seen below, in view of the language of the appellate opinion, that assessment is not inaccurate.
The particular appellate rulings which, in the opinion of this Court, leave it no choice other than to remove the restriction, are as follows. First, rather than to leave the Court free to weigh the evidence and the law proffered by all the parties, preferring one over the other only on the basis of credibility, logic, consistency with known facts, and similar qualitative factors, the appellate decision requires the Court to accord special weight and deference to the views of the Department of Justice. Second, rather than to permit the Court to make its decision on the antitrust issues by the standard of probability of outcomes, the appellate decision requires the Court to remove the information services restriction unless there is certainty that entry of the Regional Companies into the information services market will lead to anticompetitive conduct by these companies. Third, rather than to allow the Court to consider substantially the actual performance of the local telephone companies when they were still part of the Bell System, the appellate decision requires the Court to accord primary weight to the necessarily theoretical present-day forecasts of economists. Each of these factors will now be explained in somewhat more detail.
A. Deference to Department of Justice
The Court of Appeals has ruled that this Court must approve the proposed lifting of the information services restriction if the proposal satisfies the "public interest" standard of the Tunney Act. 900 F.2d at 295. Among the significant provisions of that Act is section 16(e) of title 15 of the United States Code, which directs that proposed antitrust consent decrees in government cases may not become effective unless they are approved by the court having jurisdiction of the underlying lawsuit. Indeed, it is plain from the statute and its legislative history that a court, rather than being a "rubber stamp" for the Department of Justice, is required to act as an independent check on the terms of such decrees. United States v. American Tel. & Tel. Co., 552 F. Supp. 131, 148-49 (D.D.C. 1982); see United States v. American Cyanamid Co., 719 F.2d 558, 565 (2d Cir. 1983).
The legislative history of the statute shows that the Congress was disturbed that antitrust consent decrees had sometimes failed to provide appropriate relief, either because of miscalculations by the Department of Justice or because of the "great influence and economic power" wielded with respect to that department by antitrust violators.
That history, moreover, is replete with examples of Justice Department support of companies with great economic as well as political power. Congress took particular note in this regard of the history of the ITT consent decree which was negotiated under questionable conditions,
and of the 1953 phase of the AT & T litigation, in which the then Attorney General settled the case under dubious circumstances on the basis of "token" measures agreed to following private discussions.
It was to deal with such problems that Congress directed that antitrust settlements arrived at between the Department of Justice and private corporations were not to become effective unless the court having jurisdiction over the lawsuit found them to be in the public interest.
The Court of Appeals stated in its remand opinion in this case that this Court is required to defer to the Department of Justice on the issue of whether the proposed modification of the decree is in the public interest as that term is used in the Tunney Act.
It is the Department which is to weigh the various considerations, the Court being neither required nor permitted to determine whether the resulting array of rights and liabilities is the one that will best serve society. 900 F.2d at 309.
More specifically, the appellate court instructed this Court in broad terms to "seriously consider" the Department's judgment on issues "of economic analysis," on "predictions of market behavior," 900 F.2d at 297,
and on the effectiveness of FCC regulations, 900 F.2d at 298,
the basis therefor
being that the Department might be expected to be more expert than the Court in these fields.
900 F.2d at 298.
In light of these appellate directions, the Regional Companies are drawing reasonable conclusions when they assert that, "unless the relief requested by the Department is plainly outside the bounds of rational policy choice, the Department's motion must be granted, whether or not the District Court believes that the Department is making a mistake;"
when they state that the Court of Appeals "has directed this Court simply to determine whether the Department's judgment [that removal of the information services restriction is now in order] is within 'the zone of settlements consonant with the public interest today;'"
and when they contend that "in view of the substantial deference that is due to the Department of Justice in this field of economic prediction and inexact science, no amount of discovery or trial testimony would permit the Court to upset the Department's reasoned evaluation of the competitive risks and benefits of RBOC entry."
It is in that context that this Court must consider the determinations of the Department of Justice with respect to the subjects on which, under the appellate decision, the Department is entitled to deference.
The Department's principal determinations on these subjects are as follows:
The fact that competitors depend on Regional Company bottleneck facilities is not in itself sufficient to establish a risk of anticompetitive discrimination, particularly because alternatives
The risk of discrimination is minimal since adequate legal or regulatory constraints are present.
Any selective degradation of service or the grant of priority to the Regional Company's own information service would be difficult to implement, particularly in view of the FCC's ONA and Computer III regulations.
There is no evidence that the Regional Companies would act in concert so as to discriminate in the information services field.
No substantial risk is present that competition would be impaired by Regional Company cross-subsidization because of FCC regulatory oversight and because few facilities and personnel will be shared between the Regional Companies' exchange operations and their information services.
It is this Court's conclusion that none of these contentions is supported by credible evidence in the record, and the Court finds instead, for the reasons elaborated on in Parts I through VI above that, should the restriction on information services be removed, the Regional Companies would have the incentive and the ability, notwithstanding regulatory constraints, to engage in anticompetitive acts on a substantial scale. Nevertheless, in view of the strong and hardly routine Court of Appeals admonitions, this Court has no choice but to defer to the current conclusions
of the Department of Justice on these issues.
B. The Issue of Certainty
This determination is strengthened by the appellate emphasis on certainty. The Court of Appeals has ruled that the "appropriate question under section VII [of the decree] is whether the proposed modification would be certain to lessen competition in the relevant market," 900 F.2d at 308 (emphasis added), that is, whether Regional Company entry into the information services market would be certain to have the effect of raising price or restricting output in that market.
The intervenors point out that the test under traditional Supreme Court and other appellate decisions with respect to antitrust law involves "probabilities, not certainties."
Brown Shoe Co. v. United States, 370 U.S. 294, 323 n. 39, 8 L. Ed. 2d 510, 82 S. Ct. 1502 (1962);
see United States v. General Dynamics Corp., 415 U.S. 486, 505, 39 L. Ed. 2d 530, 94 S. Ct. 1186 (1974); Federal Trade Commission v. Procter & Gamble Co., 386 U.S. 568, 577, 87 S. Ct. 1224, 18 L. Ed. 2d 303 (1967); United States v. Penn-Olin Chemical Co., 378 U.S. 158, 171, 12 L. Ed. 2d 775, 84 S. Ct. 1710 (1964); United States v. Aluminum Co. of America, 377 U.S. 271, 280, 12 L. Ed. 2d 314, 84 S. Ct. 1283 (1964); United States v. Baker Hughes, Inc., 285 U.S. App. D.C. 222, 908 F.2d 981, 984 (D.C. Cir. 1990). Indeed, the certainty standard may well be an impossible one; as the Court of Appeals recognized, economic analysis and market predictions are not an exact science (900 F.2d at 297).
While, as discussed above, the evidence persuades this Court that entry of the Regional Companies into the information services market would allow them quickly to dominate that market and to eliminate both competition and the independents which would make that competition possible, the question under the appellate mandate is whether this Court is certain that removal of the information services restriction would have such an effect. The answer to that question is in the negative.
C. Conditions Today
The Court of Appeals opinion is critical of this Court's reliance on the fact that no change had been shown between the conditions that existed in 1982 when the decree was approved and 1987 when this Court issued the "triennial review" decision. 900 F.2d at 308. To remedy that defect, the appellate court held that removal of the restriction would have to be approved if the relevant rights and obligations are within the zone of settlements "consonant with the public interest today," 900 F.2d at 307 (emphasis in original), and further, that the "district court should determine whether removal of the information services restriction as applied to the generation of information would be anticompetitive under present market conditions." 900 F.2d at 309 (emphasis in original).
It is not entirely clear how broad the Court of Appeals' direction was intended to be. On the one hand, by ruling out any reliance on the fact that no significant change had occurred since the direct evidence of the local operating companies' anticompetitive acts was presented at trial,
the appellate court may have also ruled out consideration of these earlier anticompetitive acts themselves. If there can be no reliance on the lack of change between 1982 and 1987, there can logically be no consideration of the situation as it existed in 1982.
On the other hand, it is possible that, as the Department of Justice contends, the Court of Appeals intended to allow this Court to consider both the evidence of anticompetitive acts prior to 1982 and the evidence that has been added to the record since then.
But this would still leave the Court with the very difficult task
of basing its decision primarily on theoretical predictions
of hypothetical market power and hypothetical risks of improper conduct, all of it substantially divorced from the facts for which there is an evidentiary record.
The required focus on predictions on which the various experts are in disagreement thus adds to the weight that must be given to the Justice Department's judgments
and it further complicates the search for certainty.
* * * *
To sum up. It is the Court's judgment that in view of the requirements imposed by the Court of Appeals which are summarized above, it could not responsibly
and with proper deference to that court rule that the information services restriction must be retained. Accordingly, the Court is ordering simultaneously herewith that the restriction shall be removed.
The Need For A Stay
The Court will, however, stay the effect of its decision pending the completion of appellate review. While, as indicated, this Court is following what appear to be the most plausible interpretations of the several critical Court of Appeals directions, it must be recognized that some of these directions are not necessarily susceptible of but a single interpretation.
For example, the intervenors argue, with some justification, that the "certainty" ruling may constitute a reference to the Court of Appeals' own obligations rather than those of this trial court. One of the Court of Appeals' references to the certainty standard clearly refers to that court's own obligations on appeal.
The references to the Department of Justice can likewise have several meanings: while this Court has been directed to give "serious consideration" to the Department's views on economic theory and on the efficacy of FCC regulation, the appellate court did not indicate what weight is to be given to the evidence adduced by other parties, or whether the term "serious consideration" is to be equated with "decisive effect" irrespective of other considerations. And again, as alluded to above, it may be that, in emphasizing that this Court was to make its findings with respect to current conditions, the Court of Appeals did not intend to rule out substantial consideration of the experience with anticompetitive conduct of the local telephone companies as revealed by the pre-1984 record.
For these reasons, while this Court is not prepared to depart from what appears to be the most plausible reading of the directions of the Court of Appeals (see notes 95 and 126, supra), and it therefore holds in favor of the Regional Companies, it cannot be certain that its interpretation of the dispositive appellate directions is correct. It follows, of course, that this Court cannot be certain of the correctness of its decision to remove the information services restriction from the decree.
Yet if the Regional Companies were to enter the information services market while the critical issues are still as unsettled as they may well be, substantial funds could be spent in reliance on a decision which could subsequently be vacated, and corporate changes could take place on a like reliance both within the Regional Companies and by others now engaged in one or more of the many facets of the information services. It is appropriate, therefore, to stay the effects of this Court's current ruling until finality has been reached in the appellate process,
and the Court will do so.
ORDER - July 25, 1991, Filed
Upon consideration of the motion of the Regional Companies for partial relief from section II(D) of the decree, the oppositions and replies thereto, oral argument, and the affidavits and other exhibits filed with the Court, it is this 25th day of July, 1991, in accordance with the Opinion issued contemporaneously herewith
ORDERED that the motion for partial relief be and it is hereby granted and the restriction on information services be and it is hereby lifted; and it is further
ORDERED that this decision be and it is hereby stayed until completion of the appellate process.