Box 3-5: United States Tripartite Review [3.3.2]

Box 3-5: United States

Tripartite Review
Department of Justice, Federal Trade Commission, and
Federal Communications Commission

Quick Facts:

  • DOJ and FTC have authority to review telecommunications mergers.
  • FTC may not review common carrier transactions, but does review transactions involving cable or mass media entities.
  • FCC shares concurrent jurisdiction with DOJ and FTC to review mergers involving radio licence transfer or common carriers where there is a risk of substantial lessening of competition (Clayton Act), and to ensure that the merger is in the “public interest” (Telecommunications Act).
  • Memorandum of Agreement between DOJ and FTC allocates primary responsibility to DOJ for antitrust enforcement involving the media and entertainment industry, and telecommunications services and equipment industry. (The pre-Memorandum of Agreement AOL-Time Warner merger was reviewed by FTC as a result of DOJ’s clearance).

Verizon v. Tinko LLP – U.S. Supreme Court Case

In a 2004 decision, the Supreme Court considered whether Verizon’s alleged breach of its Telecommunications Act duties to share its network with competitors constituted an anti-trust claim under Section 2 of the Sherman Act, which prohibits firms from monopolizing or attempting to monopolize.1 The respondent Curtis Trinko (an AT&T customer that received services on Verizon lines) claimed that Verizon discriminated against AT&T customers by providing them services of lower quality than it provided to Verizon’s own customers, thus constituting a breach under the Telecommunications Act and the Sherman Act. In a unanimous decision the Supreme Court held that a breach of Telecommunications Act duty to share networks with competitors does not state a competition claim under the Sherman Act.2

In making it determination, the Court considered whether the Telecommunications Act has any effect on the “application of traditional antitrust principles.” It noted that while the Telecommunications Act contains certain duties to facilitate market entry by competitive carriers (i.e, the incumbent’s duty to offer access on “just, reasonable, and nondiscriminatory terms”, and the duty to allow physical “collocation”, permitting a competitor to locate and install its own equipment on the premises of the incumbent), this “does not automatically lead to the conclusion that they can be enforced by means of an antitrust claim.”3 The Court noted that Telecommunications Act’s contains a “saving clause,” as a result of which the Act does not modify or supersede the application of antitrust laws.4

The Court then proceeded to determine whether Verizon’s action in fact violated existing antitrust standards under the Sherman Act and court precedent (i.e., refusal to deal), and concluded that Verizon’s alleged insufficient assistance to competitors was not recognized as an antitrust claim under such standards. The Court also rejected the possibility of adding this case as one of the few “exceptions from the proposition that there is not duty to aid competitors,” because the existing regulatory structure designed to prevent and remedy anticompetitive harm would not benefit from such additional scrutiny. As a result, because Verizon was already subject to FCC and state oversight, and action had already been taken by the corresponding regulatory agencies against Verizon, the Court found no additional benefits in enforcing an antitrust claim.

ENDNOTES

1 Supreme Court of the United States, Verizon Communications Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 124 S.Ct. 872 (U.S.,2004).

2 Id.

3 Id.

4 Telecommunications Act § 601(d)(1) (establishing “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.”)

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