Ruling Favors Phone Firms
Supreme Court Puts New Limits On Antitrust Suits

By Greg Stohr
Bloomberg News
Tuesday, May 22, 2007

The Supreme Court put new limits on antitrust lawsuits, throwing out a case that accused Verizon Communications and other local-telephone companies of agreeing not to compete in each other's home territories.

The justices, voting 7 to 2 yesterday, said the lawyers pressing the case had no evidence of collusion when they filed their complaint against Verizon, AT&T and Qwest Communications International. A federal appeals court had let the case go forward.

"There is no reason to infer that the companies had agreed among themselves to do what was only natural anyway," Justice David H. Souter wrote for the court.

The ruling on the case, Bell Atlantic v. Twombly, may shield companies in a variety of industries. DuPont, MasterCard Worldwide, Visa USA, Northwest Airlines, UAL, Louisiana-Pacific and several industry trade groups all signed briefs urging tighter restrictions on antitrust suits.

The high court majority faulted the lawsuit for making only a general allegation about an illegal agreement not to compete. The court said the companies might have made independent decisions not to venture into territory where another business has a dominant presence.

Justices Ruth Bader Ginsburg and John Paul Stevens dissented.

The case is one of four antitrust cases the high court is considering in its 2006-07 term, which is to conclude at the end of June. In February, the court shielded companies from claims that they illegally tried to drive a competitor out of business, overturning a $78.8 million award against Weyerhaeuser.

The dispute before the court stemmed from a 1996 federal law that sought to encourage regional phone companies to vie for each other's customers. That aspect of the law had limited success, as the largest companies proved reluctant to challenge each other directly.

In a separate case, the Supreme Court agreed to consider whether dozens of states are violating the Constitution by giving holders of in-state municipal bonds tax breaks that are not available for local government debt issued elsewhere.

The justices will review a court decision that said Kentucky was unconstitutionally discriminating against interstate commerce by taxing income from out-of-state bonds while exempting earnings on local debt. As many as 42 states, including New York and California, give their own bonds special tax treatment.