Supreme Court Decides Major Monopolization Case

On January 13, 2004, the Supreme Court issued its decision in Verizon Communications Inc. v. Law Offices of Curtis V. Trinko, LLP, No. 02-682. The Court's ruling represents a major decision in the area of monopolization under Section 2 of the Sherman Act and resolves perhaps the most important business case of the Term. The opinion addresses several significant antitrust theories applicable to monopolization cases and will effectively limit certain controversial antitrust doctrines. It could also make it substantially more difficult to bring a monopolization or attempted monopolization claim against a dominant firm, particularly in a regulated industry. This case was the subject of a Kilpatrick Stockton Antitrust Legal Alert on March 31, 2003.

Background

This lawsuit arose at the intersection of the Sherman Act and the Telecommunications Act of 1996. The Telecommunications Act sought to encourage competition and facilitate new entry in local telephone markets by requiring incumbent local exchange companies ("ILECs"), such as Verizon, to share their facilities at extremely attractive prices with new entrants into local telephone service, called competitive local exchange carriers ("CLECs"). CLECs claimed that Verizon filled its own customers' orders before those of the CLECs, failed at other times to fill CLEC orders at all, and failed to inform CLECs of the status of CLEC customer orders. In March 2000, Verizon paid a $3 million fine to end an FCC investigation into these allegations. Verizon also agreed to pay $10 million to CLECs injured by Verizon's conduct.

Trinko, a customer who bought local phone service from a CLEC, then filed an antitrust class-action suit. The suit alleged that Verizon failed to comply with the access requirements of the Telecommunications Act and that this conduct violated the monopolization provisions of Section 2 of the Sherman Act by restraining competition in the market for local telephone service and thereby injuring the class members as customers of the CLEC. The district court held that Trinko had antitrust standing, but it dismissed the suit on the ground that the complaint failed to state a cause of action under Section 2. The Second Circuit reversed, agreeing that Trinko had standing but concluding that the complaint set forth a monopolization claim.

The Supreme Court's Decision

In an opinion written by Justice Scalia for a six-Justice majority, the Court held that Verizon's alleged failure to...