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ITT WORLD COMMUNS. INC. v. WESTERN UNION TEL. CO.

October 22, 1981

ITT WORLD COMMUNICATIONS INC., ITT Domestic Transmission Systems, Inc., and O. M. Scott & Sons, Inc., Plaintiffs,
v.
WESTERN UNION TELEGRAPH COMPANY, Defendant



The opinion of the court was delivered by: LASKER

Plaintiffs, three subsidiaries of the International Telephone and Telegraph Company, *fn1" allege that Western Union ("WU") has violated and continues to violate Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1, 2, by 1) refusing to interconnect with plaintiffs' domestic and international telex transmission lines, 2) using its monopoly over domestic telex service to gain a competitive advantage in the provision of international service, and 3) entering into a contract with TRT, an international telex carrier, assuring TRT at least 50,000,000 minutes of outbound international telex traffic from the WU network and gaining TRT's assistance in WU's provision of international telex service. *fn2" WU moves under Fed.R.Civ.Pr. 12(b)(6) to dismiss the portions of the complaint relating to WU's provision of international telex service on the ground that the allegations fail to state a claim upon which relief can be granted and under Fed.R.Civ.Pr. 12(b)(1) to stay the remaining antitrust claims under the doctrine of primary jurisdiction. The motion is denied.

I.

WU first argues that plaintiffs' allegations regarding WU's provision of international telex service fail to state a claim upon which relief can be granted because the complaint fails to assert how this market entry, ordinarily an action furthering competition, violated the antitrust laws or how WU's contracts with TRT constituted an unlawful combination or conspiracy to restrain the provision of international telex service. Moreover, WU contends, plaintiffs lack standing because the complaint fails to allege the requisite "antitrust injury" under Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489, 97 S. Ct. 690, 697, 50 L. Ed. 2d 701 (1977). According to WU, any injury which plaintiffs suffered was caused by increased rather than decreased competition.

 WU's contention is unpersuasive. First, the complaint upon a fair reading alleges WU's entry into the international telex service market as part of a more general scheme on the part of WU to restrain competition in both the domestic and international telex markets. *fn3" In considering WU's motion to dismiss, the complaint must be read as a whole. Continental Ore Company v. Union Carbide & Carbon, Corp., 370 U.S. 690, 699, 82 S. Ct. 1404, 1410, 8 L. Ed. 2d 777 (1962). Thus, even if WU's international telex service and contracts with TRT were in themselves legal, "they lose that character when they become constituent elements of an unlawful scheme." Continental Ore Company v. Union Carbide & Carbon, Corp., supra at 707, 82 S. Ct. at 707.

 Second, the complaint does not allege simply that WU entered the international telex market, as WU's argument asserts, but rather than WU "used its domestic telex monopoly to gain a competitive advantage in the provision of international telex service," Complaint, P 20(c). "(T)he use of monopoly power attained in one market to gain a competitive advantage in another is a violation of § 2, even if there has not been an attempt to monopolize the second market." Berkey Photo Inc. v. Eastman Kodak Company, 603 F.2d 263, 276 (2d Cir. 1979). *fn4" Moreover, while Berkey did not directly address the issue of "antitrust injury" and standing, its necessary implication is that a competitor in the market in which another company is unfairly using its monopoly power to gain a competitive advantage has standing to sue. Such a result is entirely consistent with the requirements of Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., supra 429 U.S. at 489, 97 S. Ct. at 697, that plaintiffs must prove "injury of the type the antitrust laws were intended to prevent ..."

 Third, the complaint alleges that WU and TRT agreed that WU would guarantee 50,000,000 minutes of outbound international traffic and that TRT would assist WU's entry into the international telex market, thereby foreclosing plaintiffs from competing for that portion of the market. It is established that if a contract effects an unreasonable restraint of trade, a company foreclosed by that contract may bring an antitrust action under Section 1 of the Sherman Act, 15 U.S.C. § 1. See, e.g., Bigelow v. RKO Radio Pictures, 327 U.S. 251, 66 S. Ct. 574, 90 L. Ed. 652, reh. denied, 327 U.S. 817, 66 S. Ct. 815, 90 L. Ed. 1040 (1946); Pacific Coast Agricultural Export Ass'n v. Sunkist Growers, Inc., 526 F.2d 1196 (9th Cir. 1975), cert. denied, 425 U.S. 959, 96 S. Ct. 1741, 48 L. Ed. 2d 204 (1976). While WU asserts that its contract with TRT did not violate the antitrust laws because it effected only a small portion of the market, that factual issue cannot be determined on the pleadings. In any event, such an argument ignores the central questions whether the contract was in furtherance of a more general scheme to unreasonably restrain trade in the international telex market and whether it was reasonable in the circumstances of the particular market structure.

 II.

 WU next contends that, because of alleged repugnancy between the antitrust laws and the Communications Act's regulatory scheme, it should be concluded that Congress impliedly repealed the application of the antitrust laws to the transactions here involved. The argument runs that because the Act grants the FCC the power to determine whether a new carrier is authorized to enter a market, antitrust actions based on a market entry authorized by the FCC would undermine the FCC's jurisdiction under the Act and would force regulated parties to proceed at the risk of antitrust liability.

 WU's argument that antitrust liability is repugnant to the regulatory scheme of the Communications Act is without merit. As the Court of Appeals of this Circuit recently held, the extensive regulation of the communications industry is an insufficient ground from which to infer repeal of the antitrust laws. Northeastern Telephone Company v. American Telephone and Telegraph Company, 651 F.2d 76 (2d Cir. 1981); see also Essential Communications Systems, Inc. v. American Telephone & Telegraph Company, 610 F.2d 1114 (3d Cir. 1979); Litton Systems, Inc. v. American Telephone & Telegraph Company, 487 F. Supp. 942 (S.D.N.Y.1980); United States v. American Telephone & Telegraph Company, 461 F. Supp. 1314 (D.D.C.1978). Nor does the specific FCC authorization for WU to enter the international telex market relied on in this case create the repugnancy which WU asserts. To the contrary, the FCC authorization was itself repugnant to the Communications Act, which by its own terms forbade WU from entering that international telecommunications market. ITT World Communications, Inc. v. Federal Communications Commission, 635 F.2d 32, 43 (2d Cir. 1980); see RCA Global Communications, Inc. v. Western Union Telegraph Company, 521 F. Supp. 998 at 1004-1005 (S.D.N.Y.1981). In any event, the FCC did not affirmatively order WU to begin international telegraph operations, but merely decided that such operations would not violate the Communications Act. Whatever authority the FCC determination may have conferred on WU, it did not authorize WU to enter the international telex market in such a manner as to violate the antitrust laws. *fn5"

 III.

 WU proposes that this litigation should be stayed under the doctrine of primary jurisdiction because proceedings involving the same issues are pending before the FCC. According to WU, the FCC's resolution of those proceedings is likely to moot significant portions of this litigation and at the least would be a material aid in consideration of the issues presented.

 Plaintiffs disagree that proceedings pending before the FCC raise the same issues as in this lawsuit and argue that in any event a stay is inappropriate because 1) a stay is not necessary to avoid conflict between the FCC and the court because the FCC has no jurisdiction to pass upon antitrust claims, 2) regardless of FCC action, the court will retain jurisdiction of the antitrust claims and therefore discovery should proceed, 3) discovery will permit crystallization of the issues at which time it can be determined whether a primary jurisdiction referral would be useful, 4) the FCC has no special expertise with respect to antitrust claims, and 5) the FCC has already made its views clear.

 Since the submission of the instant motion, the FCC has issued decisions in four proceedings originally asserted by WU to be relevant to some of the issues presented by this suit. In its decisions the FCC 1) denied the petitions of international record carriers (including ITT World Communications, Inc.) for interconnection with WU and related damage claims based on refusals to interconnect, 2) vacated its July, 1980 order which had found that WU's refusal to interconnect at the five historic gateways and Miami violated the Communications Act and its earlier Policy Statement, 3) rejected WU's interconnection tariff filed pursuant to the July, 1980 order on the ground that it would be duplicative and confusing since that order had been vacated, and 4) held that ITT Worldcom had violated the Communications Act and an FCC order by joint marketing between ITT Domestic Transmission Systems, Inc. and other ITT carrier subsidiaries.

 WU argues that, despite these FCC decisions, a stay is appropriate to await the conclusion of the FCC's investigation of WU's interconnection practices and the FCC's enquiry concerning a possible rulemaking to establish a broad domestic interconnection policy. WU also contends that this action should be stayed pending the FCC's consideration of ...


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