Pacific Bell Telephone Co. v. Linkline Communications, Inc.

555 U.S. 438 (2009)

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Nature of the Case

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Facts

This case involves the market for digital subscriber line (DSL) service, which is a method of connecting to the Internet at high speeds over telephone lines. D owns much of the infrastructure and facilities needed to provide DSL service in California. D controls most of the lines that connect homes and businesses to the telephone network. Competing DSL providers must generally obtain access to d's facilities in order to serve their customers. DSL faces robust competition from cable companies and wireless and satellite services. As a condition for a recent merger, D remains bound by the mandatory interconnection requirements and is obligated to provide wholesale 'DSL transport' service to independent firms at a price no greater than the retail price of D’s service. Ps are four independent Internet service providers (ISPs) that compete with D in the retail DSL market. Ps lease DSL transport service from AT&T pursuant to the merger conditions described above. D participates in the DSL market at both the wholesale and retail levels; it provides plaintiffs and other independent ISPs with wholesale DSL transport service, and it also sells DSL service directly to consumers at retail. Ps brought suit alleging that D violated § 2 by refusing to deal with Ps, denied Ps access to essential facilities, and engaged in a 'price squeeze.' D squeezed their profit margins by setting a high wholesale price for DSL transport and a low retail price for DSL Internet service. Shortly after the decision in Trinko, where the Court held that a firm with no antitrust duty to deal with its rivals at all is under no obligation to provide those rivals with a 'sufficient' level of service, D moved for judgment on the pleadings, arguing that Ps’' claims, in this case, were foreclosed by Trinko. The court held that Trinko 'simply does not involve price-squeeze claims.' D again moved to dismiss, arguing that price-squeeze claims could only proceed if they met the two established requirements for predatory pricing: below-cost retail pricing and a ''dangerous probability'' that the defendant will recoup any lost profits. The court concluded that the amended complaint, 'generously construed,' satisfied those criteria. The Court of Appeals for the Ninth Circuit affirmed the District Court's denial of D's motion for judgment on the pleadings on the price-squeeze claims. The Court of Appeals concluded that 'those claims should remain viable notwithstanding either the telecommunications statutes or Trinko.' The Supreme Court granted certiorari to resolve a conflict over whether a plaintiff can bring price-squeeze claims under § 2 of the Sherman Act when the defendant has no antitrust duty to deal with the plaintiff.