Hooks, The Essential

Facilities Doctrine Under U.S. Antitrust Law, 70:2

Antitrust L.J., 443 (2002) ...........c000.-. 21

S. Rep. No. 104-23 (1995) (R2-7-A18) ............... 8

BRIEF OF AMICUS CURIAE AMERICAN

ANTITRUST INSTITUTE IN SUPPORT OF

RESPONDENT

July 22, 2003

Statement of Interest’

The American Antitrust Institute (“AAI”) is an independent,

not-for-profit organization dedicated to economic research,

the study of the antitrust laws, and public education. The

directors of the AAI, Jonathan Cuneo, Esq., Albert H. Foer,

Esq., and Professor Robert Lande of the University of

Baltimore Law School, authorized this filing. The Advisory

Board of the AAI consists of 62 prominent lawyers, law

professors, economists and business leaders (the members

of the Advisory Board are listed on the AAI web site:

www.antitrustinstitute.org). The members of the Advisory

Board serve in a consultative capacity and their individual

views may differ from the positions taken by the AAI. The

AAI’s mission is to increase the role of competition and

sustain the vitality of the antitrust laws.

The AAI has several concerns. First, this case reaches to the

heart of how antitrust law should function in newly

deregulated industries undergoing a transition from state-

sanctioned monopolistic markets to competitive ones. Such

transitions are likely to be resisted by incumbent

monopolists and other entrenched interests, and antitrust

law is well-suited to redress and deter conduct which may

‘The parties to this action have lodged blanket consents to the filing of

amicus briefs with the Clerk of Court. Pursuant to Rule 37.6, amicus

curiae states that no counsel for a party authored this brief in whole or

in part, and that no persons other than the AAI or its counsel have made

a monetary contribution to the preparation or submission of this brief.

frustrate or delay the emergence of competitive markets. In

the context of such a transition, it is both unnecessary and

unhelpful to insist that the antitrust laws must be

suspended until the transition is by some measure

“complete.” The scope of antitrust law should not be

artificially limited in a manner that inhibits it from

accommodating the new factual circumstances created by

deregulation. When particularly egregious conduct

threatens to derail progress toward competition, or to deny

consumers of the benefits of newly competitive markets, the

federal courts should be empowered to intervene. See A.A.

Foer & D.L. Moss, Electricity in Transition: Implications for

Regulation and Antitrust, 24 Energy L.J. 89 (2003).

Second, the AAI is concerned with the preservation of well-

settled principles of antitrust law as they apply to

transitional as well as in more traditional contexts. In

particular, the AAI urges this Court to refrain from

eviscerating the essential facilities or monopoly leveraging

doctrines by interposing unreasonably burdensome

requirements of pleading or proof.

Finally, the AAI believes that any decision of this Court

should take full cognisance of the procedural posture of the

instant case, i.e., that a motion to dismiss is under review

without the benefit of the development of a factual record.

Summary of the Argument

The AAI as amicus curiae argues herein that the amended

complaint in this case both asserts a legally cognizable

claim and alleges sufficient facts to support that claim. AAI

therefore urges affirmance of the court of appeals’ decision

reversing the Order and Opinion of the district court

granting petitioner's motion to dismiss respondent’s civil

antitrust claim.

The Telecommunications Act of 1996, Pub.L. 104-104, 110

Stat. 56 (1996), codified at 47 U.S.C. § 151 et seq. (“1996

Act” or the “Act”), requires that monopoly incumbent local

exchange carriers (“ILECs”) provide certain services to

competitive local exchange carriers (“CLECs”), particularly

“interconnection” with their local networks on terms that

are “just, reasonable and non-discriminatory” so that

CLECs can compete with ILECs in existing and emerging

telecommunications markets. 47 U.S.C. § 251. The 1996 Act

establishes a set of procedures for making and enforcing

“interconnection agreements” between ILECs and CLECs

for access to local networks. 47 U.S.C. § 252.

Respondent brought suit under Section 2 of the Sherman

Act, 15 U.S.C. § 2, and Section 4 of the Clayton Act, 15

U.S.C. § 15(a), alleging that petitioner caused antitrust

injury by failing to fulfill its duties under its

interconnection agreement with the CLEC of which

respondent was a customer.

1. Respondent’s antitrust claim is cognizable

notwithstanding the regulatory scheme established in the

1996 Act. Although precedent exists for insulating

exclusionary conduct from antitrust liability because of the

market effects of economic regulation, this principle does

not apply to the case at bar. No regulatory “necessity” or

“approval” can be raised to justify or excuse petitioner's

alleged anticompetitive conduct. In fact, the market effect

of the 1996 Act is to expand the scope of competition. As a

result, the duties of an ILEC to refrain from anticompetitive

conduct are correspondingly enlarged. By introducing new

areas of competition, the 1996 Act widens the scope for

conduct that offends the requirements of the antitrust laws.

The introduction of competition thus creates an additional

area in which one must refrain from anticompetitive

conduct. This factual circumstance is entirely consistent

with the express antitrust savings clause in the Act, 47

U.S.C. §152, note, 110 Stat. 56, 143 (1996), which forecloses

any finding of antitrust immunity.

As it pertains to the local exchange market, the primary

purpose of the 1996 Act is to effect a transition from a

monopolistic market to a competitive one. Concurrent

application of the antitrust laws and the 1996 Act will

promote this transition. Moreover, well-settled principles of

statutory construction require that where two statutes

cover the same subject area, both should be given effect to

the maximum extent possible. Because there is no “positive

repugnancy” between the antitrust laws and the 1996 Act,

the two statutes should be applied in a complimentary

manner.

Permitting respondent to prosecute its claim will not affect

the scope of affirmative duties required of a monopolist to

deal with its rivals under existing antitrust principles.

Petitioner's duty to grant access to requesting CLECs arises

under the 1996 Act and not under the antitrust laws.

Nonetheless, petitioner continues to be subject to a negative

duty to refrain from conduct that frustrates the pro-

competitive provisions of the Act. Affirmance in the instant

case would not create precedent for the expansion of

antitrust duties of a monopolist to deal with its rivals; it

would, however, support the proposition that interference

with a statutorily mandated introduction of competition can

provide the factual basis for an antitrust claim.

Reformulation of the essential facilities or monopoly

leveraging doctrines, as urged in particular by the

government in its brief as amicus curiae, is unwarranted.

Requiring a Section 2 claimant to establish that a

defendant’s conduct rises to the level of economic

irrationality in order to plead a claim under these theories

would serve no useful purpose. These well-established

doctrines already subsume the kind of exclusionary and

anticompetitive conduct prohibited by Section 2. No

claimant should be saddled with pleading and proving a

negative fact in order to establish exclusionary conduct. If

some claim of a consumer benefit can be made, or there is -

some reason why a defendant’s exclusionary conduct is not

overly restrictive, it is for the defendant and not the

plaintiff to bear the burden of going forward with evidence

to that effect.

2. The amended complaint alleges a violation of

Section 2 of the Sherman Act because it sufficiently

articulates the elements of such a claim. Respondent alleges

that petitioner breached its duties under its interconnection

agreement with respondent’s CLEC by filling its own orders

ahead of those of the CLEC’s customers, delaying orders,

and “making it difficult for its competitors to provide

service in the Local Phone Service market on the level that

[it] is able to provide to its customers in that market.” Am.

Compl. 4 21, 52. Respondent asserts that this breach was

without any valid business purpose. These statements are

sufficient to place petitioner on notice of the nature of the

claim. Dismissal of the claim because of the absence of

specific language or phraseology is contrary to the essential

requirements of law.

In particular, petitioner urges that the amended complaint

is deficient because it fails to allege that petitioner's

conduct would make no economic sense but for its tendency

to perpetuate petitioner's monopoly. But, it could not be

otherwise: There can be no legitimate economic rationale

for breaching a statutorily mandated interconnection

agreement. No consumer will purchase telephone service

from a provider who cannot connect them to all other users

on the network. The breach of an interconnection

agreement, therefore, makes competition impossible. By the

very nature of the industry, a breach of an interconnection

agreement forestalls the transition to competition

contemplated by the Act and perpetuates petitioner’s

monopoly.

Argument

The district court below granted petitioner’s motion under

Fed.R.Civ.P. 12(b)(6) to dismiss respondent’s private

antitrust claim. Law Offices of Curtis V. Trinko, L.L.P. v.

Bell Atlantic Corp., 123 F.Supp.2d 738, 742 (S.D.N.Y.,

2000). The Second Circuit Court of Appeals reversed. 305

F.3d 89 (2™ Cir., 2002) (“Trinko”). This Court granted

certiorari solely for review of the Question Presented. Sub

nom., Verizon Communications, Inc. v. Law Offices of Curtis

V. Trinko, ___ U.S. ___, 123 S.Ct. 1480, 155 L.Ed.2d 224

(2003).

Fed.R.Civ.P. 12(b)(6) codifies the common law plea of

demurrer, i.e., that the complaint fails “to state a claim

upon which relief can be granted.” It tests the legal

sufficiency of the claim, to screen out lawsuits “that are

fatally flawed in their legal premises and destined to fail *

* *” Advanced Cardiovascular Systems, Inc. v. Scimed Life

Systems, Inc., 988 F.2d 1157, 1160 (Fed.Cir., 1993).

Dismissal under the Rule is warranted when a claim either

i) asserts a legal theory that is not cognizable as a matter

of law, or ii) fails to allege sufficient facts to support a

cognizable legal claim.

It is axiomatic that the standard of review requires

accepting the allegations in the complaint as true, and

affirming dismissal of the claim

only if it is clear that no relief could be

granted under any set of facts that could be

proved consistent with the allegations.

Hinshon v. King & Spalding, 467 U.S. 69, 73,

(1984), accord, Trinko, supra, 309 F.3d 71

(Sack, J., concurring in part and dissenting

in part) and Covad Communications Co. v.

Bell Atlantic Corp., 201 F.Supp.2d 123, 128

(D.D.C., 2002)(“Covad-Bell Atlantic”).

Summary disposition of an antitrust case before the

plaintiff has had the opportunity for discovery, as this

Court has noted, “should be granted very sparingly.”

Hospital Building Co. v. Trustees of Rex Hospital, 425 U.S.

738, 746 (1976). Only if “it appears beyond doubt that the

plaintiff can prove no set of facts in support of his claim

which would entitle him to relief,” is the claim not

cognizable as a matter of law. McClain v. Real Estate Bd. of

New Orleans, Inc., 444 U.S. 232, 246 (1980) (quoting Conley

uv. Gibson, 355 U.S. 41, 45-46 (1957))[emphasis added]. This

rule applies with no less force to a Sherman Act claim. Ibid,

444 U.S. at 246.

RESPONDENT'S ANTITRUST CLAIM IS

COGNIZABLE NOTWITHSTANDING THE

REGULATORY SCHEME ESTABLISHED IN THE

TELECOMMUNICATIONS ACT OF 1996

Typically, the issue of whether an antitrust claim against

a defendant subject to market-regulating legislation is

cognizable depends on whether the offending conduct is

expressly or impliedly immune from antitrust scrutiny on

account of the regulatory scheme.’ In the present case,

* See, e.g., Natl Railroad Passenger Corp v. Nat Ass'n of Railroad

Passengers, 414 U.S. 453 (1974)(interstate railroads); California Motor

Transport Co. v. Trucking Unlimited, 404 U.S. 508 (1972)(trucking);

Maryland & Virginia Milk Producers Ass'n v. U.S., 362 U.S. 458

(1960)(milk production); U.S. Navigation Co., Inc. v. Cunard S.S. Co.,

Ltd., 284 U.S. 474 (1932)(maritime shipping); U.S. v. Philadelphia

National Bank, 374 U.S. 321 (1963)(banking); U.S. v. Radio Corp. of

America, 358 U.S. 334 (1959)(broadcasting); Otter Tail Power Co. v. U.S.,

410 U.S. 366 (1973)(electricity wholesaling); California v. FPC, 369 U.S.

482 (1962)(natural gas); Nat? Gerimedical Hosp. & Gerontology Center

v. Blue Cross of Kansas City, 452 U.S. 378 (1981)(health care); Hartford

Fire Insurance Co. v. California, 509 U.S. 764 (1993)(insurance); Pan

(continued...)

however, the express antitrust savings clause in the 1996

Act forecloses antitrust immunity.’ 47 U.S.C. §152, note,

110 Stat. 56, 143 (1996), Goldwasser v. Ameritech Corp.,

222 F.3d 390 (7™ Cir., 2000). As the Goldwasser court

stated, “Our principal holding is * * * not that the 1996 Act

confers implied immunity * * *. Such a conclusion would be

troublesome at best given the antitrust savings clause in

the statute.” 222 F.3d, at 401. Despite this, the Goldwasser

court nonetheless found that the antitrust claim before it

was not cognizable, accord, Cavalier Tel. Co. v. Verizon Va.,

Inc., No. 02-1337, 2003 WL 21153305 (4 Cir., May 20,

2003). One interpretation of the Goldwasser decision limits

its applicability to the particular complaint before that

court, the dismissal of which is attributable to the plaintiffs

failure to allege sufficient facts. However, numerous lower

courts, including the district court in the present case, have

relied on Goldwasser as authority for the proposition that

antitrust claims against incumbent local telephone carriers

must be dismissed as a matter of law.‘

At least three legal avenues other than implied immunity

*(...continued)

American World Airways, Inc., v. United States, 371 U.S. 296 (1963),

Hughes Tool Company v. Trans World Airlines, Inc., 409 U.S. 363

(1973)(air transport); Silver v. New York Stock Exchange, 373 U.S. 341

(1963), Gordon v. New York Stock Exchange, Inc., 422 U.S. 659

(1975)(securities).

“The Senate Report analyzing the bill specifically provided: “[T]he

provisions of this bill shall not be construed to grant immunity from any

future antitrust action against any entity referred to in the bill.” S. Rep.

No. 104-23, at 17 (1995) (R2-7-A18).

“See Covad-Bell Atlantic, supra (collecting cases). However, the Second

Circuit in the instant case, the Eleventh Circuit in Covad

Communications Co., et al. v. BellSouth Corp., 299 F.3d 1272 (11 Cir.),

reh'g den., 314 F.3d 1272 (2002)(“Covad-BellSouth”), and the Ninth

Circuit in MetroNet Services Corporation v. USWest Communications, 325

F.3d 1086 (9 Cir., 2003) have taken the opposite view.

may bar an antitrust claim in the context of a regulated

industry. First, the so-called “filed rate doctrine,” adopted

by this Court in Keogh v. Chicago & N.W. Ry. Co., 260 U.S.

156 (1922) and reaffirmed in Square D Co. v. Niagara

Frontier Tariff Bureau, Inc., 476 U.S. 409 (1986), bars

antitrust claims which seek remedies that are incompatible

with the rate approval process of a regulatory agency.

Second, the doctrine of “primary jurisdiction” requires a

district court to defer an antitrust claim where the case

“requires resolution of issues which, under a regulatory

scheme, have been placed within the special competence of

an administrative body.” Ricci v. Chicago Merc. Exch., 409

U.S. 289 (1973). “[I]n such a case the judicial process is

suspended pending referral of such issues to the

administrative body for its views.” United States v. Western

Pacific R. Co. 352 U.S. 59, 64 (1956), citing General

American Tank Car Corp. v. El Dorado Terminal Co., 308

U.S. 422, 433 (1940).

Finally, limitations on the cognizability of antitrust claims

against regulated entities may arise from the alteration of

the market environment induced by regulation. Thus, in

Town of Concord, Ma. v. Boston Edison Co., 915 F.2d 17 (1"

Cir., 1990), cert. denied, 499 U.S. 931 (1991), the court of

appeals did not say either that the antitrust laws did not

apply to the electrical wholesale market or that they

applied less stringently, but rather that the regulatory

scheme itself made “a critical difference in terms of

antitrust harms, benefits, and administrative

considerations.” 915 F.2d, at 23. Similarly, as then-judge

Kennedy wrote in Phonetele, Inc., v. American Telephone

and Telegraph Company, 664 F.2d 716, 737 (1981), “While

a given regulatory scheme may not amount to the degree of

necessity required to confer implied immunity on all

activities of a regulated entity, some degree of necessity

may be established as a matter of fact in individual cases.”

See also Otter Tail, supra, note 2.

Goldwasser, by contrast, does not rely on the “fact-based”

inquiry into the relationship between regulation and

antitrust suggested by Town of Concord and Phonetele. The

regulatory scheme in the Act does not alter the market in a

way that supports a bar to respondent’s claim. In fact, just

the opposite: The pro-competitive changes in the market

induced by the 1996 Act have altered the market in such a

way as to support respondent’s antitrust claim. Moreover,

the antitrust remedies sought by respondent do not conflict

in a manner analogous to the conflict with administrative

rate-setting that underlies the filed rate doctrine. That

doctrine is inapposite here, and to the extent Goldwasser

relied on the filed rate doctrine to affirm the dismissal of

the complaint in that case, it erred.

A. The 1996 Act Does Not Insulate Petitioner’s

Conduct from Antitrust Scrutiny.

The fact-based rationale underlying both Town of Concord,

supra, and the filed rate doctrine of Keogh and Square D,

supra, is straightforward: Antitrust analysis depends on

specific market conditions which, in turn, depend on

applicable economic regulation. Under both doctrines, a

Section 2 Sherman Act claim cannot survive when

regulatory oversight sufficiently reduces the likelihood that

alleged anticompetitive conduct will result in the requisite

exclusionary effect. But, such “transactional immunity” for

conduct that might otherwise violate the antitrust laws

requires specific and intimate supervision of the challenged

conduct by the regulatory agency. In the present case, no

comparable regulatory oversight exists to attenuate the

exclusionary effect of petitioner’s alleged breach of its

interconnection duties.

Admittedly, the 1996 Act establishes elaborate procedures

for negotiating and implementing interconnection

agreements between ILECs and CLECs. The procedural

role for regulators under the Act, however, plainly does not

extend to overseeing or supervising an ILEC’s performance

of its contractual interconnection duties. Nor does the Act

provide an on-going oversight mechanism intended to

prevent the challenged conduct. Requiring ILECs to enter

into interconnection agreements presupposes that such

agreements will be honored by the subscribing parties. The

failure to abide by such an agreement can in no way be

justified by any of the procedures in the Act. There can be

no inference that the alleged misconduct arises out of any

regulatory “necessity” or “approval.” The “factual

justification” which excused arguably anticompetitive

conduct by the defendants in Town of Concord and Square

D, therefore, is entirely absent in the present case.

The present case is thus analogous to U.S. v. Radio Corp. of

America, supra, note 2, where this Court held that the

antitrust laws apply to television broadcasters despite the

“pervasive regulation” of the industry by the FCC. Indeed,

that case represents an even more extreme example of a

regulatory scheme co-existing with antitrust enforcement.

Even in the face of express FCC approval, broadcasters

were still not shielded from antitrust liability for mergers

with anticompetitive effects. The Second Circuit Court of

Appeals in the case at bar, together with the Eleventh

Circuit in Covad-BellSouth, supra, note 4, and the Ninth

Circuit in MetroNet, supra, note 4, firmly rejected the

proposition that an antitrust claim is barred as a matter of

law “on the basis of an allegation of anti-competitive

conduct that happens to be ‘intertwined’ with obligations

established by the 1996 Act,” Covad-BellSouth, supra, note

4, 314 F.3d, at 1282, or because the antitrust claim was

“inextricably linked” to allegations that section 251 of the

Telecommunications Act has been violated, Trinko, supra,

305 F.3d, at 109.

B. The 1996 Act Expands the Scope of

Competition and also an Incumbent’s Duty to

Refrain from Anticompetitive Conduct.

The analytical framework of Town of Concord, however,

does more than defeat any claimed justification for

petitioner's alleged anticompetitive conduct. If a statute

that serves to replace competition with governmental

control is a “fact of market life” which can alter the

“antitrust harms, benefits, and administrative

considerations” pertaining to the conduct of a regulated

entity, so too should a statute which replaces governmental

control with competition. The clear purpose of the 1996 Act

is to “provide for a pro-competitive, de-regulatory national

policy framework * * * by opening all telecommunications

markets to competition * * *.” H.R.Conf.Rep. No. 104-458,

at 1 (1996). The Act thus turns the typical regulatory

scheme on its head by replacing monopolistic markets with

competitive ones. Such deregulatory legislation also inverts

the analysis in Town of Concord. Newly competitive

markets give rise to new factual circumstances, which, in

turn, give rise to new opportunities for the violation of the

antitrust laws.

This result does not depend on any “modification” of the

antitrust laws, which would be expressly prohibited by the

savings clause. The introduction of a competitive

environment, however, does create an additional area in

which one must refrain from antitcompetitive conduct.

Even allowing that “conduct that did not violate antitrust

law prior to the 1996 Act does not now violate antitrust law

after the Act” (Covad-Bell Atlantic, supra, 201 F.Supp.2d,

at 131), a competitive environment in the local exchange

market was created by the Act which simply d‘d not exist

before. Once the Congressionally mandated interconnection

agreements are in place, parties to those agreements should

be held to account for the natural consequences of their

breach, including any anticompetitive effects. The

. "Ss

successful emergence of competition critically depends on

the faithful performance of these agreements, in the

absence of which the intent of the statute and competition-

in-fact is frustrated.

The analysis in Goldwasser and Covad-Bell Atlantic cannot

be reconciled with the alteration in market conditions

engendered by the 1996 Act. By requiring that the

plaintiffs allegations in that case “be divorced from its 1996

Act context such that it states a freestanding antitrust

claim for Rule 12(b)(6) purposes,” (Goldwasser, supra, 222

F.3d, at 401) the Goldwasser court created an

insurmountable pre-condition. No antitrust claim can be

divorced from the conditions in the relevant market. The

fact that those conditions are a creature of the 1996 Act

does not transform preexisting duties to refrain from

exclusionary or anticompetitive conduct rooted in the

antitrust laws into statutory duties that arise solely from

the unique provisions of the 1996 Act. The obvious fact that

without the interconnection agreement required by the Act

petitioner would face no antitrust liability for its breach in

no way vitiates the gravamen of respondent’s claim.

C. Concurrent Application of the 1996 Act and the

Antitrust Laws Will Promote the Transition to

Competition.

Preclusion of respondent’s claim is inconsistent with the

transition of the local exchange market from monopoly to

competition in yet another respect. The intended end result

is a competitive local exchange market to which antitrust

law fully applies. Any bar to antitrust relief for

anticompetitive conduct by an ILEC in connection with its

statutory duties to assist rivals, therefore, must, at some

point, come to an end. When should such a moratorium be

lifted?

In Goldwasser, the court takes the view that a private

antitrust claim will not lie until local telephony becomes

sufficiently competitive, as evidenced by some future

administrative or legislative act that “dismantles” the local

exchange provisions of the 1996 Act. According to

Goldwasser, the Act’s antitrust savings clause does not

authorize applying the antitrust law to thx local telephone

market because the local market is unlike

many markets within’ the

telecommunications industry that are

already open to competition and that are not

subject to the detailed regulatory regime we

have been discussing; as to those, the

antitrust savings clause makes it clear that

antitrust suits may be brought today. At

some appropriate point down the road, the

FCC will undoubtedly find that local markets

have also become sufficiently competitive

that the transitional regulatory regime can

be dismantled and the background antitrust

laws can move to the fore. * * * [Tjhis is not

what Congress has mandated at this time for

the ILEC duties that are the subject of the

Goldwasser complaint. Goldwasser, 222 F.3d,

at 401-02.

Unfortunately, no legal authority was cited to support this

distinction between those markets to which the savings

clause should apply and those to which it should not. Nor is

there any evidence that Congress intended a consecutive

application of the Act followed at some later time by the

antitrust laws. Indeed, the legislative history reveals that

Congress intended that the antitrust laws and the local

telephony deregulatory provisions of the Act apply

concurrently and in a complimentary manner. The

conference committee stated that the savings clause

“prevents affected parties from asserting that the bill

impliedly preempts other laws.” Joint Explanatory

Statement of the Committee of Conference, H.R. Conf. Rep.

No. 104-458, S. Rep. No. 104-230, at 201 (1996). Similarly,

the continued vitality of the antitrust laws in the

telecommunications industry was commended in

statements made by Representative Conyers and Senators

Thurmond and Leahy.*®

° Antitrust law is synonymous with low prices and

consumer protection—and that is exactly what we need

in our telecommunications industry * * *. [T)he bill

contains an all-important antitrust savings clause

which ensures that any and all telecommunications

merger and anticompetitive activities are fully subject

to the antitrust laws * * *. And by maintaining the role

of the antitrust laws, the bill helps to ensure that the

Bells cannot use their market power to impede

competition and harm consumers. Covad-BellSouth,

supra, note 4, 314 F.3d, at 1281, quoting, 142 Cong.

Rec. H1145-06 (daily ed. February 1, 1996)(statement

of Rep. Conyers).

The second important antitrust issue in this legislation

is the unequivocal antitrust savings clause that

explicitly maintains the full force of the antitrust laws

in this vital industry. Today we take for granted that

the antitrust laws apply to the communications sector

***. Application of the antitrust laws is the most

reliable, time-tested means of ensuring that

competition, and the innovation that it fosters, can

flourish to benefit consumers and the economy. /d.,

quoting, 142 Cong. Rec. S687-01 (daily ed. February 1,

1996) (statement of Sen. Thurmond).

I firmly believe that we must rely on the bipartisan

principles of antitrust law in order to move as quickly

as possible toward competition in all segments of the

telecommunications industry, and away from

regulation. Relying on antitrust principles is vital to

ensure that the free market will work to spur

competition and reduce government involvement in the

industry. Id., quoting, 141 Cong. Rec. $18586-01 (daily

ed. December 14, 1995) (statement of Sen. Leahy).

The Goldwasser decision and the cases that follow it rule

out ex ante any complementarity between the two legal

regimes. This “either-or” approach to the monopoly-to-

competition transition of the local exchange market violates

a “cardinal principle” of statutory construction, explicated

by this Court in U.S. v. Borden, Co., 308 U.S. 188 (1939):

When there are two acts upon the same

subject, the rule is to give effect to both if

possible. * * * The intention of the legislature

to repeal ‘must be clear and manifest’. It is

not sufficient as was said by Mr. Justice

Story in Wood v. United States, 16 Pet. 342,

362, 363, 10 L.Ed. 987, ‘to establish that

subsequent laws cover some or even all of the

cases provided for by (the prior act); for they

may be merely affirmative, or cumulative, or

auxiliary. There must be ‘a _ positive

repugnancy between the provisions of the

new law and those of the old; and even then

the old law is repealed by implication only,

pro tanto, to the extent of the repugnancy’.

308 U.S., at 198-199 [citations omitted].

Accord, Silver v. New York Stock Exchange, supra, note 2

(applying the Borden test in the antitrust context).

By contrast, the apparent construction given by the

Goldwasser court to the antitrust laws and the 1996 Act in

pari materia is that “[t]he 1996 Act is, in short, more

specific legislation that must take precedence over the

general antitrust laws, where the two are covering precisely

the same field.” 222 F.3d, at 401. In the absence of the

requisite “positive repugnancy,” such a construction violates

the plainly stated rule in Borden.

To establish such repugnancy, petitioner, following

Goldwasser, argues that a private antitrust claim in the

circumstances at bar is irreconcilable with the 1996 Act

because the latter places exclusive control of the monopoly-

to-competition transition in the hands of the FCC and the

state utility commissions. A party would be able, by the

simple act of filing an antitrust suit, to transfer that task to

the federal courts.° But, permitting respondent’s claim to

proceed will have no such effect, and petitioner fails to go

beyond the mere assertion that it will. The regulatory

scheme established by Congress will not be “wiped away” by

the filing of a private antitrust claim in the present

circumstances.

Certainly, not all conceivable antitrust claims can be

reconciled with the procedures established under the 1996

Act as can the case at bar. For example, a competitive

carrier dissatisfied with the outcome of interconnection

negotiations regulated by the Act should not be permitted

to sidestep those regulatory procedures by filing an

antitrust action. Should such a claim reach adjudication by

a district court, petitioner’s dire prognostications may very

well come true. But, this is not such a case. In this case, the

regulation has come to an end-point, in the sense that the

procedures of the Act related to introducing competition

have been successfully implemented. In the absence of

petitioner's alleged recalcitrance in fulfilling its

interconnection duties, the quantum of competition

intended by the statute would exist unimpeded.

Respondent’s claim seeks no reform of the negotiated

interconnection duties, or any alteration of their scope or

terms. The claim simply seeks a remedy for interference

. There would, in short, be no escaping the imposition of

novel and inappropriate regulatory tasks on antitrust

judges and juries if Section 2 were now expanded to

embrace respondent's claim. Antitrust judges and

juries would become the shadow, omnipresent

regulators of the telecommunications industry—even

more than the district court that supervised the Bell

breakup decree. Pet. Br., at 34.

with competitive arrangements which the Act has already

established. In these circumstances, no opportunity exists

for the district court to act as regulator, or for juries to

substitute their judgment about the nature or scope of the

competitive arrangements mandated by the Act.

The application of the antitrust laws in an environment in

which the competitive relationships among the parties have

been fully settled serves the useful purpose of identifying

conduct which, if permitted, would be so egregious as to

threaten the transition to and the viability of statutorily-

mandated competition. Moreover, respondent’s claim

provides a remedy for those consumers injured when the

pro-competitive purposes of the Act have been undermined.

See Long Lake Energy Corporation v. Niagara Mohawk

Power Corporation, 700 F.Supp. 186, 188-9(S.D.N.Y., 1988)

(“Although * * * there are a host of agency proceedings now

underway * * * these agencies do not have the power to

grant the relief sought in this action, treble damages for

alleged violations of the antitrust laws and a broad

injunction against further anticompetitive acts.”) Antitrust

law can and should prevent the transition to a competitive

environment from backsliding in the face of conduct of the

type alleged by respondent.

D. Respondent’s Claim Will Have No Effect on the

Scope of Affirmative Duties Required of a

Monopolist Under Existing Antitrust

Principles.

Respondent’s claim involves no novel extension of the

affirmative duties required of a monopolist as they

presently exist under Section 2 of the Sherman Act. Such an

expansion of the scope of Section 2 does not follow from the

cognizability of respondent’s claim. The scope and terms of

access which petitioner is required to grant under any given

interconnection agreement are not issues that require

adjudication in any antitrust litigation. The fact that the

1996 Act imposes duties that “go well beyond anything the

antitrust laws would mandate on their own,” Goldwasser,

supra, 222 F.3d, at 400, does not nullify the negative duties

in the antitrust law to refrain from actionable

anticompetitive conduct. Certainly, the Goldwasser court is

correct to decline “to equate a failure to comply with the

1996 Act with a failure to comply with the antitrust laws.”

222 F.3d, at 401. But, just as certainly, an antitrust

violation that happens also to involve a failure to comply

with an interconnection agreement required by the Act does

not imbue the antitrust laws with additional duties that

stem from the statute.

Indeed, if respondent’s duties to grant access to its CLEC

counterparties arise under its interconnection agreements

and not under the antitrust laws, as petitioner asserts,

there would be little or no precedential effect on the scope

of the essential facilities or monopoly leveraging doctrines

from a decision by this Court that petitioner’s alleged

interference with the pro-competitive arrangements of the

Act are actionable under the antitrust laws. Such a holding

would not support a claim that antitrust principles have

been expanded by this Court so as to encompass the more

exacting duties imposed by the statute.

Affirmance in this case would lend support, however, to the

proposition that the failure to perform statutory duties

designed to promote a transition to competition in the

marketplace—when accompanied by the other requisite

elements of a Section 2 offense—may form the factual basis

of a viable antitrust claim.

It is puzzling, therefore, that both petitioner and the United

States and the Federal Trade Commission as amici curiae

devote so much argumentation to the issue of the extent to

which a monopolist ought to be compelled to share

resources or grant access to rivals. Petitioner urges that

“respondent’s proposed Section 2 duty to provide rivals

adequate affirmative assistance * * * reduces the incentives

that antitrust law centrally encourages” and “creates

significant costs of implementation.” Pet. Br., at 27-8.

Similarly, the government argues that

courts should be hesitant to impose a duty to

assist rivals. The decisions of a seller, even a

monopolist, regarding to whom it will sell, on

what terms, and under what sort of quality

and purchaser-satisfaction measures,

generally reflect its own assessment of how

to compete and provide goods most effectively

in the marketplace. U.S. Br., at 20.

In the same vein, the government argues that affirmance in

this case “would fundamentally transform the Sherman

Act” so that monopolists would have to “pull their

competitive punches, assist their competitors, convert

themselves from retailers into wholesalers, and share

monopoly profits on demand.” U.S. Br., at 30.

But these issues—the scope and terms of access to the local

exchange network—have all been settled in the context of

the Act, and are beyond the reach of respondent’s claim.

The appropriate forum before which to voice objections to

the interconnection obligations established by the Act is the

Congress, not before this Court in the context of an

antitrust claim seeking redress for the anticompetitive

effects of petitioner’s alleged failure to abide by established

legal requirements.

E. Reformulating the Pleading or Proof

Requirements of a Section 2 Claim Based on

the Essential Facilities or Monopoly

Leveraging Doctrines is Unwarranted.

The petitioner’s conditional duties to provide access to

certain of its local exchange facilities arises out of the 1996

Act and not out of Section 2 of the Sherman Act. Because of

this, the scope or continued validity of either the essential

facilities or monopoly leveraging doctrines of Section 2 are

inapposite in the present case. Despite the irrelevance of

such issues, however, a radical reformulation of these

doctrines is urged by petitioner and the government in their

respective briefs. Such a reformulation of these doctrines is

entirely unwarranted.

Both theories are fully consistent with leading decisions of

this Court upholding liability under Section 2 based on

exclusionary or anticompetitive conduct. With respect to the

essential facilities doctrine, in the exceptional

circumstances in which access to a truly essential facility is

necessary for the very existence of competition, the

imposition of an affirmative duty to deal based on Section

2 is entirely consistent with such decisions as Aspen Skiing

Company v. Aspen Highlands Skiing Corporation, 472 U.S.

585 (1985) and Otter Tail Power Co. v. U.S., supra, note 2.

See Pitofsky, R., et al., The Essential Facilities Doctrine

Under U.S. Antitrust Law, 70:2 Antitrust L.J., 443 (2002).

The suggestion by the court of appeals below that

respondent’s claim could be couched in terms of the

essential facilities doctrine does not somehow “dispense

with” the exclusionary conduct requirement of Section 2.

U.S. Br., at 20. As the Ninth Circuit described it,

When a firm’s power to exclude rivals from a

facility gives the firm the power to eliminate

competition in a market downstream from

the facility, and the firm excludes at least

some of its competitors, the danger that the

firm will monopolize the downstream market

is clear. In this circumstance, a finding of

monopolization, or at least attempted

monopolization, is appropriate and there is

little need to engage in the usual lengthy

analysis of factors such as intent. Alaska

Airlines, Inc. v. United Airlines, Inc., 948

F.2d. 536, 546 (9" Cir., 1991) [emphasis in

original].

Thus, the exclusion of competition lies at the very heart of

the essential facilities doctrine. The government urges,

however, that more than the mere exclusion of competition

should be required. In particular, it is urged not only that

the denial of access to an essential facility be exclusionary,

but also, citing Matsushita Electric Industries Co. v. Zenith

Radio Corp., 475 U.S. 574, 588-89 (1986), “economically

irrational for the monopolist but for the conduct’s adverse

impact on competition.” U.S. Br., at 16. Such a standard is

wholly inappropriate in the context of a claimed

exclusionary denial of an essential facility.

The reason can be traced directly to the circumstances of

the Matsushita case itself, in which this Court adopted the

skepticism of Chicago School economic scholars, who

stressed the implausibility of predatory pricing as a

profitable anticompetitive scheme. The combination of the

short-term benefits of lower prices for consumers and the

perceived implausibility that predatory pricing can be a

successful anticompetitive strategy led to the exercise of

extreme caution in predatory pricing cases in the form of a

severely strict standard of exclusionary or predatory

behavior.

However, the factors that led this Court to raise the bar in

predatory pricing cases are entirely absent from a provable

Section 2 claim based on an essential facilities theory, so

such extreme caution is unwarranted. It is sufficient that a

defendant be given an opportunity to establish that any

harm to competition is not disproportionate to the benefits

that may accrue to consumers from denying access to an

essential facility, or that superior efficiencies or other pro-

competitive justifications outweigh any anticompetitive

effects. To require a claimant to establish the “economic

irrationality” of a defendant's conduct in an essential

facilities case as part of its case-in-chief goes far beyond

anything that may be necessary to prevent the unjust result

that a competitor is held to task under the antitrust laws

for what may be essentially pro-competitive conduct.

Similarly, the government makes the same demand for a

prima facie showing of economic irrationality before a

claimant may establish a Section 2 claim based on a theory

of monopoly leveraging, U.S. Br., at 26. This doctrine is also

consistent with longstanding decisions of this Court, such

as U.S. v. Griffith, 334 U.S. 100 (1948) and Spectrum

Sports, Inc. v. McQuillan, 506 U.S. 447 (1993). There is no

rationale for such a severe standard in a monopoly

leveraging case. As this Court made abundantly clear in

Spectrum Sports, supra, 506 U.S., at 456, as long as a

“dangerous probability of monopolization” by a defendant

can be established, the exclusionary conduct element has

been satisfied.

Finally, aside from the fact that such issues are

fundamentally unrelated to the ultimate nature of

respondent's claim in the instant case, and irrespective of

the merits of the government’s desire to reformulate all

Section 2 cases in the image of Matsushita, such judicial

revisionism is not appropriate in the context of a motion to

dismiss. Even if this Court is inclined to yield to the

government's exhortations to dramatically alter the

jurisprudence of Section 2, it should only do so based on a

fully developed factual record, and not in the procedural

posture of the present case, in which the only issue is

whether respondent has pled sufficient facts to proceed to

gather proof that petitioner has violated the law.’

"The essential facilities cases cited above, for example, apply to vertically

related markets, in which control of an upstream input acts as the

“gateway” to a downstream market. Under the 1996 Act and FCC

(continued...)

Il.

THE AMENDED COMPLAINT ALLEGES A

VIOLATION OF SECTION 2 OF THE SHERMAN

ACT.

The fundamental elements of a claim for violation of Section

2 of the Sherman Act have been elaborated upon by this

Court on numerous occasions:

‘The offense of monopoly under § 2 of the

Sherman Act has two elements: (1) the

possession of monopoly power in the relevant

market and (2) the willful acquisition or

maintenance of that power as distinguished

from growth or development as a

consequence of a superior product, business

acumen, or historic accident.’ Eastman

Kodak Co. v. Image Technical Services, Inc.,

504 U.S. 451, 481 (1992), quoting United

States v. Grinnell Corp., 384 U.S. 563,

570-71 (1966), accord Goldwasser, supra,

222 F.3d, at 396-7.

Thus, having a monopoly does not by itself violate Section

2: a defendant must have engaged in improper exclusionary

acts to acquire or maintain its monopoly power, see United

States v. Aluminum Co. of America, 148 F.2d 416, 430 (2™

Cir., 1945) (“The successful competitor, having been urged

to compete, must not be turned upon when he wins.”). “The

[Sherman Act] directs itself not against conduct which is

competitive, even severely so, but against conduct which

"(...continued)

regulations, wholesale interconnection to the local loop is a separate

relevant market from retail telephone service. The instant case thus fits

squarely into the doctrine as a matter of law. At the very least, market

definition is a factual inquiry that is not amenable to summary

adjudication on a motion to dismiss.

unfairly tends to destroy competition itself.” Spectrum

Sports, supra, 506 U.S., at 458. However, as this Court

observed in Spectrum Sports, “It is sometimes difficult to

distinguish robust competition from conduct with long-term

anticompetitive effects.” 506 U.S., at 458-9.

In the analysis of conduct

it is relevant to consider its impact on

consumers and whether it has impaired

competition in an unnecessarily restrictive

way. If a firm has been ‘attempting to

exclude rivals on some basis other than

efficiency,’ it is fair to characterize its

behavior as predatory. It is, accordingly,

appropriate to examine the effect of the

challenged pattern of conduct on consumers,

on [the defendant's] smaller rival, and on

[the defendant] itself. Aspen Skiing Company

v. Aspen Highlands Skiing Corp., 472 US.,

at 605, quoting R. Bork, The Antitrust

Paradox 138 (1978) [footnote omitted].

A. The Amended Complaint Articulates the

Elements of a Claim Under Section 2 of the

Sherman Act.

The amended complaint states sufficient facts to allege a

cause of action under Section 2 of the Sherman Act under

the foregoing standards. The amended complaint alleges

that at the time material to the claim, petitioner had

monopoly power with respect to local telephone service in

the relevant geographic market, defined to be “those areas

in which [petitioner] is the ILEC, viz., most of or all of

Maine, New Hampshire, Vermont, Massachusetts, Rhode

Island, New York, New Jersey, Pennsylvania, Delaware,

Maryland, Virginia, West Virginia, the District of Columbia,

and those portions of Connecticut and other states in which

26 -

[petitioner] is the ILEC.” Am. Compl., 4410, 48.

Furthermore, the amended complaint alleges that

petitioner

has engaged in _ exclusionary and

anticompetitive behavior by, inter alia,

attempting to exclude or reduce the market

share of rivals in the Local Phone Service

[market] on a basis other than efficiency, i.e.,

by making it difficult for its competitors to

provide service in the Local Phone Service

market on the level that [petitioner] is able

to provide to its customers in that market.

This conduct has had an impact on

consumers and has impaired competition in

the Local Phone Service [market] in an

unnecessarily restrictive way. Am. Compl.,

452.

Moreover, it is alleged that petitioner has

increased the barriers to entry into the Local

Phone Service market in the Geographic

Market, has retarded the development of

competition within the Local Phone Service

market in the Geographic Market, and has

weakened the ability of competitors to

compete in the Local Phone Service market

within the Geographic Market. Am. Compl.,

953.

The amended complaint also alleges that petitioner's

“anticompetitive conduct” “had and has a dangerous

probability of preventing CLECs from establishing

significant positions in the Local Phone Service [market].

Am. Compl., 156. Moreover, respondent alleges that “[t}here

is no valid business reason for [petitioner's] behavior” which

was undertaken with a “specific intent to acquire a, or

maintain its, monopoly in the Local Phone Service market.”

Am. Compl., 4957, 58. Finally, it is alleged that the class of

which respondent is a representative has been injured in its

business and property interests. Am. Compl., 459.

These allegations constitute “a short and plain statement of

the claim showing that the pleader is entitled to relief,” as

required by the Fed.R.Civ.Proc. 8(a)(2). A statement which

“gives the defendant fair notice of what the plaintiffs claim

is and the grounds upon which it rests” is sufficient. Conley

v. Gibson, 355 U.S. 41, 47 (1957). “This simplified notice

pleading standard relies on liberal discovery rules and

summary judgment motions to define disputed facts and

issues and to dispose of unmeritorious claims.”

Swierkiewicz v. Sorema N. A., 534 U.S. 506, 512, (2002).

B. There Can Be No Legitimate Economic

Rationale for the Breach of a Statutorily

Mandated Interconnection Agreement.

Despite the express allegation that petitioner had no valid

business reason for its conduct, it is urged that because an

actionable Section 2 claim in this context requires

exclusionary conduct that must “make no business sense

except for its enabling monopoly returns,” “respondent’s

claim fails that test.” Pet. Br., at 21. This argument is

remarkable in two respects.

First, dismissal of respondent’s claim on account of a

claimed lack of specific language in the amended complaint

contravenes “(t]he Federal Rules [which] reject the

approach that pleading is a game of skill in which one

misstep by counsel may be decisive to the outcome and

accept the principle that the purpose of pleading is to

facilitate a proper decision on the merits.” Swierkiewicz,

supra, 534 U.S., at 514 (quoting Conley, supra, 355 U.S.., at

48).

Second, petitioner urges that “unprofitability of the conduct

without monopoly returns” is an “essential requirement for

unlawful unilateral conduct,” Pet. Br., at 23, while the

government argues that “a refusal to sell an input to a rival

when it requires the incumbent to forfeit profits would

make obvious business sense.” U.S. Br., at 20. This

argument is fallacious in this case for several reasons.

One reason is that so-called “network effects” make it all

but impossible for any benefit to accrue from petitioner's

violation of an interconnection agreement that is not related

to monopoly profits. Since no consumer will purchase

telephone service from a local carrier that cannot

interconnect with all other telephone users, competition is

not possible without inter-onnection. If petitioner’s conduct

is profitable, it is because—and only because—of its

anticompetitive effect. Petitioner’s alleged conduct cannot

be seen as a business strategy designed to accomplish

anything other than the perpetuation of its market power.

Even if, arguendo, the interconnection agreement requires

petitioner to sell access to its facilities below cost, the

conduct still lacks any valid business justification. This

Court has already established the legality of the TELRIC

pricing formula. AT&T Corp. v. Iowa Utils. Bd., 525 U.S.

366 (1999). Unfavorable terms in the wholesale market

cannot justify exclusionary practices in that market to

monopolize the retail market, where price-cost margins may

be higher.

Moreover, sound public policy militates against using the

profitable frustration of the 1996 Act as a legitimate

justification for exclusionary conduct. The transition from

a monopolistic market to a competitive one is bound to

create a modicum of economic hardship for an incumbent.

But this is what Congress has mandated. From the

incumbent's perspective, it may be eminently sensible to

attempt to forestall such a transition, but doing so is not a

legitimate form of competition. Having been encouraged to

enter markets that were previously closed to them, a CLEC

should not be impeded by an incumbent reluctant to abide

by the law, nor should respondent be deprived of an

antitrust remedy on the grounds that retarding the

transition to competition bestows economic benefits on the

incumbent. Conduct that frustrates the expressed will of

Congress should not shield petitioners from the legal

consequences of having inflicted injury of the type meant to

be addressed by the antitrust laws. See Brunswick Corp. v.

Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489 (1977)(“The

injury should reflect the anticompetitive effect either of the

violation or of anticompetitive acts made possible by the

violation.”).

Finally, as argued above (in Section I.E., supra), the burden

of showing a justification for allegedly exclusionary conduct

lies with petitioner. A claimant should not be required to

allege or prove the unprofitability of alleged anticompetitive

conduct in order to state a claim for which relief can be

granted. Creating such a burden serves no useful p: “pose.

It frustrates the intent of Section 2 and imposes an

unreasonable requirement on Section 2 claimants by

requiring the allegation or proof of facts which, in most

circumstances, cannot be known ab initio.

Conclusion

For the foregoing reasons, the judgment of the court of

appeals should be affirmed.

Respectfully submitted,