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Supreme Court Decision Update - Twombly v. Bell Atlantic Corp.

antitrust-744719.jpgTwombly v. Bell Atlantic Corp. (PDF of the Opinion) is a class-action antitrust lawsuit filed against the Baby Bells (the Incumbent Local Exchange Carriers), asserting that the telecommunications companies created a monopoly that prevented others from entering the industry by using similar business practices, such as pricing. The litigants, led by plaintiff William Twombly and including all the other subscribers of local telephone and/or high speed internet service from 1996 to the present, alleged that Bell Atlantic (which is now part of Verizon) and other telecommunication companies didn’t offer sufficient U.S. Federal Communications Commission-mandated assistance to new entrants to the industry, nor did they engage in active competition. “Their actions allegedly included making unfair agreements with the CLECs [competitive local exchange carriers] for access to ILEC networks, providing inferior connections to the networks, overcharging, and billing in ways designed to sabotage the CLECs’ relations with their own customers.” Additionally, the plaintiffs alleged, the ILECs conspired not to compete.

The Supremes disagreed, siding with the Baby Bells in another 7-2 opinion penned by Justice Souter. The central question was “whether the challenged anticompetitive conduct stem[ed] from independent decision or from an agreement, tacit or express.” The Court concluded that the plaintiffs complaint failed to show any sort of tacit or express agreement. “While a showing of parallel ‘business behavior is admissible circumstantial evidence from which’ agreement may be inferred, it falls short of ‘conclusively establish[ing] agreement or…itself constitut[ing] a Sherman Act offense.” In fact, Souter writes, the probable reason that they companies didn’t compete against each other was because they were created prior to the 1996 Telecommunications Act, when this sort of activity was permissible. And thus, “a natural explanation for the noncompetition alleged is that the former Government-sanctioned monopolists were sitting tight, expecting their neighbors to do the same thing,” as per the old rules. Accordingly, Twombly’s complaint was dismissed for failure to state a claim.

In the dissent, Justive Stevens (joined by Ginsberg) asserted that the actions of the Baby Bells was enough to imply a tacit agreement of conspiracy and, at the very least, the plaintiffs should have had a chance to go ahead to the discovery phase of the trial and investigate the issue further.