SW Legal studies in Business

Potential Competition Between Telephone Companies Irrelevant Under Clayton Act
Description Appeals court held that a private challenge to the merger of two Baby Bell telephone companies on the grounds that they are potential competitors in the local phone service market fails because of an exemption carved out of the Clayton Act for mergers of regulated common carriers that operate in separate markets.
Topic Antitrust
Key Words Mergers; Potential Competition; Clayton Act; Immunity; Exception
C A S E   S U M M A R Y
Facts SBC and Ameritech, two of the Baby Bells, merged after receiving approval from the Federal Communications Commission (FCC) and state regulators. The Antitrust Division of the Department of Justice did not oppose the merger. A consumer group sought to enjoin the merger on the grounds that the firms, which operated in separate markets, were potential competitors. Consumers were injured because of the loss of potential competition, as each firm might enter the market of the other to offer local phone service. The trial court held that the plaintiff did not have standing and dismissed the suit; plaintiffs appealed.

Affirmed. Approval of the merger by the FCC does not immunize the merger against a private challenge, so the consumer group has standing to challenge the merger. If the complaint alleged that the merger reduced competition between firms that were currently competing, then relief could be sought. But under the Clayton Act there is an exception for mergers of common carriers that are not in competition with each other. The firms are regulated monopolies with assigned territories that did not overlap before the merger. The argument that they are potential competitors does not stand under section 7 of the Clayton Act.

Citation South Austin Coalition Community Council v. SBC Communications, Inc., 274 F.3d 1168 (7th Cir., 2001)

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