Northeastern Telephone Co. v. American Telephone and Telegraph Co.

651 F.2d 76 (1981)

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Northeastern Telephone Co. v. American Telephone and Telegraph Co.

United States Court of Appeals for the Second Circuit
651 F.2d 76 (1981)

Facts

Northeastern Telephone Co. (Northeastern) (plaintiff) sued both the American Telephone and Telegraph Co. (AT&T) and its affiliate Southern New England Telephone Company (SNET) (defendants). Northeastern alleged that AT&T, acting via SNET, engaged in predatory pricing with regard to its telephone equipment in an attempt to monopolize the market. SNET, unlike Northeastern, sold multiple products. Northeastern urged the district court to adopt a fully-distributed-cost test instead of a marginal- or variable-cost test to determine whether Northeastern fixed prices with the intent to monopolize. Under the fully-distributed-cost test, the evidence showed that SNET was able to subsidize its reduction in the price of telephone equipment with revenue generated in selling other products. The fully-distributed-cost test also showed that as a public utility under the authority of a state regulatory agency, SNET could allocate its joint costs to the parts of its business in which there was no competition. The district court accepted this test and entered judgment in favor of Northeastern. The court found that a fully-distributed-cost analysis would aid single-market competitors such as Northeastern in their competition with multiproduct firms such as SNET. SNET appealed.

Rule of Law

Issue

Holding and Reasoning (Kaufman, J.)

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