Corporate & Securities Law

Trinko After LinkLine

By Manfred Gabriel

One of the effects of the Supreme Court’s recent LinkLine decision was to extend the reach of Trinko. Trinko dealt with the relation of regulation (in the telecomm industry) and Antitrust. The decision proceeded in three steps:

1. The 1997 Telecommunications Act declares the antitrust laws to be applicable.
2. The claim in Trinko, which concerned non-price terms in the resale of telecomm services under a duty to deal flowing from the 1997 Act, was a novel claim that would have extended the reach of the antitrust laws (specifically §2 Sherman Act).
3. Because of the dangers of false positives inherent in antitrust enforcement, and because of the presence of an regulatory scheme designed to prevent and sanction antitrust violations, §2 should not be extended to reach the claims in Trinko, absent an antitrust duty to deal.

The Ninth Circuit, in its Linkline decision, which was overruled by the Supreme Court, used this structure of the Trinko decision to argue that Trinko should not preclude Linkline’s price-squeeze claim, since it was not an extension of the antitrust laws (having been established in Alcoa), and because the regulatory scheme in Linkline did not (effectively) address antitrust violations.

The opinion of the court in Linkline, Chief Justice Roberts writes that Trinko

… makes clear that if a firm has no antitrust duty to deal with its competitors at wholesale, it certainly has no duty to deal under terms and conditions that the rivals find commercially advantageous. … The nub of the complaint in both Trinko and [Linkline] are identical?the plaintiffs alleged that the defendants (upstream monopolists) abused their power in the wholesale market to prevent rival frims from competing effectively in the retail market. Trinko holds that such claims are not cognizable under the Sherman Act in the absence of an antitrust duty to deal.

This re-interpretation of Trinko, extends Trinko in significant ways. First, the specific application to the telecommunications industry and its regulatory scheme is gone; Trinko á la Linkline is broadly applicable to any vertically-integrated upstream monopolist. Second, the holding is no longer confined to an extension of the antitrust laws, but reaches all of §2 (hence the possibility of a slippery slope, as Hanno pointed out). Finally, the prensence and effectiveness of a regulatory scheme, which provides a regulatory duty to deal and which may or may not address abuses of market power, has been taken out of the equation: the only thing that matters now is the absence of an antitrust duty to deal. And we know from Trinko that antitrust duties to deal probably don’t exist except perhaps under Aspen Skiing, that is in the case of prior business relationships discontinued for no good reason other than exclusion of a rival.

Full post as published by Antitrust Review on March 18, 2009 (boomark / email).