Justice Breyer: “… the European Commission. They have done all kinds of things.”

Posted on December 9, 2008 | Filed Under communication technologies 

Price squeeze, refusal to deal and/or predatory pricing in the DSL wholesale business - these are issues that not only European telecommunications regulators, competition authorities and courts have to deal with. In the US, the Supreme Court heard oral arguments yesterday in the case Pacific Bell v. Linkline (transcript here). The basic issue at stake in that case is whether a price squeeze claim based on antitrust regulation (specifically section 2 of the Sherman Act) can be brought in a matter that is (also) subject to industry specific regulation.

Pacific Bell, a vertically integrated company providing wholesale and retail DSL services, argued that under Trinko there was no antitrust duty to deal at all at the wholesale level, and thus no antitrust-based price squeeze claim could be brought against it. This view had not been shared by the Court of Appeals for the 9th Circuit. 

Surprisingly, in the oral arguments before the US Supreme Court, the respondent, Linkline, did not defend the decision of the 9th Circuit, but rather argued it should be vacated as it was incomplete. Much of the oral argument therefore was dedicated to the question of whether the Court would have to address the substance matter, and in doing so would need to reverse one of the most famous antitrust decisions: Alcoa. Or could the Court just vacate the decision of the 9th Circuit,

“leaving it up to the district court to proceed as it believes appropriate under the law with the Brooke Group claim [predatory pricing, not price squeeze]?
MR. BLECHER: I think -
JUSTICE BREYER: Is that a possible thing to say?
MR. BLECHER: And -
JUSTICE BREYER: Yes or no, please.
MR. BLECHER: It avoids the need to -
JUSTICE BREYER: Is it, yes, we could do that, or no -
MR. BLECHER: Yes.
JUSTICE BREYER: Yes we can?
MR. BLECHER: Yes, you can. That’s what we’re suggesting.”
[emphasis added]

Of course the issues at stake bear some resemblance to European cases, both under competition law and industry-specific regulatory intervention, most notably the cases Deutsche Telekom (price squeeze; see here) and Wanadoo/France Télécom (predatory pricing; see here)-cases, both already decided by the Court of First Instance and now pending at the European Court of Justice. Mr. Brunell, acting before the US Supreme Court on behalf of the American Antitrust Institute (amicus curiae for Linkline), even brought the European perspective - where it is accepted that the mere existence of regulatory authorities does not preempt the application of competition law - into view. Brunell quoted John Vickers of Oxford, and was asked by Justice Souters whether Vickers supports recognition of an antitrust price squeeze claim “in the circumstances in which there was regulatory involvement like the FCC”. In his reply, Brunell said: “I believe the European Commission also recognizes such a claim in the presence of regulation.” Justice Breyer then went on about Vickers, and stated he would be

“surprised that Vickers has written that under the circumstances I have outlined that there is a valid price squeeze antitrust claim or that the British Commission has held that. I would be very interested to know the citation of that. Because he may have done. I don’t read everything.
MR. BRUNELL: The European commission –
JUSTICE BREYER: I’m not saying the European Commission. They have done all kinds of things. I am saying the — the –
(Laughter.)
JUSTICE BREYER: I am saying the British Monopolies or Restricted Practices Commission of which Vickers was the head. I agree with you that he is very knowledgeable, but I would be surprised if he had written contrary to what I just said in that example.”

It is interesting to note that Justice Breyer does not seem to hold the European Commission - as a competition authority - in high regard. Also, Breyer is wrong on John Vickers, who was Director General/Chairman of the Office of Fair Trading, not of the “British Monopolies or Restricted Practices Commission” (he probably meant the Monopolies and Merger Commission, which since 1999 is the Competition Commission). And of course, even if the economic reasoning for/against antitrust action may be the same all over the world (at least in comparably developed economies), applicable law does differ. In fact, Mr. Burnell, in setting out his arguments for admitting an antitrust-based price squeeze claim in the US Supreme Court also neatly summarized some of the reasoning behind the European approach (as seen for instance in the Deutsche-Telekom Case) of applying both the standards of competition law and of telecommunications law.

“In this case you have a regulation that is designed to ensure that the monopolist does not extend its monopoly power into unregulated competitive markets. And so the — surely, the regulators focus — can focus on the wholesale rates and ensure in this case that the rate that the monopolist charges itself is the same as the rate it charges its rivals with the object of ensuring a competitive downstream market.

But that doesn’t mean that that should oust antitrust law. The regulators may, in fact, think that it’s important to have antitrust law available to enforce claims in order for them to cut back on their regulations. And indeed, in this case, when the — when AT&T sought to de-tariff its wholesale offering, the regulators referred to the fact that one of the justifications for de-tariffing would be that the antitrust laws would be available in case there were a problem.

So the — the relationship between antitrust and regulation is symbiotic and complementary.”

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One Response to “Justice Breyer: “… the European Commission. They have done all kinds of things.””

  1. “Come, deal justly with me”* - no duty to deal, no price squeeze : contentandcarrier on February 26th, 2009 2:07 am

    […] US Supreme Court issued its opinion in the case Bell v. Linkline on 25 Februar 2009 (see here for a previous post on that case with more details on the background). In its decision the Supreme […]

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