West Case Update

Federal Regulation of Telecommunications Does Not Eliminate Antitrust Actions

Description Appeals court held that an antitrust suit by a DSL Internet provider against a regional telephone company could proceed. The provider had presented sufficient evidence to show the possibility of monopolization activities by the telephone company, which is not protected against such suit by federal regulation of telecommunications.

Topic Antitrust

Key Words Sherman Act; Monopolization; Telecommunications Act

C A S E S U M M A R Y

Facts Covad is a seller of DSL Internet service. BellSouth, a regional telephone company, also sells DSL service. The companies signed an "interconnection agreement" to allow Covad to provide DSL service to consumers over BellSouth phone lines. Covad later sued BellSouth, contending that it has attempted to stifle competition by failing to live up to its contractual obligations and by exclusionary behavior, including price squeezes, misleading advertising, and misuse of Covad's confidential customer information. Covad contended these actions violated the Sherman Act and the Telecommunications Act. The district court dismissed the suit. Covad appealed.

Decision
Reversed. The allegations made by Covad that BellSouth manipulated its dual role as an Internet provider wholesale supplier and as a retail competitor by engaging in a price squeeze, were sufficient to state a claim of monopolization under the Sherman Act. Even if Covad can show that BellSouth breached its contract with Covad, that does not mean there was a violation of the Sherman Act. The issue would be if such a breach was part of a larger scheme of anticompetitive practices. The Telecommunications Act, which is part of the federal regulatory scheme of telephone companies, does not limit the applicability of the antitrust laws.

Citation Covad Communications Co. v. BellSouth Corp., 299 F.3d 1272 (11th Cir., 2002)

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Federal Regulation of Telecommunications Does Not Eliminate Antitrust Actions
Description	Appeals court held that an antitrust suit by a DSL Internet provider against a regional telephone company could proceed. The provider had presented sufficient evidence to show the possibility of monopolization activities by the telephone company, which is not protected against such suit by federal regulation of telecommunications.
Topic	Antitrust
Key Words	Sherman Act; Monopolization; Telecommunications Act
C A S E S U M M A R Y
Facts	Covad is a seller of DSL Internet service. BellSouth, a regional telephone company, also sells DSL service. The companies signed an "interconnection agreement" to allow Covad to provide DSL service to consumers over BellSouth phone lines. Covad later sued BellSouth, contending that it has attempted to stifle competition by failing to live up to its contractual obligations and by exclusionary behavior, including price squeezes, misleading advertising, and misuse of Covad's confidential customer information. Covad contended these actions violated the Sherman Act and the Telecommunications Act. The district court dismissed the suit. Covad appealed.
Decision	Reversed. The allegations made by Covad that BellSouth manipulated its dual role as an Internet provider wholesale supplier and as a retail competitor by engaging in a price squeeze, were sufficient to state a claim of monopolization under the Sherman Act. Even if Covad can show that BellSouth breached its contract with Covad, that does not mean there was a violation of the Sherman Act. The issue would be if such a breach was part of a larger scheme of anticompetitive practices. The Telecommunications Act, which is part of the federal regulatory scheme of telephone companies, does not limit the applicability of the antitrust laws.
Citation	Covad Communications Co. v. BellSouth Corp., 299 F.3d 1272 (11th Cir., 2002)