Statement of Chairman F. James Sensbenbrenner, Jr.

“Saving the Savings Clause”Antitrust Telecom Oversight Hearing

November 19, 2003

            The Committee on the Judiciary has exclusive jurisdiction over all federal antitrust laws and exercises oversight of the federal agencies charged with their implementation. As Chairman of this Committee, I have made it a priority to rigorously assess the implementation of the antitrust laws. I have also sought to ensure that the lawmaking authority of Congress and its exclusive legislative prerogatives are accorded the executive and judicial deference the Constitution commands.

            The elimination of AT&T’s telephone monopoly is widely-regarded as a landmark pro-competitive achievement and inextricably rooted in the antitrust laws. While the former Bell monopoly had operated for decades in a comprehensive state and federal regulatory regime, the government relied on the antitrust laws to provide the pro-competitive remedy that regulation could not and can not provide alone.

However, only two decades later, the continued application of the antitrust laws in the telecommunications sector is under legal assault. The purpose of today’s hearing is to examine how we have gotten to this point, and how Congress can emphasize its clear intent in this important debate.

            While the 1982 consent decree produced almost immediate competitive gains in the long distance telephone market, local telephone service was still the exclusive province of the regional Bell companies who inherited much of the local infrastructure of the former AT&T monopoly. As a result, this Committee and Congress as a whole continued to spearhead efforts to ensure that the antitrust laws served as an effective pro-competitive tool.

            The Telecommunications Act of 1996 represented the most decisive expression of congressional resolve to bring competition to the telecom industry. The findings section of the 1996 Act states that its purpose is “to promote competition and reduce regulation in order to secure lower prices and higher quality services for American telecommunications consumers . . . by opening all telecommunications markets to competition.”

            In the 1996 Act, Congress enacted an explicit antitrust savings clause in the legislation. In plain language that provides clear and unmistakable congressional guidance to both regulators and judges, the antitrust savings clause contained in Section 601(c)(1) of the 1996 Act provides that: “. . . Nothing in this Act or the amendments made by this Act shall be construed to modify, impair, or supersede the applicability of any of the antitrust laws.” The clarity of this savings clause leaves very little to the imagination of a regulator or judge. However, the imaginations of regulators and judges can sometimes be more active than we can predict, and in some cases their apparent misunderstanding of the will of Congress is disappointing and difficult to comprehend.

            The savings clause was by no means the only significant antitrust provision contained in the 1996 Act. To promote the competition, Section 271 requires DOJ to examine competitive conditions in local markets before FCC approves the Bell’s applications to provide long-distance service. This elevated DOJ role reaffirms the centrality of Antitrust law in the Act’s effective application.

            The antitrust laws provide relief to competitors when a monopoly maintains its position by inflicting significant injury on a competitor. When anti-competitive injury arises from violations of the Telecommunications Act of 1996, the antitrust laws may also come into play. Congress emphatically did not intend to create a safe harbor in which monopolists could violate the antitrust laws with impunity. Rather, the antitrust laws and 1996 Act are mutually-reinforcing remedial systems: Violations of the 1996 Act may or may not establish an actionable antitrust claim, but the plain language and logical framework of the Act preserve an antitrust remedy for sustained anti-competitive conduct.

            Nonetheless, a record of considerable judicial confusion has developed over the last few years. In its Goldwasser decision in 2000, the Seventh Circuit Court of Appeals dismissed an antitrust claim against Ameritech and held that the 1996 Act “must take precedence over the general antitrust laws.”

            Last year, in Law Offices of Curtis Trinko v. Verizon, the Second Circuit sharply departed from the reasoning contained in Goldwasser and recognized that a violation of the 1996 Act may also violate the antitrust laws. On March 3, 2003, the Supreme Court took the case and oral arguments were heard last month. There is much at stake in this case. If Trinko is overturned, the historic role of the antitrust laws in promoting competition in the telecom sector and the clear intent of Congress will be judicially subverted. If this occurs, a swift and decisive legislative correction will be necessary and it will be forthcoming. Everyone can rest assured that the antitrust laws will continue to apply to this industry.

            I am also concerned about the standard for a section 2 violation that DOJ has proposed in the Trinko case, and we will examine that issue today as well. With that, I now recognize the Ranking Member for his remarks.