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Weekly UpdatesCasting implementation practicality aside, what remains is the common institutional implication of the EF doctrine and the Trinko decision that repudiated it--regulation and competition policy should be formulated by the same institution. The EF doctrine essentially asks antitrust agencies and courts to become price regulators as well. Not only does effective limitation of the market power inherent in an EF require setting the access price, the very determination of an EF requires that one engage in an inquiry to see if regulation would increase the output of the firm that owns it.
Trinko says the same thing, only delegating the role of price setter and competition enforcer to the regulatory agency, rather than to antitrust enforcement. If there is a regulator in place with the authority to oversee competition, the benefits of additional enforcement through antitrust are outweighed by the costs associated by the imposition of duties to deal. (44) At least implicitly, the Trinko opinion suggests that the Court would have granted outright regulatory immunity but for the explicit antitrust savings clause in the Telecommunications Act of 1996. (45) Credit Suisse, three years later, only reinforced this perspective. (46)
V. SHOULD ANTITRUST AND REGULATION BE COMBINED?
Both Trinko and the EF doctrine suggest putting antitrust and regulation together, inviting us to ask whether that is a good idea. The skepticism expressed here regarding both Trinko and EF could lead to a negative answer, but that would be premature. While expressing general support for antitrust over regulation, Carlton and Picker observers have supported Trinko, although primarily on the grounds that antitrust courts should not be imposing duties to deal. (47)
More generally, one can imagine potential virtues of coordination, particularly when antitrust and regulation are complements. When the incentives to subvert competition are created by regulation, one might "internalize" the enforcement "externalities" by having the same body that imposes regulations bear the burden of enforcing the industry structures necessary to make regulation work. Similarly, an agency assessing how to control market power of a firm under its jurisdiction may want to decide how best to combine price controls, structural requirements, and behavioral injunctions in fashioning effective responses to market power concerns. On the antitrust side, one may want to add to the arsenal of legal weaponry against direct price control through market power as well as rules against collusion, excessive concentration through merger, and monopolization. (48)
However, arguments on the other side are compelling, most importantly regarding the clashes between incompatible institutional cultures. The core presumption of a regulator is that competition cannot work in substantial segments of the sectors under its jurisdiction. For that reason, a central planner needs to step in to determine prices, product quality, and other dimensions that the market would fail to provide. On the other hand, antitrust enforcement is motivated by a faith that markets do work. The role of policy is simply to eliminate fundamentally artificial impediments in the form of collusive agreements, concentrated mergers, or exclusionary and predatory practices that create monopolies in markets that would otherwise be competitive.
To combine antitrust and regulation institutionally asks people committed to the idea that markets succeed to design and enforce policies based on their failure, and vice versa. Trinko and the EF doctrine both pose the following questions: (1) Do we want antitrust agencies thinking about central planning rather than markets as an option?; and, (2) Do we want regulators responsible for policing competitive performance in unregulated markets?
I doubt it, but the debate surely will go on.
(1.) United States v. AT&T, 552 F. Supp. 131 (D.D.C. 1982).
(2.) Verizon Comm., Inc. v. FCC, 535 U.S. 467, 523 (2002) (upholding the FCC's pricing methods for network elements); U.S. Telecomm. Ass'n v. FCC, 359 F.3d 554, 576 (D.C. Cir. 2004) (denying the FCC's use of uneconomic entry to meet the statutory definition of "impairment" necessary to justify supplying a network element to competitors); Covad Comm. v. FCC, 450 F.3d 528 (D.C. Cir. 2006) (upholding, on its fourth attempt, the FCC's tests for "impairment").
(3.) See Timothy Brennan, Skating Toward Deregulation: Canadian Developments, 60 FED. COMM. L.J. 325 (2008).
(4.) See Timothy Brennan, Why Regulated Firms Should Be Kept Out Of Unregulated Markets: Understanding the Divestiture in U.S. v. AT&T, 32 ANTITRUST BULL. 741 (1987).
(5.) See Michael Crew, Paul Kleindorfer & David Sumpter, Bringing Competition to Telecommunications by Divesting the RBOCs, in OBTAINING THE BEST FROM REGULATION AND COMPETITION 21 (Michael Crew & Menahem Spiegel eds., 2005). For an earlier critique of the discrimination argument and a response, see Dennis Weisman, Regulation and the Vertically Integrated Firm: The Case of RBOC Entry into InterLATA Long Distance, 8 J. REG. ECON. 249 (1995); David Reiffen, A Regulated Firm's Incentive to Discriminate: A Reevaluation and Extension of Weisman 's Result, 14 J. REG. ECON. 79 (1998).
(6.) See Brennan, supra note 4.
(7.) See id.; see also Timothy Brennan, Cross-Subsidization and Cost Misallocation by Regulated Monopolists, 2 J. REG. ECON. 37, 37-51 (1990).
(8.) See Timothy Wu, from his presentation at "The Enduring Lessons of the Breakup of AT&T: A Twenty-Five Year Retrospective." Space here does not allow a full discussion of this issue, but I note here that one could view the issue not as requiring that all Interact content be treated identically, but that all content be handled with some minimum level of quality. This would respond both to consumer protection concerns and a universal-service-like expectation that links supplied by a content provider on its Web site will be accessible by its readers.
(9.) 540 U.S. 398 (2004).
(10.) See, e.g., MCI Comm. Corp. v. AT&T, 708 F.2d 1081, 1102 (7th Cir. 1982).
(11.) Telecommunications Act of 1996, Pub. L. No. 104-104, [section] 601(b)(l), 110 Stat. 56, 143 (1996) (codified as amended at 47 U.S.C. [section] 152 note (2000)).
(12.) 127 S. Ct. 2383 (2007).
(13.) See Timothy Brennan, Regulation and Competition as Complements, in OBTAINING THE BEST, supra note 5, at 1.
(14.) U.S. v. Microsoft Corp., 87 F.Supp. 2d 30 (D.D.C. 2000); see infra note 35 and accompanying text.
(15.) Interestingly, the U.S. enforcement agencies supported the eventual outcome in Trinko. See Brief for the United States and the Federal Trade Commission as Amici Curiae Supporting Petitioner, Verizon Comm., Inc. v. Law Offices of Curtis V. Trinko, L.L.P., 540 U.S. 398,410-11 (2004) (No. 02-682).
(16.) Trinko, 540 U.S. at 410-11 (2004)
(17.) See accompanying text, infra notes 43-46.
(18.) See Timothy Brennan, Trinko v. Baxter: The Demise of U.S. v. AT&T, 50 ANTITRUST BULL. 635 (2006).
(19.) See infra p.138, tbl.1.
(20.) Pub. L. No. 104-104, [section][section] 251-52, 110 Stat. 56, 61-70 (1996) (codified as amended at 47 U.S.C. [section] 251-52 (2000)).
(21.) The law firm of Curtis V. Trinko, the plaintiff in the case, was not a local carrier alleging discrimination against itself, but a customer of AT&T alleging harm as the result of Verizon's alleged discrimination. Three of the nine Supreme Court Justices ruling for Verizon argued that they would have done so simply on the basis that Trinko was not directly harmed and thus lacked standing. Trinko, 540 U.S. at 416 (Stevens, J., Souter, J., & Thomas, J., concurring).
(22.) In recounting this story, I do not intend to assume that the Telecommunication Act's procedures for facilitating entry by local carriers relying on incumbent facilities were justified, nor that the prices proposed for such access were justified. For a critique of the pricing proposal from a "regulatory takings" perspective, see Timothy J. Brennan, Comparing "Stranded Costs" Arguments in Telecommunications and Electricity, in REGULATION UNDER INCREASING COMPETITION 79 (Michael Crew ed., 1999). The purpose here is only to illustrate that the economic settings of AT&T and Trinko were the same. No differences in the decisions can be attributed to claims that the economics were different, e.g., that the loop market in Trinko was competitive despite the Telecommunication Act's access requirements.
(23.) This figure taken from Brennan, Demise, supra note 18, at 649.
(24.) United States v. AT&T, 552 F. Supp. 131, 226-27, 232-34 (D.D.C. 1982).
(25.) Trinko, 540 U.S. at 411-15. In doing so, the Court explicitly rejected an "essential facilities" justification for duties to deal. For a discussion of essential facilities, see infra notes 38-41 and accompanying text. Other aspects of the Court's decision, including refusing to impose a duty because Verizon did not sacrifice profits to refuse interconnection and providing such interconnection only because of statutory and regulatory obligations, are criticized in Brennan, Demise, supra note 18, at 655-57, relying on a general critique of "profit sacrifice" tests in Timothy J. Brennan, Saving Section 2: Reframing U.S. Monopolization Law, in THE POLITICAL ECONOMY OF ANTITRUST 417, 428-31 (Vivek Ghosal & Johan Stennek eds., 2007).
(26.) 15 U.S.C. [section] 2 (2000).
(27.) MCI Comm. Corp. v. AT&T, 708 F.2d 1081, 1102 (7th Cir. 1982) (emphasis added) (citation omitted) (quoting Georgia v. Pa. R.R., 324 U.S. 439, 456 (1945), Gordon v. N.Y. Stock Exch., 442 U.S. 659, 682 (1975)).
(28.) See Trinko, 540 U.S. at 406 (citation omitted) (quoting United States v. Nat'l Ass'n of See. Dealers, Inc., 422 U.S. 694, 734 (1975), 47 U.S.C. [section] 152 note (2000)).
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