Supreme Court Rejects Antitrust ‘Price Squeeze’ Claim
Posted Feb 25, 2009 05:54 pm CST
The U.S. Supreme Court has rejected a claim that an AT&T subsidiary engaged in an illegal price squeeze by charging competitors steep wholesale rates for high-speed Internet service, making it impossible to compete on the retail level with the parent company.
The price-squeeze theory holds that a company with market power at the wholesale level may not leave insufficient margin between its wholesale and retail prices in an effort to squelch competition from wholesale purchasers.
“If both the wholesale price and the retail price are independently lawful, there is no basis for imposing antitrust liability simply because a vertically integrated firm’s wholesale price happens to be greater than or equal to its retail price,” Roberts wrote for the court.
The opinion left open the option of a predatory pricing claim, but a majority of justices said a higher bar exists for such claims, according to a Wall Street Journal report (sub. req.) on today’s decision.
The Reuters story on the ruling says it is the latest in a series of Supreme Court decisions that generally make it more difficult to bring antitrust lawsuits.
The case is Pacific Bell Telephone Co. v. Linkline Communications Inc.