In an opinion authored by Chief Justice John Roberts, the U.S. Supreme Court held that a company with no antitrust duty-to-deal with a competitor cannot violate the antitrust laws by squeezing its wholesale and retail prices to such an extent that competitors are unable to earn a sufficient return at the retail level. The case involved a claim by internet services provider, linkLine Communications, against Pacific Bell Telephone. Following the Court’s recent decision in Verizon — which held that a regulatory duty-to-deal did not constitute an antitrust duty-to-deal — the Court ruled in favor of Pacific Bell, remanding for further consideration of the plaintiff’s predatory pricing claim, i.e. that Pac Bell’s retail prices were below cost.
As a matter of logic, the opinion appears to be clearly correct. If a company may refuse to sell to a competitor, and thus block all competition, then it cannot violate the antitrust laws by agreeing to sell, but at a high price. The real problem dates back to the Verizon decision that a regulatory duty-to-deal is not an antitrust duty-to-deal. If a regulatory program is designed to stimulate competition in a market that might not otherwise be competitive, efforts to stifle competition in that market should be tested under the antitrust laws unless the regulatory statute specifies otherwise or, at a minimum, the relevant regulatory agencies opposes the antitrust proceeding. Neither was true in Verizon.
In Pacific Bell, Chief Justice Roberts suggested that no antitrust duty-to-deal existed in the internet service market because it was a competitive market. To be sure, internet service can be provided through telephone lines, cable TV lines, and by satellite. But that competition may not reach all consumers, and may be sub-optimal for many reasons. Presumably, the lack of confidence in robust competition has led to a continuing regulatory duty on the part of telephone companies to provide access to competitive internet service providers.