South Austin v. SBC Communications ( 2001 )


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  • In the
    United States Court of Appeals
    For the Seventh Circuit
    No. 00-3864
    South Austin Coalition Community Council, et al.,
    Plaintiffs-Appellants,
    v.
    SBC Communications Inc.,
    Defendant-Appellee.
    Appeal from the United States District Court
    for the Northern District of Illinois, Eastern Division.
    No. 99 C 7232--Blanche M. Manning, Judge.
    Submitted November 14, 2001/*--Decided December 19, 2001
    Before Easterbrook, Kanne, and Evans,
    Circuit Judges.
    Easterbrook, Circuit Judge. SBC
    Communications and Ameritech--two of the
    Baby Bells created by the breakup of AT&T
    in 1983--merged in 1999 after receiving
    approval from the Federal Communications
    Commission and several state regulators.
    The Antitrust Division of the Department
    of Justice declined to file suit. But
    this did not deter the plaintiffs in this
    case, which have sued twice. The first
    suit, filed before SBC and Ameritech had
    obtained the necessary administrative
    approvals, was dismissed as premature.
    
    191 F.3d 842
    (7th Cir. 1999). This second
    suit, filed immediately after the
    approvals, has been dismissed for want of
    standing. 2001 U.S. Dist. Lexis 9850 (N.D.
    Ill. June 22, 2001).
    When the local-service subsidiaries of
    AT&T were spun off in the 1980s, most
    people assumed that local phone service
    is a natural monopoly. This was a premise
    of the divestiture, and each Baby Bell
    was constituted as a monopoly in its
    service area. By the time of the merger
    the technological basis of this natural-
    monopoly assumption had come into serious
    question, and the legal barriers to
    competition also were in the process of
    being dismantled. Thus the antitrust
    objection to the merger was based on
    potential rather than ongoing
    competition. The agencies were concerned-
    -and in this suit the plaintiffs contend-
    -that, had SBC and Ameritech not merged,
    each would have entered the other’s core
    markets and created extra competition to
    consumers’ benefit. The complaint
    alleges, for example, that but for the
    merger SBC would have begun to offer
    local phone service in Chicago (part of
    Ameritech’s original territory), and
    Ameritech would be offering local service
    in St. Louis, an area assigned to SBC in
    the AT&T divestiture. The FCC and the
    Antitrust Division concluded that, even
    if this is so, many other rivals remain--
    and that as a practical matter there is
    effective competition between land lines
    and cellular service, so that competition
    prevails even in markets that have a
    single land-line local-service provider.
    But official approval does not immunize a
    phone merger against private antitrust
    challenge; sec.7 of the Clayton Act, 15
    U.S.C. sec.18, confers immunizing power
    on the Surface Transportation Board, the
    Federal Power Commission, and several
    other bodies, but not on the FCC or the
    Antitrust Division. So private plaintiffs
    are free to seek divestiture. See
    California v. American Stores Co., 
    495 U.S. 271
    (1990).
    Plaintiffs allege that the merger has
    reduced long-run competition. This
    implies not only injury-in-fact (the core
    of the Article III standing requirement)
    but also "antitrust injury." That is to
    say, these plaintiffs complain about the
    kind of injury (reduced output and higher
    prices) against which the antitrust laws
    are directed. See Atlantic Richfield Co.
    v. USA Petroleum Co., 
    495 U.S. 328
    (1990); Cargill, Inc. v. Monfort of
    Colorado, Inc., 
    479 U.S. 104
    (1986);
    Brunswick Corp. v. Pueblo Bowl-O-Mat,
    Inc., 
    429 U.S. 477
    (1977). Nonetheless,
    the district court dismissed the
    complaint for want of standing. The
    court’s opinion summarizes at length the
    conclusions of the administrative
    agencies approving the merger and then
    states, without additional reasoning,
    that the allegations of the complaint are
    too "speculative and vague" to justify
    putting the administrative conclusions to
    the test. This approach has nothing to do
    with standing. Complaints need not be
    elaborate, and in this respect injury
    (and thus standing) is no different from
    any other matter that may be alleged
    generally. See Lujan v. Defenders of
    Wildlife, 
    504 U.S. 555
    , 561 (1992). The
    district court’s approach amounts to a
    conclusion that the complaint fails to
    state a claim on which relief may be
    granted--and this is how SBC (the
    surviving firm in the merger) chooses to
    treat it. It does not attempt to defend
    the district court’s standing rationale
    but argues instead that antitrust
    complaints must be more thorough than the
    normal civil complaint, the better to
    curtail the high cost of antitrust
    litigation by facilitating early
    disposition.
    That is not correct. A pleading is
    sufficient if it contains
    (1) a short and plain statement of the
    grounds upon which the court’s
    jurisdiction depends, unless the court
    already has jurisdiction and the claim
    needs no new grounds of jurisdiction to
    support it, (2) a short and plain
    statement of the claim showing that the
    pleader is entitled to relief, and (3) a
    demand for judgment for the relief the
    pleader seeks.
    Fed. R. Civ. P. 8(a). Plaintiffs’
    complaint does all of these things and
    may not be dismissed just because it does
    not do more. Rule 9 sets out special
    pleading requirements for some matters,
    such as fraud and admiralty, but it does
    not require extra detail for antitrust
    suits--and the Supreme Court insists that
    courts not add to the requirements of
    Rule 8. See, e.g., Leatherman v. Tarrant
    County, 
    507 U.S. 163
    (1993); Gomez v.
    Toledo, 
    446 U.S. 635
    , 640 (1980); cf.
    Crawford-El v. Britton, 
    523 U.S. 574
    (1998). Doubtless antitrust litigation is
    expensive, but Congress has not responded
    to this expense with extra pleading
    requirements--as it did, for example, in
    the field of private securities
    litigation. See 15 U.S.C. sec.78u-4(b).
    As long as Rule 8 stands unaltered, and
    there is no antitrust parallel to the
    Private Securities Litigation Reform Act,
    courts must follow the norm that a
    complaint is sufficient if any state of
    the world consistent with the complaint
    could support relief. See Hishon v. King
    & Spalding, 
    467 U.S. 69
    , 73 (1984); see
    also, e.g., Conley v. Gibson, 
    355 U.S. 41
    , 45-46 (1957). It is not necessary
    that facts or the theory of relief be
    elaborated. See Walker v. National
    Recovery, Inc., 
    200 F.3d 500
    (7th Cir.
    1999); Bennett v. Schmidt, 
    153 F.3d 516
    (7th Cir. 1998). District courts may
    mitigate the expense of litigation by
    resolving motions for summary judgment
    early in the case--in advance of
    discovery, if appropriate, for summary
    judgment may be sought at any time. See
    Fed. R. Civ. P. 56.
    Still, a pleader may volunteer enough to
    show that the claim cannot succeed, and
    then dismissal under Rule 12(b)(6)
    follows. See American Nurses’ Association
    v. Illinois, 
    783 F.2d 716
    (7th Cir.
    1986). Plaintiffs have done just this by
    alleging that before the merger both SBC
    and Ameritech were regulated common
    carriers, each a monopolist of land-lines
    service in its assigned territory. Thus
    plaintiffs allege a diminution in
    potential competition, rather than a
    merger between firms currently competing
    in overlapping markets. And this is fatal
    to the suit, because an exception to
    sec.7 of the Clayton Act carves out of
    its scope a merger of common carriers
    that do not directly compete. The
    critical portion of sec.7 reads:
    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.
    15 U.S.C. sec.18. Both SBC and Ameritech
    were common carriers. The last clause of
    this sentence allows "such common
    carrier" to "extend" its lines by merger,
    provided that "there is no substantial
    competition between the company extending
    its lines and the company whose stock,
    property, or an interest therein is so
    acquired." "[S]uch common carrier" must
    refer back to the introductory clause--a
    "common carrier subject to the laws to
    regulate commerce". Do telecommunications
    carriers meet that description? They are
    subject to many laws regulating
    interstate commerce, but the context of
    this phrase, with its reference to
    "branches or short lines," coupled with
    the date of its enactment (1914), raises
    the possibility that it covers only
    railroads subject to the jurisdiction of
    the Interstate Commerce Commission (now
    morphed into the Surface Transportation
    Board). But that would not be the right
    reading, as we concluded in Navajo
    Terminals, Inc. v. United States, 
    620 F.2d 594
    (7th Cir. 1979), when applying
    this language to a merger of motor
    carriers. Section 7 has a separate
    exemption for railroad mergers approved
    by the Surface Transportation Board; the
    sentence we have quoted thus would be
    surplusage if read as limited to
    railroads. And the legislative history--
    the enactment history, not the fog of
    words generated by legislators--shows
    that "common carrier" means all common
    carriers. The version of sec.7 that
    passed by the House used the word
    "railroad"; the Senate amended this to
    "common carrier", a broader designation;
    the House acceded to the Senate’s
    amendment. The Senate’s committee report
    observed that this change was made
    precisely to "apply to any common
    carrier, thus including telephone and
    pipe lines". See Earl W. Kintner,
    Legislative History of the Federal
    Antitrust Laws and Related Statutes 1748,
    2466 (1978), which collects this and
    related background material. We rely on
    the legislative deeds, not the
    accompanying explanation that restates
    the obvious. Understandably, in light of
    this history, plaintiffs do not contend
    that the phrase "common carrier subject
    to the laws to regulate commerce" is
    limited to those entities regulated by
    the Interstate Commerce Commission in
    1914.
    What plaintiffs do argue is that the
    world has changed since 1914. When sec.7
    was enacted, regulated common carriers
    rarely competed, and then did so only by
    sufferance of the agencies after securing
    certificates of public interest,
    convenience, and necessity. Today most
    regulated industries, including
    telecommunications, have been deregulated
    in whole or in substantial part; the
    Telecommunications Act of 1996 plus the
    advent of wireless phone technology have
    brought competition to the local phone
    market, and plaintiffs argue that we
    should not read the exceptions to sec.7
    to reduce the force of this competition.
    The factual premise of this contention is
    doubtful. In 1914 railroad lines often
    competed; even when tracks were laid far
    apart, shippers had a choice of lines.
    Grain, livestock, and steel could go west
    from Chicago through St. Louis and the
    Union Pacific, or over the Northern
    Pacific lines through Minnesota and the
    northern tier, or could go by the
    Illinois Central (or barge down the
    Mississippi) to the Gulf of Mexico and
    then by ship through the Panama Canal.
    Competition among common carriers is not
    an invention of the late Twentieth
    Century. Even if competition among common
    carriers were a novelty, however, this
    would not affect the meaning of sec.7.
    The world may have changed, but the
    statute has not. As the Supreme Court
    remarked in National Broiler Marketing
    Association v. United States, 
    436 U.S. 816
    (1978), when dealing with an
    antitrust exemption dating to 1920, a
    change in economic conditions is a
    challenge to Congress, not the courts;
    and if the legislature leaves exemptions
    alone, they must be enforced as written.
    The Supreme Court has not embraced Judge
    Calabresi’s proposal, see Guido
    Calabresi, A Common Law for the Age of
    Statutes (1982), that old enactments be
    treated no differently from common law,
    equally subject to judicial upkeep.
    This leaves plaintiffs’ argument that
    potential competition should be treated
    as "substantial competition between the
    company extending its lines and the
    company whose stock, property, or an
    interest therein is so acquired" for
    purposes of sec.7. Yet this would leave
    no work for the exemption to do. It would
    rewrite sec.7 so that mergers of common
    carriers are exempt from scrutiny if and
    only if the merger would not violate
    sec.7 in the first place. The only
    function of this exemption must be to
    distinguish potential-competition from
    actual-competition cases. If the merging
    common carriers do not compete actually
    or potentially, they face no antitrust
    risk. If they currently (and
    substantially) compete, then the
    exemption is inapplicable by its terms.
    Only potential competition remains to be
    affected by the exemption; this is the
    respect in which common carriers differ
    from, say, manufacturers or financial
    intermediaries. If two banks merge, the
    court must consider any reduction in
    potential competition as well as the
    reduction in ongoing competition. See,
    e.g., United States v. Marine
    Bancorporation, Inc., 
    418 U.S. 602
    (1974). But if two common carriers merge,
    only the reduction in existing
    competition matters. That’s all the
    exemption in sec.7 does; to end its
    application to potential competition is
    to wipe the exemption off the books.
    Leaving potential competition among
    common carriers to agencies rather than
    juries is hardly such a surprising step
    that courts should struggle against the
    reading. Assessing the significance of
    potential competition is difficult for
    the best economists and would be nearly
    impossible as a subject for trial--
    especially when regulatory agencies
    exercise so much control over how common
    carriers interact.
    Plaintiffs’ complaint concerns potential
    competition, for it acknowledges that SBC
    and Ameritech had lawful monopolies in
    local land-line service at the time of
    the merger. What plaintiffs want the
    district court to examine is the economic
    effect of eliminating each Baby Bell as a
    potential entrant into the other’s
    territory. That is exactly the line of
    inquiry that the common-carrier exemption
    to sec.7 forecloses. Thus although we do
    not agree with the district court’s
    opinion, its judgment may be sustained on
    other grounds. The judgment is modified
    to dismiss the complaint on the merits
    rather than for lack of jurisdiction,
    and, as so modified, is
    affirmed.
    FOOTNOTE
    /* This appeal has been assigned to the panel that
    resolved the initial appellate proceedings con-
    cerning this merger. See Operating Procedure
    6(b). The panel has concluded that a second oral
    argument is not necessary.