Antitrust Lawyer Blog Commentary on Current Developments

FTC Seeks to Limit Trinko and Credit Suisse

On June 15, 2010, Howard Shelanski, Deputy Director for Antitrust in the Bureau of Economics at the Federal Trade Commission, appeared before the House Committee on the Judiciary’s Subcommittee on Courts and Competition Policy and delivered a prepared statement on behalf of the Commission. In his appearance, Mr. Shelanski requested legislative action in light of the Supreme Court’s decisions in Verizon v. Trinko and Credit Suisse v. Billing . Both of these recent cases have implications for bringing antitrust actions in federal court in regulated industries.

Trinko was a consumer class-action suit brought of behalf of New York City customers of AT&T against Verizon for violation of § 2 violation of the Sherman Act, which declares that a firm shall not “monopolize” or “attempt to monopolize.” Plaintiffs alleged that Verizon failed to comply with its network-sharing duties with new-entrant AT&T in violation of the Telecommunications Act of 1996 (“the Act”), and that Verizon’s actions constituted anticompetitive and exclusionary conduct under § 2.

The Supreme Court disagreed, 9-0, and reversed the Court of Appeals in favor of Verizon. The Court held that, while the antitrust-specific saving clause barred implied immunity from antitrust actions, the complaint still did not state a monopolization claim under § 2. Verizon, Scalia wrote for the Court, would not have assisted rival AT&T without the compulsion of the Act, and there was no apparent willingness to forsake short-term profits for an anticompetitive effect as in Aspen Skiing , the outer boundary of § 2 liability.

Further, there was an extensive regulatory structure in place to remedy anticompetitive behavior, and the regulatory authorities had already penalized Verizon with fines and daily reporting requirements for their actions against AT&T. The “slight benefits” of antitrust intervention, Scalia said, is far outweighed by the risks of possibly inconsistent and harmful rulings by judges who do not have the expertise the regulatory bodies have in discerning permissible dealings from impermissible dealings, nor similar enforcement abilities.

Credit Suisse was an antitrust suit brought under § 1 of the Sherman Act for collusion by underwriters of initial public offerings of securities. The defendants in the case allegedly used illegal tying, “laddering,” and excessive commission schemes in marketing IPOs. The applicable regulatory statute gave the SEC authority to review all of these activities and though there was a general savings clause, there was no antitrust-specific savings clause. The Court held, 7-1 (Thomas, J. dissenting), that the applicable securities laws implicitly precluded the application of antitrust laws in the case. The Court’s standard in cases where regulatory law and antitrust law overlap is that when there is a “clear repugnancy” between the statute and antitrust law, antitrust law is precluded.

Breyer, writing for the majority in Credit Suisse, noted that precedent finds “repugnancy” between securities and antitrust law when there is a regulatory body that has authority to supervise the activity in question and is supervising the activity, and applying securities law and antitrust law would produce conflicting standards. Since judges applying antitrust law, Breyer writes, would not be able to reliably distinguish impermissible tying, laddering, and commissions from very similar underwriting activities that are permissible under securities law, securities law and antitrust law in this situation are repugnant and antitrust law is implicitly precluded.

The decisions in Trinko and Credit Suisse, Mr. Shelanski argues, significantly reduce the situations in which industry-specific regulatory statutes and antitrust statutes can be simultaneously applied. The Court in Credit Suisse, specifically, expands the idea of “repugnancy” between regulation and antitrust law—thus, antitrust law preclusion—even where the only conflict with regulation is through possible judicial error. The Supreme Court in both cases reaffirms its fear—also noticeably present in the Brooke Group , Linkline , and Weyerhaeuser decisions—that judges applying antitrust law will not have the knowledge to distinguish anticompetitive conduct from pro-competitive conduct. According to this line of Supreme Court cases, judicial error in antitrust suits would mean costly false-positive decisions that chill enterprise, so anticompetitive suits are best brought under industry-specific regulatory law.

In his testimony, Mr. Shelanski states his fears that Trinko and Credit Suisse will lead lower courts to preclude antitrust suits when they are needed to protect consumers. Since the Court never distinguishes between private and public antitrust actions, Mr. Shelanski appeals to the Subcommittee to pass legislation that clearly exempts the agencies from the high standards of Trinko and Credit Suisse.

Public enforcement actions, Shelanski says, would not pose the same problems private suits do. First, public actions have lower costs and greater societal benefits because the agencies have the resources to examine the costs and benefits of an antitrust action, while keeping the interests of the public in mind. Second, unlike private actions, the plaintiff agencies don’t materially benefit from successful competition enforcement. Third, the agencies can better coordinate with regulatory agencies to avoid conflicts, duplication of efforts, and judicial error.

While the FTC in particular might be able to avoid the strictures of Trinko and Credit Suisse by pursuing conduct under Section 5 of the Federal Trade Commission Act rather than the Sherman Act, Shelanksi states, the FTC will probably still be unnecessarily hampered. The solution, he concludes, “is for Congress to clarify that neither Credit Suisse nor Trinko prevents public antitrust agencies from acting under any of the antitrust laws” in order to ensure that the agencies can vigorously pursue anticompetitive conduct.


Brent Skorup

(202) 589-1834
bskorup@dbmlawgroup.com