| 7th Circuit Upholds
Dismissal of Private Antitrust Action Against Merging RBOCs |
12/19. The U.S.
Court of Appeals (7thCir) issued its opinion
in South
Austin Coalition v. SBC, affirming the
dismissal of a private antitrust action challenging the SBC
Ameritech merger. The Appeals Court held that this action is
barred by Section 7 of the Clayton Act.
The plaintiffs, the South Austin Coalition Community Council
(a Chicago area group), and others, sought to stop the merger
of SBC and Ameritech.
Ameritech and SBC were two of the original Regional Bell
Operating Companies (RBOCs) formed by the break up of the Bell
system in the 1980s. They merged in 1999, with the approval of
the Department of Justice's Antitrust Division and
the FCC. See, DOJ/ATR
pleadings. The plaintiffs filed a complaint in U.S.
District Court (NDIll) against SBC alleging violation of
federal antitrust laws. They argued that had SBC and Ameritech
not merged, each would have entered the other's core markets
and created extra competition to consumers' benefit.
District Court. The District Court dismissed the
complaint on the grounds that the plaintiffs lacked standing.
The Court reasoned that the allegations in the complaint were
too speculative and vague to justify putting the
administrative conclusions to the test. This appeal followed.
Appeals Court: Standing and Pleading Requirements. The
Appeals Court affirmed the dismissal, but on other grounds.
First, the Appeals Court held that the plaintiffs do have
standing to maintain the suit. It wrote that FRCP
8 sets out the minimal pleading requirements, and the
plaintiffs met those by alleging facts amounting to injury in
fact (satisfying the Article III standing requirement) and
antitrust injury (satisfying the antitrust statutory
requirement). The Court noted that Rule 8 sets out special
pleading requirements for some types of cases, and the
Congress has established requirements in others, such as the
Private Securities Litigation Reform Act (PSLRA). However,
there are no special pleading requirements for private
antitrust actions.
Appeals Court: Clayton Act. The Appeals Court affirmed
the dismissal on the basis of an obscure Clayton Act
exemption. It held that this action, as plead, is barred
by Section 7 of the Clayton Act, codified at 15 U.S.C.
§ 18, which creates an antitrust merger exemption for
common carriers "where there is no substantial
competition".
15 U.S.C. § 18, ¶ 4. This section provides that
"Nor shall anything herein contained be construed to
prohibit any common carrier subject to the laws to regulate
commerce from aiding in the construction of branches or short
lines so located as to become feeders to the main line of the
company so aiding in such construction or from acquiring or
owning all or any part of the stock of such branch lines, nor
to prevent any such common carrier from acquiring and owning
all or any part of the stock of a branch or short line
constructed by an independent company where there is no
substantial competition between the company owning the branch
line so constructed and the company owning the main line
acquiring the property or an interest therein, nor to prevent
such common carrier from extending any of its lines through
the medium of the acquisition of stock or otherwise of any
other common carrier where there is no substantial competition
between the company extending its lines and the company whose
stock, property, or an interest therein is so acquired."
This section was enacted by the Congress in 1914 with
regulated railroads in mind. Nevertheless, the Appeals Court
held that its language is broad enough to encompass
telecommunications carriers, and that it remains in effect
today, notwithstanding telecom deregulation. The Court further
suggested that the statute is obsolete, but added that its
repeal is a job for the Congress, not the judiciary.
The opinion of the three judge panel was written by Judge
Frank Easterbrook, a leading authority on antitrust law. |
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| Insider Trading |
| 12/29. The SEC filed a
civil complaint
in U.S.
District Court (DDC) against Sean Price and Benjamin
Maldonado alleging insider trading. The two simultaneously
consented to entry of judgment restraining them from violation
of federal securities laws, ordering disgorgement of loses
avoided, and ordering payment of civil penalties. Price is an
SVP of Safenet, an Internet security company. Maldonado was
previously a stockbroker in the Washington DC office of
Merrill Lynch. The complaint alleges that Price tipped
Maldonado in advance of a Safenet announcement that the
company expected to report quarterly financial results below
analysts' expectations, and that Maldonado subsequently sold
29,500 shares that were owned by him and members of his
family. See also, SEC
release. |
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| House Subcommittee Holds
Hearing on Electronic Communications Networks |
12/19. The House
Commerce Committee's Subcommittee on Commerce, Trade, and
Consumer Protection held a hearing titled "Electronic
Communications Networks in the Wake of September 11th".
Rep. Cliff Stearns
(R-FL), the Chairman of the Subcommittee, presided. He said in
his opening
statement that "a company like Ebay is an ECN because
it facilitates the meeting of buyers and seller without the
intervention of a middleman. More specialized ECNs, like our
witness today, specialize in facilitating markets in stock by
causing buyers and seller to meet electronically using private
electronic networks. ECNs are electronic networks that do not
have physical trading locations. Therefore, they are somewhat
less susceptible to disruption of service stemming from events
in a particular location." However, he pointed out during
the question and answer session that some of this advantage is
lost by the fact that most of the offices of ECNs involved in
securities trading are located in Manhattan.
Rep. Billy Tauzin
(R-LA), the Chairman of the full committee, submitted a statement
for the record. He said that "As our economy continues to
evolve into an electronic marketplace, the fundamental
principle of commerce that we must protect is the ability to
exchange information as efficiently and reliably as possible.
Continuity of operations is part of this equation. ... The
purpose of the hearing today is to identify any barriers that
may prevent the technology at our witnesses' disposal from
being used more broadly to the benefit of investors. As the
world leader of free markets, the United States must make sure
that regulation serves to make technology an asset to strong
markets – not stand as an impediment."
Matthew Andresen of The
Island ECN said in his opening
statement that "we should eliminate any barriers that
inhibit fair competition between electronic and traditional
markets. Currently, there are two main market structure
changes that must be immediately pursued to ensure such fair
competition. First, ECNs must be permitted to freely
disseminate their market data to investors without sacrificing
the very qualities that make ECNs compelling alternatives to
traditional markets. Second, since all markets are competing
in the same securities for the same customers, all markets
must be permitted to operate under the same ground rules in
the same manner."
See, prepared testimony of witnesses: Steven
Randich (NASDAQ), Matthew
Andresen (The Island ECN), Catherine
Kinney (NYSE), Kim
Bang (Bloomberg Tradebook), Kevin
O'Hara (Archipelago), Joel
Steinmetz (SVP of Instinet),
and Keith
Jamiatis (NYFIX Millennium). |
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| Tech Companies Oppose
Ultrawideband Delay |
12/19. Representatives of Intel, IBM, Texas Instruments,
Sharp Labs and Siemens wrote a letter
to FCC Chairman Michael Powell,
and the other Commissioners, "regarding the Commission's
removal of the ultra wideband (UWB) item from its December 12,
2001, open meeting agenda." See, FCC
notice of deletion of UWB item from agenda. (This is ET
Docket No. 98-153.)
They wrote that "We are concerned that a short delay
could be extended, which in turn would be a substantial
setback to the timely development and deployment of UWB
services. This could have a negative impact on current
industry momentum focused on building UWB technology and
products. This proceeding is more than three years old with
almost 800 comments, notices, and technical studies on the
docket. UWB proponents have filed detailed technical analyses
showing that operation of their devices will not cause harmful
interference to other users of the spectrum, both government
and non-government. These analyses also explain why studies
that purport to show harmful interference gave incorrect
results. It is time to issue a decision."
UWB devices, which use very narrow pulses with very wide
bandwidths, have potential applications in both radar and
communications technologies. It has been argued that UWB
devices can use large portions of already allocated spectrum
with minimal or no interference to incumbent users.
Intel submitted a comment
[PDF] to the FCC back on November 27, 2000, in which it stated
that "Intel believes that UWB is a very promising
technology for enabling short distance, high data rate
connections that can support new and innovative applications,
and Intel supports the FCC in the formation of regulations for
UWB transmissions in order to bring these benefits to the
marketplace in a timely manner."
See also, NTIA
Report 01-383 titled "The Temporal and Spectral
Characteristics of Ultrawideband Signals" and dated
January 2001; NTIA
Report 01-384 titled "Measurements to Determine
Potential Interference to GPS Receivers from Ultrawideband
Transmission Systems" and dated February 2001; and NTIA
Report 01-45 titled "Assessment of Compatibility
between Ultrawideband (UWB) Systems and Global Positioning
Systems (GPS) Receivers" and dated March 2001. |
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| AT&T Broadband and
Comcast to Merge |
12/19. AT&T announced
that the Boards of Directors of AT&T and Comcast "approved a
definitive agreement to combine AT&T Broadband with
Comcast ... The new company ... will have approximately 22
million subscribers ... 2.2 million high speed data customers
and one million cable telephony customers." AT&T
added that it "will spin off AT&T Broadband and
simultaneously merge it with Comcast, forming a new company to
be called AT&T Comcast Corporation." See, AT&T
release. See also, Comcast
release.
The merger requires antitrust and FCC review, and approval by
both companies' shareholders. The law firm of Wachtell Lipton Rosen & Katz
represents AT&T. Davis Polk
& Wardwell represents Comcast. |
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| Thursday, Dec 20 |
CANCELLED. 10:00
AM. The Senate
Judiciary Committee will hold a business meeting.
Location: Room 226, Dirksen Building.
1:30 PM. The U.S. International Telecommunication Advisory
Committee (ITAC) will hold a meeting regarding preparations
for the 2002 World Telecommunication Development Conference (WTDC).
See, notice
in Federal Register. Location: State Department, Room 1408. |
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| Friday, Dec 21 |
| 8:30 AM. Federal Trade
Commission (FTC) Chairman Timothy Muris will speak at the Brookings Institute
roundtable titled "Trade and Investment Policy."
Location: Brookings Institute, Falk Auditorium, 1775
Massachusetts Avenue, NW, Washington DC. |
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| Monday, Dec 24 |
The FCC will be closed.
The USPTO will be closed.
Any any action or fee due Saturday, December 22, Sunday,
December 23, Monday, December 24, or Tuesday, December 25,
will be considered as timely on Wednesday, December 26, 2001.
See, USPTO
release. |
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| Christmas Schedule |
| The Tech Law Journal Daily E-Mail Alert will not be
published on Monday, December 24, Tuesday, December 25, or
Wednesday, December 26. |
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| People and Appointments |
12/19. Suzanne Tetreault was named Associate Bureau
Chief and Chief of Staff of the FCC's Enforcement Bureau. She has
been with the FCC since 1991. See, FCC
release.
12/19. President Bush announced his intention to nominate John Rogers to be
a U.S. Circuit Judge for the Sixth Circuit. See, White
House release.
12/19. President Bush announced his intention to nominate Timothy
Stanceu to be Judge of the U.S. Court of International
Trade. See, White
House release. |
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| More News |
| 12/19. The USPTO published
an announcement
in its web site that it "now accepts maintenance fee
payments by deposit account over the Internet." |
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| Correction |
| The Wednesday, December 19, 2001, issue of the TLJ Daily
E-Mail Alert incorrectly stated the oral argument in the Festo
case is scheduled for January 3. The Supreme Court is
scheduled to hear oral argument on January 8. (Festo
Corporation v. Shoketsu Kinzoku Koygo Kabushiki, No. 00-1543,
a case regarding the doctrine of equivalents in patent law.) |
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