MCI Communications Corp. v. Am. Tel. & Tel. Co.

• Decision Date: 06 October 1978
• Docket Number: No. 74 C 633.,74 C 633.
• Citation: 462 F. Supp. 1072
• Court: U.S. District Court — Northern District of Illinois
• Parties: MCI COMMUNICATIONS CORPORATION et al., Plaintiffs, v. AMERICAN TELEPHONE & TELEGRAPH COMPANY et al., Defendants.

462 F. Supp. 1072

MCI COMMUNICATIONS CORPORATION et al., Plaintiffs, v. AMERICAN TELEPHONE & TELEGRAPH COMPANY et al., Defendants.

No. 74 C 633.

United States District Court, N. D. Illinois, E. D.

October 6, 1978.

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Robert F. Hanley, Chester T. Kamin, Richard J. Gray, Vicki A. Thompson, Christopher J. McElroy, Alfred Y. Kirkland, Jr., Raymond C. Fay, John R. Worthington, Jenner & Block, Chicago, Ill., for plaintiffs.

George L. Saunders, Jr., Theodore N. Miller, Michael S. Yauch, Kenneth K. Howell, Gerald A. Ambrose, Sidley & Austin, Chicago, Ill., for defendants.

MEMORANDUM OPINION

GRADY, District Judge.

MCI Communications Corporation ("MCI"), a specialized communications common carrier engaged in providing private line communications services for businesses and government agencies between their offices in different cities, is suing the American Telephone & Telegraph Company ("AT&T") and its affiliated companies for a conspiracy in restraint of trade, monopolization, attempted monopolization, and conspiracy to monopolize. The complaint is based on the following events. In 1973, MCI sought approval of construction permits for a microwave transmission system between Chicago and St. Louis. (Complaint, par. 17).¹ This system, if approved, would directly compete with AT&T Long Lines for the data communications business of the government and private companies, the market of which AT&T controls a 90 per cent share. (Complaint, pars. 7, 22). In 1969, the FCC granted MCI construction permits for the Chicago to St. Louis route and ordered AT&T to interconnect MCI's intercity transmission system with the Bell System's intracity network. (Complaint, par. 17).

During the pendency of MCI's application, AT&T allegedly initiated a massive publicity campaign directed at the public, MCI's potential customers, state and federal regulators, Congressmen, and the Executive Branch, asserting that competition in the provision of business and data communications services would damage the national telephone network and asking for a "moratorium on competition" in that field. (Complaint, par. 23(m)). Also during this period, AT&T expanded at an unprecedented rate its circuits which transmitted private line business and data communications. (Complaint, par. 23(i)).

After MCI received approval for the Chicago-St. Louis construction and the FCC ordered interconnection, AT&T allegedly engaged in numerous other activities designed to maintain Long Lines' monopoly power in the business and data communications market. (Complaint, par. 23). AT&T's local affiliates refused to interconnect MCI to various services, such as common control switching arrangements ("CCSA") and intercity private line service ("FX"), to points beyond metropolitan distribution areas, to cities not serviced by MCI, to independent telephone carriers, and to other specialized common carriers who serviced cities not serviced by MCI. (Complaint, par. 23(a)). For any potential customer who needed these interconnections, AT&T tied provision of the services and any expansion of distribution to the use of Long Lines' intercity transmission facilities. (Complaint, par. 23(h)). In those cases where AT&T's affiliates permitted interconnection, they furnished interconnection on unilateral and discriminatory terms. The rates charged MCI for installation and maintenance were higher than those charged for Bell subsidiaries. (Complaint, par. 23(b)(1), (6), and (7)). The quality of the interconnection received by MCI was lower than that provided to Bell subsidiaries, in that the local affiliates supplied low grade equipment, inadequate circuitry, inadequate technical information, inadequate follow-up on complaints, and poor repair service to MCI. (Complaint, par. 23(c)(2)-(4), (d), and (e)). In addition, the local affiliates imposed significant geographic and customer restrictions upon MCI's interconnections. (Complaint, par. 23(b)(3)-(5)). When MCI protested about these interconnection practices to the FCC, AT&T allegedly filed sham tariffs before various State regulatory commissions which sought to deny MCI the interconnections ordered by the FCC. (Complaint, par. 23(1)).

AT&T then initiated a campaign to harass MCI's present customers, to discourage potential customers from buying MCI's service, and to disparage MCI generally throughout the business and financial community. To discourage potential customers, AT&T caused the filing of "mirror" and "experimental" tariffs with the FCC for the Chicago-St. Louis routes. (Complaint, par. 23(g), (j)). These tariffs offered lowered rates and greater services than those supplied by MCI, but at the time of filing, AT&T knew that it did not have the ability to provide the breadth of services or to charge the low rates established in the tariff. (Complaint, par. 23(j)). Nevertheless, AT&T publicized the tariff's terms to potential customers in the business community and represented that it would soon provide the services contained in the tariff. (Complaint, par. 23(j)). In addition, AT&T threatened to withdraw advisory personnel and services from companies which purchased MCI's services. (Complaint, par. 23(f)(5)). As to MCI's present customers, AT&T required them to sign a customer authorization before proceeding with inter-connection. (Complaint, par. 23(f)(1)). AT&T then supplied them with other AT&T services on a discriminatory basis and misrepresented to them that the terms of AT&T's new tariff would soon be available. (Complaint, par. 23(f)(2), (4)). Finally, in its more general publicity, AT&T disparaged the safety and reliability of MCI's service, the aptitude and acumen of MCI's personnel, and the strength of MCI's financial position. (Complaint, par. 23(k)).

Although this case was filed in 1974 and the parties are near the completion of discovery, AT&T has now moved to dismiss the entire complaint. With the exception of the allegations of sham proceedings and lobbying, defendant argues, all the activities detailed in the complaint are within the exclusive jurisdiction of the FCC and are therefore impliedly immunized from the antitrust laws. The remaining allegations, defendants contend, fall within the Noerr immunity which protects certain forms of first amendment activity.

On the question of implied immunity, AT&T has made two interrelated, but quite distinct, arguments. The first is that the pervasive regulation of common carriers by the FCC under the "public interest" standard is necessarily and inherently inconsistent with the antitrust laws and that therefore all of AT&T's conduct should obtain a blanket immunity from the coverage of the antitrust laws. The second takes a fall back position. The argument is that even though all of AT&T's conduct may not be immunized, the FCC, in its pervasive regulation, has approved each of the allegedly anticompetitive activities of which MCI complains and that therefore AT&T should obtain at least ad hoc immunity from the antitrust laws.

In essence, both of these arguments rely on the doctrine of exclusive jurisdiction as distinguished from the doctrine of primary jurisdiction. The former doctrine is invoked when the enforcement of the antitrust laws is so plainly repugnant to agency administration of a regulatory statute that the antitrust court is ousted of jurisdiction. 7 von Kalinowski, Antitrust Laws and Trade Regulation: ? 44A.02 (1977). Primary jurisdiction, on the other hand, is invoked when the defendant's conduct is arguably immune from anti-trust liability due to the regulatory statute or when the agency has jurisdiction over some of the defendant's conduct and its decision would be of material aid in clarifying the antitrust issues. Ricci v. Chicago Mercantile Exchange, 409 U.S. 289, 93 S.Ct. 573, 34 L.Ed.2d 525 (1973). Rather than dismissing the case entirely, as is required by a finding of exclusive jurisdiction, a court which applies the doctrine of primary jurisdiction merely stays its proceedings and refers certain factual or legal questions to the administrative agency for preliminary determination. United States v. Philadelphia National Bank, 374 U.S. 321, 353, 83 S.Ct. 1715, 10 L.Ed.2d 915 (1963). There are two primary reasons for this prior resort to the agency: the need for administrative uniformity, and "the need for administrative expertise in distilling the relevant facts in a complex industry." United States v. Radio Corporation of America, 358 U.S. 334, 347-48, 79 S.Ct. 457, 3 L.Ed.2d 354 (1959).

It is important to note at the outset that AT&T's assertions of immunity in this case are based on the doctrine of exclusive, as opposed to, primary jurisdiction. It is equally important to recognize that AT&T bases its arguments for exclusive jurisdiction not on an express grant of statutory immunity but on an implied grant of immunity. Given this posture, AT&T's claims of implied immunity must satisfy the exacting standard articulated by the Supreme Court: "Repeal of the antitrust laws by implication is not favored and not casually to be allowed. Only where there is a `plain repugnancy between the antitrust and regulatory provisions' will repeal be implied." Gordon v. New York Stock Exchange, 422 U.S. 659, 682, 95 S.Ct. 2598, 2611, 45 L.Ed.2d 463 (1975). ". . . Repeal is to be regarded as implied only if necessary to make the regulatory statute work, and even then only to the minimum extent necessary." Silver v. New York Stock Exchange, 373 U.S. 341, 357, 83 S.Ct. 1246, 1257, 10 L.Ed.2d 389 (1963).

FEDERAL COMMUNICATIONS ACT

The question of implied immunity turns in considerable part on the legislative history and content of the regulatory statute. Thus, we must begin by an analysis of the Federal Communications Act. Federal regulation of communications common carriers began with an amendment of the Interstate Commerce Act, in which communications...