Sherman Act, and the policy's effect on competition, the FCC's findings will be received as evidence where relevant, but the findings will not be treated as conclusive.
III. Merits of the Motion.
Before the Court on this motion is the question whether the Bell System's policy of refusing to register or to provide letters of intent to provide service to Attache Phones in IMTS base station areas violated the Sherman Act as a matter of law. Plaintiffs advance two theories in support of a finding of Sherman Act liability. First, plaintiffs contend that the Bell System's refusal to provide mobile service to Attache Phones constituted a group boycott by defendant AT&T and its operating company subisidiaries, and that AT&T must therefore be found to have committed a per se violation of section one of the Sherman Act. Second, plaintiffs argue that AT&T, in combination with its subsidiaries, violated sections one and two of the Sherman Act by using the Bell System's monopoly power over telephone services to foreclose competition in the mobile telephone equipment market. In connection with this second theory, plaintiffs characterize AT&T's offense alternatively as a combination in restraint of trade, violative of section one, or an individual or combined attempt to monopolize the mobile phone market, violative of section two. Because of the existence of genuine issues of material fact, neither of plaintiffs' theories justifies summary judgment, as will be elaborated infra. Before discussing plaintiffs' theories, however, the Court must evaluate defendant's claim of antitrust immunity.
Applicability of Parker v. Brown
Defendant argues that the Bell System's implementation of the IMTS area policy amounts to state action within the meaning of Parker v. Brown23 and is therefore exempt from the Sherman Act. In Parker the Supreme Court held that an anticompetitive state-created and state-enforced program for marketing raisings did not violate the Sherman Act because the program "derived its authority and its efficacy from the legislative command of the state and was not intended to operate or become effective without that command."
AT&T argues that Parker applies to this case because state regulatory agencies, and not the FCC, regulate the intrastate aspects of mobile telephone service.
State regulation of mobile telephone service, as described by defendant, is undeniably extensive. Local telephone companies, including Bell System companies, are required to file with the state regulatory agencies tariffs setting forth the rates and regulations relating to the provision of intrastate service by the company. The tariffs are subject to review and investigation by the state agencies. During the complaint period mobile service tariffs that had been filed with the state agencies by the Bell System operating companies typically required that customer-supplied equipment "shall be suitable for the proper operation of the [mobile telephone] service."
AT&T claims that the Bell System's IMTS area policy was implemented pursuant to these tariffs and that implementation of the policy therefore represented state action within the meaning of Parker.
The Court need not decide in this case whether regulation of mobile telephone service is conducted predominantly by state agencies, as defendant contends, rather than by the FCC, because as a matter of law the nature of the state agencies' involvement in defendant's IMTS area policy does not meet the Parker standard. As the Supreme Court stated recently in Goldfarb v. Virginia State Bar :
"The threshold inquiry in determining if an anticompetitive activity is state action of the type the Sherman Act was not meant to proscribe is whether the activity is required by the State acting as Sovereign."
In Goldfarb the Court refused to immunize as state action lawyers' minimum fee schedules issued and enforced by the State and County Bar, even though the State Bar was a state-created agency. The Court reasoned that no state law or rule of the state Supreme Court required or directed the issuance and enforcement of minimum fee schedules.
In this case, as in Goldfarb, no state agency directed or required the defendant to engage in the allegedly anticompetitive activity. Even assuming that the state regulatory agencies had considered and approved the tariffs filed by the Bell companies, the terms of the tariffs were too general to permit characterization as specific state directives or requirements that the Bell System implement the IMTS area policy. In fact, it cannot be assumed that the state agencies understood that the wording of the tariffs, as interpreted by the Bell System, would exclude portable phones from service in IMTS areas. For these reasons the circuit court cases cited by defendant, in which Parker has been applied to actions taken pursuant to specific rate schedules filed with state regulatory agencies,
are inapposite here. The Court relies instead on the ample authority supporting denial of Parker immunity where the regulated industry's actions are not specifically directed or approved as to particulars by the state regulatory agency.
The Intra-corporate Conspiracy Issue
An underlying premise of plaintiffs' group boycott theory is that AT&T and its wholly-owned subsidiaries may be treated as separate entities capable of conspiring with each other. Defendant argues, however, that the Bell System acts not as a group, but as a single entity insofar as its IMTS area policy is concerned.
In several cases, beginning with United States v. Yellow Cab Co.,31 and Kiefer-Stewart Co. v. Joseph E. Seagram & Sons,32 the Supreme Court has stated without qualification that the fact of common ownership does not prevent a finding of conspiracy among separately incorporated companies.
Commentators have criticized this so-called "intra-corporate conspiracy doctrine"
and have inferred limitations on the doctrine from the facts of the Supreme Court cases that articulated it.
Nonetheless, many lower courts have broadly endorsed the doctrine in dictum or in cases where no Sherman Act violation was found.
In many cases appellate courts have relied on the doctrine in reversing grants of summary judgment that had been premised on the defendants' corporate interrelationship.
Rarely have courts actually found affiliated corporations guilty of conspiring in violation of the Sherman Act, however, and then only in cases where, after a full trial, the facts established, either expressly or by necessary implication, that the corporations had acted without a legitimate business purpose and with anticompetitive intent.
In some cases the courts have refused to apply the doctrine, finding it inappropriate to the factual context.
The cases in the last two categories mentioned suggest what seems to this Court the proper approach to the intracorporate conspiracy issue. In those cases the courts decided whether or not to treat the defendant companies as conspirators only after determining, on the basis of all the facts, whether the companies' actions amounted to, in purpose and effect, a conspiracy in restraint of trade. As the Supreme Court said, in first applying the doctrine in Yellow Cab, supra, the Sherman Act "is aimed at substance rather than form."
Accordingly, if in this case the Bell System companies each adopted and implemented the IMTS area policy with anticompetitive intent, and if the policy exerted an effect substantially similar to that of a conspiracy among independent companies in restraint of trade, then the Bell System's corporate affiliation will provide no defense. The resolution of this issue depends on the facts to be established at trial.
The Group Boycott Claim
Group boycotts have long been classified as per se violations of the Sherman Act.
This means, theoretically, that a plaintiff proves a violation of section one simply by establishing that a group boycott has occurred, regardless of the motivation underlying the boycott and the extent of the public harm effected by the boycott.
Thus if, in the instant case, the Bell System's adherence to the IMTS area policy constituted a group boycott within the meaning of the Sherman Act, AT&T has violated the Act as a matter of law.
Although in many cases concerted refusals to deal have been categorized as group boycotts and, therefore, as per se violations of section one,
at least three circuits have held in recent years that not all concerted refusals to deal should be accorded per se treatment.
These holdings have rested on the expressed recognition that the per se rule was developed by the Supreme Court to reach only those types of conduct that amount to "naked restraints of trade with no purpose except stifling of competition."
All three circuit courts carefully analyzed the group boycott cases and determined that in every case where a per se rule was applied, the court had either found that the defendants' purpose was to exclude a competitor or was otherwise anticompetitive, or else the anticompetitiveness of the defendants' purpose was obvious from the facts even without an express finding.
In Dalmo Sales Co. v. Tysons Corner Regional Shopping Center,47 Judge Pratt of this District Court expressed a similar view of the group boycott per se cases in denying a motion for preliminary injunction in an antitrust case. Judge Pratt ruled that because the motivation underlying the defendant's action was not clearly anticompetitive, plaintiffs had not shown that they were likely to prevail on the merits of the group boycott claim.
The D.C. Circuit affirmed the decision.
In light of the Circuit Court cases and the authority in this Circuit, the Court believes the correct rule to be that the per se rule should be applied to concerted refusals to deal only if exclusionary purpose or effect and lack of legitimate competitive purpose are obvious from the nature of the combined action or are established by the evidence.
Consideration of all the evidence in this case, including the FCC's findings, fails to convince the Court that the per se rule should be applied here. Neither the underlying purpose nor the effect of the IMTS area policy appears unambiguously anticompetitive. In fact, as the FCC found, implementation of the policy in all but uncongested IMTS base station service areas was a technologically justifiable means of maintaining the efficiency of the IMTS systems.
Because of the existence of factual issues as to the competitive purpose and effect of the IMTS area policy, summary judgment must be denied as to this claim.
The Otter Tail Theory
Plaintiffs base their second theory in support of summary judgment on Otter Tail Power Co. v. United States.52 The analogy plaintiffs seek to draw between Otter Tail and the instant case must be rejected for several reasons. First, in Otter Tail the defendant concededly possessed monopoly power within the market of the scarce facility, i.e., power subtransmission lines.
In this case, however, an issue of fact exists as to whether AT&T possessed monopoly power within the mobile telephone service market in the relevant geographic areas. The alternative service evidently afforded by the RCC's precludes summary judgment on this issue. Second, in Otter Tail the lower court based its findings of monopolization and attempt to monopolize on the proof of intent and market power adduced during a full trial on the merits.
In this case, however, issues of material fact exist as to AT&T's intent and market power within the mobile telephone market, and as to whether Attache Phones and the vehicular phones supplied by AT&T's subsidiaries were competing products. Those issues of fact preclude summary judgment on plaintiffs' section two claim. The same factual issues bar summary judgment on this claim even if it is rephrased to state that the IMTS area policy constituted an unreasonable restraint of trade as a matter of law.
Oliver Gasch / Judge
Date September 30th 1975