Chapter VI. Immunities
| Pages | 299-343 |
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CHAPTER VI
IMMUNITIES
A. Introduction
Congress designed the Telecommunications Act of 1996 (the “1996
Act”) to foster competition in the local telephone service market and
transform the regulated monopoly telecommunications industry into a
regulated competitive market.1 To accomplish this goal, the 1996 Act
imposes on incumbent local exchange carriers (ILECs) “a host of duties
intended to facilitate market entry” and accelerate the development of
competition.2 “Foremost among these duties is the [ILEC’s] obligation
under [47 U.S.C. § 251(c)] to share its network with competitors.”3
Simultaneously, Congress made it clear that the 1996 Act is intended
to coexist with existing antitrust law. The 1996 Act explicitly repeals
Section 221 (a) of the Communications Act of 1934 (the
“Communications Act”),4 which had conferred antitrust immunity with
respect to mergers or consolidations approved by the Federal
Communications Commission (FCC). In addition, Section 152(b)(l) of
the 1996 Act states that “nothing in this Act or the amendments made by
this Act shall be construed to modify, impair, or supersede the
applicability of any of the antitrust laws.”5 Consequently, the 1996 Act’s
regulated competition scheme is not intended to provide general antitrust
immunity to the telecommunications industry. For this reason, immunity
in the telecommunications industry continues to be shaped by the judicial
application of general antitrust immunity principles.
Twice recently the U.S. Supreme Court has directly addressed the
interplay between the amended Communications Act’s regulatory
scheme and traditional antitrust concepts. In both cases the Court held
that, notwithstanding the defendant’s alleged failure to comply with
obligations imposed by the 1996 Act and the Federal Communications
Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat. 56
(1996), codified at 47 U.S.C. §§ 151 et seq. [hereinafter 1996 Act]).
2. Id. at 371.
3. Id.
4. 1996 Act, supra note 1, § 601(b)(2).
5. Id. § 601(b)(1).
300 Telecom Antitrust Handbook
Commission, the plaintiffs had failed to state a claim under the Sherman
Act.
In Verizon Commc’ns v. Law Offices of Curtis V. Trinko LLP,6 the
Supreme Court directly addressed the concept of antitrust immunity as
applied to the 1996 Act and resolved a split among the circuit courts as to
whether failure to provide reasonable access to essential facilities may
constitute an antitrust violation, even though access to such facilities is
governed by the 1996 Act. In an opinion by Justice Scalia, the Supreme
Court dismissed for failure to state a Sherman Act claim a complaint
alleging violations of antitrust laws because of an ILEC’s failure to
provide access to essential facilities on reasonable terms.
Justice Scalia began by reviewing the antitrust-specific savings
clause of the 1996 Act7 and observing that “just as the 1996 Act
preserves claims that satisfy existing antitrust standards, it does not
create new claims that go beyond existing antitrust standards.”8 The
Court found little antitrust precedent supporting the proposition that a
dominant firm like Verizon was required to cooperate with a rival,
especially where the rival was demanding that the firm enter into a new
and conceivably permanent commercial relationship. The access
obligations imposed by the 1996 Act did not change these traditional
principles. To the contrary, “[t]he 1996 Act’s extensive provision for
access makes it unnecessary to impose a judicial doctrine of forced
access.”9
In determining whether to apply traditional antitrust principles, the
Court observed,
[O]ne factor of particular importance is the existence of a regulatory
structure designed to deter and remedy anticompetitive harm. Where
such a structure exists, the additional benefit to competition provided
by antitrust enforcement will tend to be small, and it will be less
plausible that the antitrust laws contemplate such additional scrutiny.10
The Court concluded that, for several reasons, the regulatory
framework of the 1996 Act “significantly diminishes the likelihood of
6. 540 U.S. 398 (2004).
7. 1996 Act, supra note 1, § 152.
8. Trinko, 540 U.S. at 407.
9. Id. at 411.
10. Id. at 412.
Immunities 301
major antitrust harm.”11 First, to have access to the long-distance market
in the first place, “an incumbent LEC must be on good behavior in its
local market,” which includes the commitment to provide the
nondiscriminatory access to its unbundled network elements.12 That
commitment is enforceable by the FCC through continuing oversight and
the possibility of financial penalties.13
Second, the Court concluded that a trial court is poorly equipped to
evaluate allegations of whether an ILEC violated its access obligations
“not only because they are highly technical, but also because they are
likely to be extremely numerous, given the incessant, complex, and
constantly changing interaction of competitive and incumbent LECs
implementing the sharing and interconnection obligations.”14 Finally, the
Court observed, “[e]ffective remediation of violations of regulatory
sharing requirements will ordinarily require continuing supervision of a
highly detailed decree,” a role traditionally played by regulatory
agencies, not courts.15
The holding in Trinko was limited to antitrust claims based on
violations of the access obligations under Section 251 of the 1996 Act. In
Pacific Bell Tel. Co. v. linkLine Commc’ns,16 the Supreme Court,
resolving a conflict between circuit courts, extended Trinko to bar price-
squeeze claims under Section 2 of the Sherman Act when the defendant
carrier has no antitrust duty to deal with the plaintiff. As a condition to a
recent merger, defendant AT&T had been required by the FCC to
provide wholesale DSL transport services to independent firms “at a
price no greater than the retail price of AT&T’s DSL service.”17 The
plaintiffs were four independent Internet service providers who competed
with AT&T in the retail DSL market in California. They contended that
AT&T had monopolized the DSL market through a pricing strategy of
setting too high a price for “wholesale” DSL transport services to the
plaintiffs, and too low a price for “retail” sales of DSL services to the
consumers for whose business the plaintiffs were competing with AT&T.
Cir. 1990)) (internal quotation marks omitted).
12. Id.
13. Id. at 413.
14. Id. at 414.
15. Id. at 414-15.
16. 555 U.S. 438 (2009).
17. Id. at 443.
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