WASHINGTON - The United States Supreme Court today dismissed an antitrust case filed by class-action plaintiffs William Twombly and Lawrence Marcus against Bell Atlantic Corp. - which merged with GTE Corp. in 2000 to form Verizon Communications Inc. - and several other large telephone companies.
Twombly and Marcus, representatives of a purported class of virtually everyone who uses landline telephones in the United States, in 2002 sued the major telephone companies for allegedly "conspiring" to suppress competition. The complaint filed by the Milberg, Weiss law firm made two sets of allegations: First, plaintiffs alleged that defendants had refused to render sufficient assistance to new competitors under expansive regulatory obligations that were imposed by the Federal Communications Commission and later vacated by the courts. Second, plaintiffs alleged that defendants had refrained from "meaningful," but not total, competition in one another's traditional telephone service territories, based on the theory that such entries were supposedly attractive business opportunities.
The federal trial court dismissed the case because the allegations were too flimsy to state a claim.
The U.S. Court of Appeals for the Second Circuit reinstated the case. It held that allegations of companies acting similarly or "in parallel," combined with a conclusory allegation of "conspiracy," almost always suffices to state an antitrust claim. The Second Circuit decision noted, "To rule that allegations of parallel anti-competitive conduct fail to support a plausible conspiracy claim, a court would have to conclude that there is no set of facts that would permit a plaintiff to demonstrate that the particular parallelism asserted was the product of collusion rather than coincidence." That standard, which relies not on the facts alleged but on un-alleged facts that might be proved, would allow virtually any allegation of parallel conduct to proceed.
The Supreme Court today reversed the Second Circuit's decision, holding that it distorted basic antitrust policies.
The following should be attributed to John Thorne, senior vice president and deputy general counsel of Verizon Communications:
"The Supreme Court's decision embraces an important principle about protecting the freedom of firms to make unilateral decisions on what markets to enter or not enter. Today's decision is the fifth in a series of Supreme Court decisions establishing that firms will not be challenged under antitrust for making independent choices that benefit consumers. The court's decision in Brooke Group affirmed the freedom to lower prices. The court's decision in Discon (in which Verizon's predecessor NYNEX was the petitioner) affirmed the freedom to choose suppliers. The court's decision in Trinko (in which Verizon was the petitioner) affirmed the freedom to invest. The court's decision in Weyerhauser affirmed the freedom to expand output. Today's decision affirms the freedom to decide when and how to enter new markets.
"Consumers benefit when companies of every size have the right to lower prices, choose suppliers, invest, expand output, and enter new markets freely."