Northeastern Tel. Co. v. American Tel. & Tel. Co.

Citation477 F. Supp. 251
Decision Date30 November 1978
Docket NumberCiv. No. B-75-319.
CourtUnited States District Courts. 2nd Circuit. United States District Court (Connecticut)
PartiesNORTHEASTERN TELEPHONE COMPANY, Plaintiff, v. AMERICAN TELEPHONE AND TELEGRAPH COMPANY, Western Electric Company, Inc., and the Southern New England Telephone Company, Defendants.

J. Daniel Sagarin, Schless & Sagarin, Bridgeport, Conn., Philip E. McCleery, pro hac vice, J. Robert Sheehy, pro hac vice, Sheehy, Lovelace & Mayfield, Waco, Tex., for plaintiff.

Marshall R. Collins, Asst. Atty. Gen., Hartford, Conn., for amicus curiae.

John M. Goodman, Leonard Joseph, J. Paul McGrath, Dewey, Ballantine, Bushby, Palmer & Wood, New York City, Lewis H. Ulman and Peter J. Tyrrell, William J. O'Keefe, Anne U. MacClintock, Southern New England Telephone Co., New Haven, Conn., William R. Moller, Moller & Horton, Hartford, Conn., Burton K. Katkin, New York City, for defendants.

RULING ON MOTIONS TO DISMISS

DALY, District Judge.

This case arises from the involvement of a regulated telephone utility monopoly in the business terminal equipment market made competitive as the result of the Carterfone1 decision of the Federal Communications Commission ("FCC" or "the Commission"). Plaintiff Northeastern Telephone Company ("Northeastern") sells telephone terminal equipment to customers in Connecticut. This equipment is installed on the customer's premises and connected to the public telephone lines. The defendant Southern New England Telephone Company ("SNET"), owned in part by defendant American Telephone & Telegraph Company also markets terminal equipment, which is manufactured by the defendant Western Electric Company, and which is subject to the supervision of the FCC and the Connecticut Public Utilities Control Authority ("PUCA" or "the Authority"). See Conn. Gen.Stat. § 16-1 (1977). Northeastern has brought this action alleging that the defendants have monopolized, and have attempted and conspired to monopolize and restrain trade in the Connecticut business terminal equipment market in violation of sections 1 and 2 of the Sherman Antitrust Act, 15 U.S.C. §§ 1 and 2, and in violation of the Connecticut Antitrust Act, Conn.Gen. Stat. §§ 35-26 to 28, 35-35. The request for relief includes an injunction and treble damages under sections 4 and 16 of the Clayton Act, 15 U.S.C. §§ 15, 26. The defendants have moved to dismiss claiming immunity from antitrust laws on the basis of pervasive federal and state regulation, and also arguing that the challenged activities are within the state-action exception to the Sherman Act. See Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1942). The defendants also assert that certain activities challenged in the complaint are protected by the First Amendment. Finally, the defendants argue that the Connecticut Antitrust Act is inapplicable.

I. IMPLIED ANTITRUST IMMUNITY DUE TO FEDERAL REGULATION.

FCC REGULATION

Congress articulated a broad mandate for the FCC in the Communications Act: "to make available, so far as possible, to all the people of the United States a rapid, efficient, Nation-wide, and world-wide wire and radio communication service with adequate facilities at reasonable charges. . .." 47 U.S.C. § 151. The FCC's primary tool for regulating telecommunications common carriers is the tariff, a formal schedule of a carrier's charges, classifications, regulations and practices required to be filed with the Commission before conducting business. 47 U.S.C. § 203(a). All unjust or unreasonable tariffs are unlawful, § 201(b), as is unjust or unreasonable discrimination in tariffs. § 202(a). The Commission may, at its own initiative or upon complaint of an interested party, hold hearings as to the lawfulness of any new tariff and suspend its effective date. If the investigation has not been completed within five months past the original effective date,2 the tariff becomes operative pending a determination of its lawfulness. § 204(a). If the FCC upon completion of the investigation concludes that the scrutinized activity violates the Act, the Commission may issue cease-and-desist orders or require the carrier to adopt prescribed rates and practices. § 205(a). Once the tariffs become effective, the common carriers must conform to them. § 203(c).

In addition to examining tariffs, the FCC may also establish rules and regulations "necessary in the public interest" to carry out its statutory duties. § 201(b). The carriers themselves are under a duty "to furnish such communication service upon reasonable request." § 201(a). Also, the FCC must "keep itself informed . . . as to technical developments and improvements in wire . . . communication . . . to the end that the benefits of new inventions and developments may be made available to the people of the United States." § 218.

The Communications Act is not without sanctions for unlawful conduct by the carriers. The failure to obey an FCC order will result in a fine of $1,000 for every violation, to be levied each day against continuing offenses. § 205(b). A carrier is also liable to persons injured by conduct in violation of the Act for the "full amount of damages sustained . . . together with a reasonable counsel or attorney's fee." § 206, §§ 207-209.

The standard mandated by the Communications Act to govern FCC regulation of telecommunications common carriers is the "public interest." § 201(b). Although Congress has not explicitly directed the FCC to consider competition as a factor, the FCC clearly includes competitive concerns in its decision-making process. However, competition is only one of numerous factors that the Commission must consider, and may not be looked upon as an end in itself. E. g., FCC v. RCA Communications, Inc., 346 U.S. 86, 94, 73 S.Ct. 998, 97 L.Ed. 1470 (1953); Hawaiian Telephone Co. v. FCC, 162 U.S.App.D.C. 229, 235, 498 F.2d 771, 777 (1974); Satellite Business Systems, 62 F.C. C.2d 997, 1070 (1977).

Prior to 1968, many telephone companies would permit only company-provided telephone equipment to be attached to their telephone lines. This practice, embodied in both state and federal tariffs, resulted in a telephone equipment monopoly, and aided the states in redistributing the cost of telephone services by setting equipment prices at levels related only indirectly to cost. In Use of Carterfone Device in Message Toll Telephone Service, 13 F.C.C.2d 420, reconsideration denied, 14 F.C.C.2d 571 (1968), the FCC embarked upon a major reform of telephone interconnection. In that decision, the FCC found that the complete prohibition against interconnection of customer-owned equipment was unreasonable and unlawful because it was done without regard to whether interconnection would "adversely affect the telephone company's operation or the telephone system's utility for others." 13 F.C.C.2d at 424. Furthermore, the FCC found the complete exclusion unreasonably discriminatory because only the telephone company's equipment could be connected. Id. That portion of the tariff incorporating the interconnection prohibition was therefore stricken.

The Carterfone decision left to the companies the task of accommodating the traditional need to protect the safety and effectiveness of the telephone lines with the new requirement of liberalized customer interconnection. In November 1968, defendant AT&T filed a new tariff allowing interconnection for the most part only through a company-provided protective device. In response, the FCC allowed the new tariff to become effective while explicitly reserving decision on its lawfulness. AT&T "Foreign Attachment" Tariff Revisions, 15 F.C.C.2d 605, 610 (1968), reconsideration denied, 18 F.C.C.2d 871 (1969). The FCC then embarked upon an extensive investigation of the interconnection question, commissioning a study by the National Academy of Sciences and commencing an informal investigation of its own.

In 1972, the year that plaintiff Northeastern entered the Connecticut terminal equipment market, the FCC convened a joint federal and state board to investigate interconnection. By 1974, however, the spectre of conflicting standards established by the various state regulatory agencies prompted the FCC to assert "paramount jurisdiction" over the technical standards for all interconnection equipment. Telerent Leasing Corp., 45 F.C.C.2d 204 (1974), aff'd sub nom. North Carolina Util. Comm'n v. FCC, 537 F.2d 787 (4th Cir. 1976), cert. denied, 429 U.S. 1027, 97 S.Ct. 651, 50 L.Ed.2d 631 (1976).

The present complaint was filed in October of 1975. In November of that year, the FCC promulgated a registration program for interconnect equipment, and directed telephone companies to permit direct interconnection of all equipment that met the Commission's criteria. Direct interconnection was also required for equipment that included a protective device that similarly met the Commission's criteria. Otherwise, the telephone company could still require the customer to use a company-provided protective device just as the post-Carterfone tariffs had required. Interstate and Foreign MTS and WATS, 56 F.C.C.2d 593 (1975), modified, 58 F.C.C.2d 736 (1976), aff'd sub nom. North Carolina Util. Comm'n v. FCC 552 F.2d 1036 (4th Cir.), cert. denied, 434 U.S. 874, 98 S.Ct. 222, 54 L.Ed.2d 154 (1977). See 47 C.F.R. § 68 (1976). The FCC found that the carriers had failed to "propose effective procedures and/or tariff conditions to prevent harm without unduly restricting a customer's right to make reasonable use of the facilities furnished by the carriers." 56 F.C.C.2d at 598. Accordingly, the Commission declared the post-Carterfone tariffs to be an unnecessary interference with a customer's right to make reasonable use of the telephone lines, and an unjust and unreasonable discrimination against certain users and suppliers of terminal equipment. Id.

IMPLIED IMMUNITY

The Communications Act of 1934 does not include an explicit, general exemption of FCC regulated activities from the antitrust laws; therefore...

To continue reading

Request your trial
6 cases
  • United States v. American Tel. and Tel. Co.
    • United States
    • U.S. District Court — District of Columbia
    • 28 Febrero 1983
    ...631 F.2d at 1327-31, 1334-35; Essential Communications Systems, Inc. v. AT & T, supra, 610 F.2d at 1125; Northeastern Telephone Co. v. AT & T, 477 F.Supp. 251 (D.Conn.1978), rev'd on other grounds, 651 F.2d 76 (2d Cir.1981); United States v. AT & T, supra, 461 F.Supp. at 109 Brief on Topic ......
  • Phonetele, Inc. v. American Tel. & Tel. Co.
    • United States
    • U.S. Court of Appeals — Ninth Circuit
    • 3 Diciembre 1981
    ...MCI Communications Corp. v. American Tel. & Tel. Co., 462 F.Supp. 1072, 1094-95 n.27 (N.D.Ill.1978); Northeastern Tel. Co. v. American Tel. & Tel. Co., 477 F.Supp. 251, 257-58 (D.Conn.1978), rev'd, 651 F.2d 76 (2d Cir. 1981). We do not read NASD to indicate that the FCA-based immunity is ei......
  • Smith v. Metropolitan Property and Liability Ins. Co., 1142
    • United States
    • U.S. Court of Appeals — Second Circuit
    • 10 Julio 1980
    ...Reed, 306 F.2d 481, 487 (2d Cir. 1962); Beach v. Rome Trust Co., 269 F.2d 367 (2d Cir. 1959); see also Northeastern Tel. Co. v. American Tel. & Tel. Co., 477 F.Supp. 251 (D.Conn. 1978). Connecticut, which is home to four of the ten leading carriers of property/casualty insurance, 6 surely h......
  • Northeastern Tel. Co. v. American Tel. & Tel. Co.
    • United States
    • U.S. District Court — District of Connecticut
    • 30 Julio 1980
    ...had not made the requisite showing to support an implied immunity from the antitrust laws. Northeastern Telephone Co. v. American Telephone & Telegraph Co., 477 F.Supp. 251 (D.Conn.1978) hereinafter "Northeastern". This Court is in full accord with Judge Daly's ruling on the immunity issue ......
  • Request a trial to view additional results
1 books & journal articles
  • ANTITRUST ANTITEXTUALISM.
    • United States
    • 1 Enero 2021
    ...Town Sound & Custom Tops, Inc. v. Chrysler Motors Corp., 959 F.2d 468, 476 (3d Cir. 1992); Ne. Tel. Co. v. Am. Tel. & Tel. Co., 477 F. Supp. 251, 258 n.ll (D. Conn. (253) N. Pac. Ry. Co. v. United States, 356 U.S. 1, 4 (1958). (254) United States v. Topco Assocs., Inc., 405 U.S. 596......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT