Supreme Court to hear Verizon plea to block lawsuits on rival access

White House, others want lower-court ruling voided

March 11, 2003|By BLOOMBERG NEWS

WASHINGTON - Verizon Communications Inc. will get a U.S. Supreme Court hearing in its bid to block retail customers from suing local phone providers for not opening the door wide enough to competitors.

Verizon, six other companies and the Bush administration sought review of a 2nd U.S. Circuit Court of Appeals decision permitting the lawsuits. They contend the ruling usurps the power of regulators and unfairly subjects dominant companies to antitrust suits and possible triple damages.

The justices will consider whether consumers may seek antitrust damages for the alleged failure of regional phone companies to give competitors access to local switches and circuits, as required by a 1996 law.

The 2nd Circuit decision spawned 25 consumer suits. Rivals filed five antitrust lawsuits against the three largest regional phone companies: Verizon, BellSouth Corp. and SBC Communications Inc.

The Supreme Court took the case to reverse the 2nd Circuit's decision because the consumer suit "attempts to change antitrust law in a very expansive fashion," predicted Ernest Gellhorn, who teaches antitrust law at George Mason University in Arlington, Va.

"The question really is," Gellhorn said, "does a firm with monopoly power have to play totally by different rules?"

The lawsuit, filed by New York attorney Curtis V. Trinko's firm, contends that Verizon's intransigence in opening its local network to competitors contributed to poor service from his local- phone provider, AT&T Corp.

"Antitrust law provides a right of action against a monopolist who deals with competitors in a predatory fashion," Trinko and his legal team argued in court papers.

Verizon, the largest U.S. local-phone company, says the appellate decision would put judges and juries in charge of issues that should be decided by regulatory agencies such as the Federal Communications Commission.

"The 2nd Circuit decision presents new conduct-influencing burdens and risks for firms in any market where monopoly allegations can be advanced and class action lawyers see an opportunity," Verizon contended.

BellSouth and SBC joined Verizon in asking the Supreme Court to overturn the appeals court ruling.

"We believe the Supreme Court should clarify that the congressionally designated regulators, not juries, should resolve these complex disputes," BellSouth said.

United Parcel Service Inc., Honeywell International Inc., Visa USA Inc. and Eastman Kodak Co. urged the Supreme Court to intervene, saying the case will have implications beyond telecommunications.

The justices are to hear arguments in their term beginning in October and rule by July next year.

Verizon's shares fell $1.31, or 3.9 percent, to close at $32.75 yesterday. BellSouth's shares lost 93 cents, or 4.4 percent, to $20.07, and SBC's shares dropped $1.14, or 5.6 percent, to $19.35.

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