Justices to weigh Nynex bid to bar suit Bell Atlantic subsidiary seeks to block 'group boycott' case of Discon

Legal affairs

March 24, 1998|By Lyle Denniston DTC | Lyle Denniston DTC,SUN NATIONAL STAFF

WASHINGTON -- In a case likely to set an important antitrust precedent, the Supreme Court agreed yesterday to consider a plea by a Bell Atlantic Corp. subsidiary to block a lawsuit that targets that company's dealings with suppliers in New York state.

The subsidiary, Nynex Corp., and two affiliated companies are facing a potential damage verdict for allegedly engaging in a "group boycott" against Discon Inc., a New York company that removes outmoded telephone equipment from central office facilities.

Nynex, which merged into Bell Atlantic last year, has already had to give its New York Telephone Co. customers a $35 million rebate under a settlement with the Federal Communications Commission for the same actions that led to Discon's lawsuit.

A federal appeals court in New York City cleared the way for the Discon case to go to trial, ruling that Nynex's purchasing arm may have joined with AT&T Technologies in a conspiracy to deprive Discon of equipment-removal business. Discon's lawsuit, which was filed in 1990, has not gone to trial because Nynex took the case on to the Supreme Court.

In its ruling against Nynex, the appeals court said that if two companies that are not themselves competitors agree to shut out a third company that competes with one of them, that step can constitute a "group boycott" that could violate the Sherman Antitrust Act.

This decision appeared to represent an expansion of prior antitrust law; group boycotts normally involve a group of competitors collectively acting against a rival. Federal appeals courts are divided over whether that expansion of the law is proper.

The Supreme Court appeared to have stepped in to clear up that conflict.

Discon was established in 1984 to provide equipment-removal services after American Telephone & Telegraph was broken up in a telecommunications antitrust settlement.

The so-called Baby Bells -- the regional phone companies spun off by AT&T -- were then obliged to obtain their supplies and services from competitive markets.

Discon sought the removal business of New York Telephone. But Discon said Nynex sought to deal mainly with AT&T Technologies, an AT&T affiliate that also provided equipment-removal services to phone companies.

Discon charged that AT&T Technologies sold the removal service at inflated prices but passed a secret rebate back to Nynex subsidiaries to offset those higher payments.

This action, according to Discon, produced added revenue for Nynex and New York Telephone that did not have to be cleared with New York state's telephone regulators, which normally oversee the company's rates.

In paying a rebate to its customers, Nynex did not admit it had broken any laws.

A Supreme Court ruling on the antitrust aspects of this dispute is expected next year.

Pub Date: 3/24/98

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