U.S. Supreme Court

High Court to Hear ‘Price Squeeze’ Antitrust Case that Split FTC and SG

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The U.S. Supreme Court has agreed to review a case that tests the antitrust “price squeeze” doctrine in a case against a unit of AT&T. The issue has divided the government, with the Federal Trade Commission supporting the theory and the Justice Department opposing it.

Several Internet providers had sued AT&T unit Pacific Bell Telephone Co. contending that its wholesale prices were too high for them to compete with AT&T’s own Internet service, the Wall Street Journal reports (sub. req.). Pac Bell was required to sell access to its network at wholesale prices under federal law.

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, according to the petition for certiorari (PDF posted by SCOTUSblog). The San Francisco-based 9th U.S. Circuit Court of Appeals had allowed the claim to proceed.

Solicitor General Paul Clement had urged the court to grant cert and reverse the 9th Circuit, according to the Wall Street Journal story. “Such a theory of liability could not be reconciled with this court’s modern antitrust jurisprudence,” he wrote.

The Federal Trade Commission announced in a press release (PDF) that it disagreed with Clement’s analysis, SCOTUSblog reports. “The holding of the 9th Circuit is unquestionably correct,” the FTC statement says. “Price-squeeze claims have long been part of [antitrust] doctrine.”

The case is Pacific Bell Telephone Co. v. Linkline Communications Inc.

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