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Another Setback for U.S. Telecom Competition

Associated Press reports that the U.S. Supreme Court sided with the nation's largest local phone companies in a lawsuit by consumers alleging anti-competitive business practices, and restraint of trade.

The court ruled 7-2 that the suit lacked any specifics in accusing the companies of secretly agreeing not to compete in each other's territories for local telephone and broadband Internet service -- implying that the fact that they clearly do not compete, is pure coincidence.

As unlikely as that may seem, it's still not enough to make a bare assertion of conspiracy, Justice David Souter wrote in the majority opinion. Souter said the complaint alleging restraint of trade "comes up short."

He said the consumers who filed the suit "have not nudged their claims across the line from conceivable to plausible." In dissent, Justice John Paul Stevens objected to the lower court's dismissal of the case without requiring a response from the phone companies. Such a response could have included an explanation of the apparent "coincidental agreement" not to compete.

Federal rules, previous rulings and "sound practice mandate that the district court at least require some sort of response," Stevens wrote. The case stems from changes to the telecommunications law in 1996.

The local phone companies were to open their monopoly markets to competition -- which they did somewhat. In return, they were given the opportunity to enter the long-distance business -- which they did fully.

At the time, the four companies controlled more than 90 percent of the market for local phone service. The original defendants were Bell Atlantic Corp., BellSouth Corp., Qwest Communications International Inc., and SBC Communications Inc. The lawsuit was initiated such a long time ago that companies merged, and even changed names as they created still bigger companies that further inhibited telecom competition.

Consumers represented by the plaintiffs' attorneys sued when the companies continuously kept to their own territories -- avoiding direct competition. The consumers also alleged the local phone companies conspired to keep smaller companies from competing successfully in the larger companies' markets.

The Bush administration supported the phone companies, saying the lawsuit "fails to provide concrete notice of the alleged wrongdoing." Those filing such lawsuits, said the Justice Department's solicitor general, need to be able to point to specific allegations of particular jointly attended meetings or to involvement of alleged conspirators in joint activities.

Regardless, the 2nd U.S. Circuit Court of Appeals previously sided with the consumers, concluding those filing the lawsuit had stated "a plausible claim of conspiracy." Meaning, this case was potentially more than just a coincidental agreement not to compete.

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