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07-512 PACIFIC BELL TEL. CO. V. LINKLINE COMMUNICATIONS, INC. DECISION BELOW: 503 F3d 876 CERT. GRANTED 6/23/2008 QUESTION PRESENTED: Whether a plaintiff states a claim under Section 2 of the Sherman Act by alleging that the defendant - a vertically integrated retail competitor with an alleged monopoly at the wholesale level but no antitrust duty to provide the wholesale input to competitors - engaged in a “price squeeze” by leaving insufficient margin between wholesale and retail prices to allow the plaintiff to compete. LOWER COURT CASE NUMBER: 05-56023
The U.S. Supreme Court case Pacific Bell Telephone Company, DBA AT&T California et al. v. Linkline Communications, Inc., et al., 2008 revolved around the issue of antitrust laws and price squeezing by a company with significant market power. The plaintiffs were internet service providers who bought DSL transport services from AT&T at wholesale prices and then sold broadband to consumers; they accused AT&T of violating Section 2 of the Sherman Act by engaging in a "price squeeze". They claimed that AT&T raised its wholesale prices while simultaneously lowering its retail prices, making it impossible for them to compete effectively. However, the Supreme Court ruled in favor of Pacific Bell (AT&T), stating that there was no violation as long as their retail pricing remained above cost - even if this made competition difficult or impossible for those buying at their wholesale rates.
In the dissenting opinion for Pacific Bell Telephone Company, DBA AT&T California et al. v. Linkline Communications, Inc., et al., Justice Breyer argued that the majority's decision to dismiss price-squeeze claims under Section 2 of the Sherman Act was a departure from established antitrust principles and precedent. He contended that such claims should be evaluated on a case-by-case basis rather than categorically dismissed as per se lawful or unlawful. The justice also disagreed with the majority's reliance on Trinko in their ruling, stating it did not directly address price-squeezes but instead focused on refusal-to-deal cases which are fundamentally different scenarios. Furthermore, he expressed concern over potential negative implications of this ruling for competition and consumers alike - if dominant firms can freely impose price squeezes without fear of legal repercussions then smaller competitors may be driven out of business leading to less market competition and potentially higher prices for consumers.