Wednesday, July 9, 2008
Posted by D. Daniel Sokol
ABSTRACT: The plaintiffs in Twombly v. Bell Atlantic alleged that the nation's largest incumbent telephone service providers violated § 1 of the Sherman Act by conspiring to hinder competition in their regional markets. More specifically, each firm chose not to compete outside of its region (with another incumbent), even though doing so may have been profitable. In May of 2007, the United States Supreme Court ruled 7-2 in favor of the incumbents, effectively striking down the latest antitrust action against the telecommunications industry and raising the pleading standard for future cases. The Twombly outcome, along with other recent developments in the telecommunications industry, signals a re-consolidation of the wireline firms who were divested from AT&T in 1984. This paper describes where Twombly fits in the evolving regulation of telephony, discusses an economic rationale for the incumbents' parallel conduct, and reviews the antitrust and economic consequences of Twombly.