aggressively progressing on our joint venture") is of itself dispositive of the question whether a joint venture was formed by the Agreement. The former is self-serving; the latter is plainly not intended as a legal characterization.
It can be determined, however, as a matter of law, that the Agreement did not create a joint venture. The Agreement provides: "The construction, interpretation and performance of this Agreement shall be governed by the laws of the State of New Jersey." (P 14.)
New Jersey law concerning the necessary characteristics of a joint venture is discussed at some length in Wittner v. Metzger, 72 N.J. Super. 438, 178 A.2d 671 (N.J. Sup. Ct. App. Div.), cert. denied, 37 N.J. 228, 181 A.2d 12 (N.J. 1962). A "joint venture is not a status created or imposed by law but is a relationship voluntarily assumed and arising wholly ex contractu, express or implied." 178 A.2d at 674 (citations omitted). That does not mean that a contractual statement that the contracting parties are (or are not) joint ventures ends all inquiry. To be joint venturers, the parties must contract to certain things, discussed in Wittner, one of which is reflected in the statement that "a joint adventure is an undertaking usually in a single instance to engage in a transaction of profit where the parties agree to share profits and losses." 178 A.2d at 675 (quoting Kurth v. Maier, 133 N.J. Eq. 388, 31 A.2d 835, 836 (N.J. Ct. of Err. & App. 1943)). IAN has not alleged, nor has it cited any provision of the Agreement to the effect, that, in proceeding under the Agreement, Malhotra is to share any losses AT&T may incur. Thus, under New Jersey law, AT&T and Malhotra are not joint venturers.
That AT&T is not a joint venturer with Malhotra, of course, does not necessarily mean that the Agreement cannot have an effect in the market in which Malhotra participates, and IAN seeks to participate, in which overseas callers call IPs based in the United States.
5: Monopoly Power.
The first element of a monopolization claim is "possession of monopoly power in the relevant market." Ortho Diagnostic, 822 F. Supp. at 153 (quoting Grinnell, 384 U.S. at 570-71). Monopoly power is "the power to control prices or exclude competition." Grinnell, 384 U.S. at 571 (quoting United States v. E.I. duPont De Nemours & Co., 351 U.S. 377, 391 (1956)). See also Broadway Delivery Corp. v. United Parcel Serv., Inc., 651 F.2d 122, 126-27 (2d Cir.) ("The power to control prices or exclude competition . . . in the relevant market." (citations omitted)), cert. denied, 454 U.S. 968, 70 L. Ed. 2d 384, 102 S. Ct. 512 (1981). "The existence of such power ordinarily may be inferred from the predominant share of the market." Grinnell, 384 U.S. at 571.
Again, the Amended Complaint is conclusory: IAN alleges, with respect to the "market for providing transport and billing facilities and toll settlement arrangements" (Am. Cplt. P 25), that AT&T "controls a predominate [sic] share of that market." (Id.) And it alleges that "by virtue of defendant's power to decide whether to execute [agreements similar to the Agreement], AT&T exercises monopoly power over the relevant market [which of the two markets alleged in paragraphs 24 and 25 of the Amended Complaint is not identified, but IAN may mean both] that is vital to IAN's revenue flow and competitive success." (Id. P 32.) The Amended Complaint does not, however, indicate what AT&T's share of either of the markets actually alleged is.
With respect to the third market referred to by IAN in its Letter Brief of September 23, 1993 -- the market consisting of "worldwide telephone traffic originating or terminating in the United States" (id. at 2) -- IAN does suggest an AT&T market share. AT&T, in its moving papers, has stated that "the Court may take judicial notice that as of 1991 AT&T received only 70.8 percent of telephone traffic originating or terminating in the United States." (Def. Mem. at 21 (citing Linda Blake & Jim Lande, Common Carrier Bureau, Industry Analysis Division, FCC, International Communications Commission Traffic Data Report for 1991, D1-D6 (1992))). IAN has enlisted that statement in support of its Section 2 claims. As a general proposition, a market share of 70% should be an adequate (if barely adequate) basis, at the pleading stage, for an inference of power in a relevant market. See Ortho Diagnostic, 822 F.2d at 153 ("Courts routinely find monopoly power where the market share is greater than 70 percent."
Thus, the Court is left with two alleged markets AT&T's share of which is not alleged, and one unalleged market of which there is some evidence that AT&T has a share from which, if alleged, the inference could be drawn that, in that market, AT&T has monopoly power. This situation, again, would be a ground, by itself, for dismissal. See World Arrow Tourism Enter., Inc. v. Trans World Airlines, Inc., 582 F. Supp. 808, 811-12 (S.D.N.Y. 1984). The Court will, however, draw such inferences as it may in plaintiff's favor for purposes of the present motion.
As to the market in which overseas callers call IPs based in the United States, the Court will assume that, although AT&T is not a joint venturer with Malhotra, it indirectly participates in that market through the Agreement. Further, the Court will assume that AT&T, through the Agreement, receives a predominant share of overseas calls to United States based IPs by reason of the FTC policy of "proportionate return" or otherwise.
In the case of the markets in which IAN does not participate (or seek to participate) -- that in which AT&T provides "billing services" and that consisting of "worldwide telephone traffic originating or terminating in the United States" -- the Court will assume, for purposes of the present motion, that AT&T has, again, a share of a magnitude sufficient to satisfy any numerical test applicable at the pleading stage. AT&T has volunteered that it has (or had in 1991) a 70.8% share of the second of such markets; its ability to supply "billing services" may be taken, for purposes of the present motion, to be roughly commensurate with its 70.8% share of the second market.
Thus, for purposes of the present motion, AT&T will be considered to have market shares in the markets IAN has alleged, or suggested, from which monopoly power can be inferred. It must be kept in mind, however, that "a heavy reliance on market share statistics is likely to be an inaccurate or misleading indicator of 'monopoly power' in a regulated setting." MCI, 708 F.2d at 1107. Rather, "the size of a regulated company's market share should constitute, at most, a point of departure in assessing the existence of monopoly power." Id.
Even if a defendant has monopoly power, of course, a plaintiff must show more. Section 2 "does not prohibit monopoly simpliciter." Berkey, 603 F.2d at 273. "Not the possession, but the abuse, of monopoly power violates section 2." Olympia, 797 F.2d at 374. A plaintiff must also show "the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident." Ortho Diagnostic, 822 F. Supp. at 153 (quoting Grinnell, 384 U.S. at 571-72).
In the present case, IAN does not allege that AT&T acquired monopoly power improperly. Rather, the gravamen of the Amended Complaint is that AT&T is maintaining alleged monopoly power in the market in which overseas callers call United States based IPs, or seeking to monopolize that market, through leveraging its alleged monopoly power in the other asserted markets. And the means by which AT&T is claimed to be doing this -- whether in IAN's "actual" monopolization claim or its monopoly leveraging claim
-- is by withholding from IAN the "billing services" afforded to Malhotra by the Agreement, i.e., an alleged "essential facility." The application of the "essential facility" doctrine to the facts alleged by IAN must, therefore, be examined.
The "essential facility" doctrine is, in the first place, an exception to the general rule that "a firm with lawful monopoly power has no general duty to help its competitors, whether by holding a price umbrella over their heads or by otherwise pulling its competitive punches." Olympia, 797 F.2d at 375 (citations omitted). Or, as put in Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585, 86 L. Ed. 2d 467, 105 S. Ct. 2847 (1985),
"even a firm with monopoly power has no general duty to engage in a joint marketing program with a competitor." 472 U.S. at 600. See also Twin Labs., 900 F.2d at 568.
An examination of the principal cases establishing the "essential facility" doctrine, and sustaining claims under it, shows that IAN has not alleged facts which support the proposition that AT&T is not free not to deal with IAN, but must rather supply IAN with the "essential facility" of "billing services" by entering into an agreement with IAN similar to the Agreement.
The origin of the "essential facility" doctrine can be traced, it has been suggested,
to United States v. Terminal R.R. Ass'n, 224 U.S. 383, 56 L. Ed. 810, 32 S. Ct. 507 (1912). In that case, a group of some fourteen railroads had, through the commonly owned defendant association, acquired "substantially every terminal facility by which the traffic of St. Louis is served." 224 U.S. at 394. As later characterized by the Supreme Court, "the combination had acquired control of all available facilities for connecting railroads on the east bank of the Mississippi with those on the west bank." Associated Press v. United States, 326 U.S. 1, 25, 89 L. Ed. 2013, 65 S. Ct. 1416 (1945). The Terminal Court ordered a reorganization of the arrangement which would permit other railroads to use the facilities.
The Terminal case did not proceed on an express "essential facility" doctrine. The doctrine seems first to have been expressly formulated in Hecht. At issue in Hecht was a claim by the plaintiff (the unsuccessful applicant for an American Football League franchise) that the defendant (the owner of the Washington Redskins) had violated the antitrust laws by refusing to share Washington's only football stadium. The court sustained a jury instruction elaborating the "essential facility" doctrine. 570 F.2d at 992-93.
In Hecht, the court relied on Otter Tail Power Co. v. United States, 410 U.S. 366, 35 L. Ed. 2d 359, 93 S. Ct. 1022 (1973), as well as on the Terminal case, in setting forth the "essential facility" doctrine. See 570 F.2d at 992. In Otter Tail, the defendant had been found to have attempted to monopolize and to have monopolized the retail distribution of electric power in its service area. The Court described the relevant market thus:
In towns where Otter Tail distributes at retail, it operates under municipally granted franchises which are limited from 10 to 20 years. Each town in Otter Tail's service area generally can accommodate only one distribution system, making each town a natural monopoly market for the distribution and sale of electric power at retail. The aggregate of towns in Otter Tail's service area is the geographic market in which Otter Tail competes for the right to serve the towns at retail. That competition is generally for the right to serve the entire retail market within the composite limits of a town, and that competition is generally between Otter Tail and a prospective or existing municipal system. These towns number 510 and of those Otter Tail serves 91%, or 465.
410 U.S. at 369-70 (footnote omitted). Among the means used by the defendant to maintain its monopoly position, in the face of attempts by towns in the area to replace the defendant as distributor of electric power in towns with municipal distribution systems, were "refusals to 'wheel' power to such systems, that is to say, to transfer by direct transmission or displacement electric power from one utility to another over the facilities of an intermediate utility." Id. at 368. The Court noted that "proposed municipal systems have great obstacles; they must purchase the electric power at wholesale. To do so they must have access to existing transmission lines. The only ones available belong to Otter Tail." Id. at 370 (footnote omitted). The Court sustained the District Court's finding that "Otter Tail's refusals . . . to wheel were solely to prevent municipal power systems from eroding its monopolistic position." Id. at 378.
These seminal cases -- Terminal, Otter Tail and Hecht -- fit well within the Second Circuit's description of the "essential facility" case law set out in Twin Labs.:
A leading antitrust commentator would limit the analysis to "facilities that are a natural monopoly, facilities whose duplication is forbidden by law, and perhaps those that are publicly subsidized and thus could not practicably be built privately." Most of the successful essential facility claims fall within the categories stated by this commentator. In cases finding liability in other categories, however, the facility in question was more than dominant; it was effectively the only one in town.
900 F.2d at 569 (quoting Phillip Areeda & Herbert Hovenkamp, Antitrust Law, P 736.2 (Supp. 1988)) (other citations omitted).
The Terminal case was a case of a "natural monopoly," as well as "the only [facility] in town." Twin Labs., 900 F.2d at 569. As the Terminal court noted:
The result of the geographical and topographical situation is that it is, as a practical matter, impossible for any railroad company to pass through, or even enter St. Louis, so as to be within reach of its industries or commerce, without using the facilities entirely controlled by the Terminal Company.