610 F.

2d 1114
1979-2 Trade Cases 62,978

ESSENTIAL COMMUNICATIONS SYSTEMS, INC.,

Appellant,
v.
AMERICAN TELEPHONE & TELEGRAPH COMPANY,
Western Electric
Company and New Jersey Bell Telephone Company, Appellees.
No. 78-2521.

United States Court of Appeals,

Third Circuit.
Argued Sept. 7, 1979.
Decided Oct. 30, 1979.
As Amended Nov. 5 and Nov. 13, 1979.
Rehearing and Rehearing In Banc Denied Nov. 23, 1979.

David Berger (argued), H. Laddie Montague, Jr., Robert Simon Balter,

Philadelphia, Pa., for appellant; Berger & Montague, P. C., Philadelphia,
Pa., of counsel.
Bernard M. Hartnett, Jr., Donald B. Heeb, Copeland G. Bertsche, Newark,
N. J., for appellee, New Jersey Bell Telephone Co.; Harold S. Levy, New
York City, Donald K. King, Little Rock, Ark., Frank C. Cheston, of
counsel.
Clyde A. Szuch, Frederick L. Whitmer, Pitney, Hardin & Kipp,
Morristown, N. J., George L. Saunders, Jr. (argued), C. John Buresh,
Sidley & Austin, Chicago, Ill., for appellees American Telephone and
Telegraph Company and Western Electric Company.
John H. Shenefield, Asst. Atty. Gen., Barry Grossman, Ron M. Landsman
(argued), Attys., Dept. of Justice, Washington, D. C., for United States as
amicus curiae.
Before SEITZ, Chief Judge, and GIBBONS and HIGGINBOTHAM,
Circuit Judges.

OPINION OF THE COURT

GIBBONS, Circuit Judge.

This is an appeal from an order dismissing a private treble damage action and a
request for injunctive relief brought under sections 4 and 16 of the Clayton Act,
15 U.S.C. 15, 26 (1976), on the ground that the conduct alleged in the
complaint was exempt from antitrust scrutiny because it occurred in an industry
and an area subject to regulation by the Federal Communications Commission
(FCC). We reverse.

2I. PLEADINGS AND PROCEEDINGS IN THE DISTRICT COURT

3

The plaintiff is Essential Communications, Inc. (Essential), a corporation

engaged in the distribution of telephone station equipment for use at telephone
customers' premises. The defendants are American Telephone and Telegraph
Company (AT&T), the parent corporation of the Bell System, which comprises
the largest telephone communications system in the United States, Western
Electric Company (WECo.), AT&T's equipment manufacturing subsidiary, and
New Jersey Bell Telephone Company (NJ Bell), one of the AT&T's operating
subsidiaries.

On May 17, 1973, Essential filed a complaint charging AT&T, WECo. and NJ
Bell with violations of sections 1 and 2 of the Sherman Act, 15 U.S.C. 1, 2
(1976), in that they sought to exclude from the market for telephone terminal
equipment a device, called a Code-a-Phone, distributed by Essential. The
complaint alleges that prior to November 1, 1968, the Bell System maintained a
monopoly in the distribution, installation and service of telephone terminal
equipment, by virtue of filed tariffs which prohibited customers from attaching
to the Bell System station equipment obtained from any source other than Bell.
On that date the decision of the Federal Communications Commission (FCC) in
Carterfone1 became effective, which according to the complaint, opened up the
telephone terminal equipment market to competition and which encouraged
Essential to commence distributing, installing, and servicing that equipment.
Among the equipment distributed by Essential is the Code-a-Phone,
manufactured by Ford Industries, Inc., and supplied by Ford both to Essential
and to NJ Bell. This device, when electrically connected to a telephone
customer's telephone line automatically answers, transfers, and records
incoming calls. Thus Essential and NJ Bell allegedly became competitors in the
distribution, installation, and service of Code-a-Phones. However, following the
Carterfone decision the defendants, in an effort to hinder Essential's

competition, filed with the FCC a new tariff which required customers of the
Bell Systems to lease from Bell an interface device called a protective
connecting arrangement (PCA) before they would be allowed to connect
Essential's equipment to the Bell System network. The PCA is alleged to be
unnecessary for the protection of the network since the Ford Code-a-Phones
distributed by Essential were identical with those distributed by NJ Bell, and no
such device is required for the latter. It is also charged that NJ Bell
unreasonably delayed in furnishing PCAs to Essential's customers, and caused
service difficulties for those customers by improperly installing and servicing
PCAs. The complaint seeks treble damages and unspecified injunctive relief.
5

On October 3, 1973, by consent of the parties, the district court action was
stayed so that the New Jersey Public Utilities Commission might consider the
propriety of the PCA tariff. However, in 1974, the FCC asserted exclusive
jurisdiction over regulation of the interconnection of customer-provided
terminal equipment. When FCC jurisdiction was sustained by the Fourth
Circuit Court of Appeals,2 the New Jersey Public Utilities Commission
concluded that it lacked jurisdiction to consider the validity of the PCA tariff,
and the district court stay was revoked.

On August 1, 1977, the defendants moved to dismiss the complaint because the
activity complained of, being subject to regulation by the FCC, was impliedly
exempt from the antitrust laws. Finding in the Federal Communications Act of
1934, 47 U.S.C. 151-609 (1976), an intention to repeal the antitrust laws in
areas in which the FCC has exercised its regulatory authority, the district court
granted the motion.3 Thereafter, the court denied as untimely a motion to
amend the complaint by adding an allegation that the defendants had
committed a fraud upon the FCC by inducing the agency not to suspend the
PCA tariff. This appeal followed.

II. EXEMPTION BY VIRTUE OF FEDERAL LAW

7

As will be developed herein, this appeal presents no issue of express statutory

exemption from the antitrust laws. It involves, rather, the alleged
incompatibility between the procompetitive policies of the antitrust laws and
the pervasive scheme of regulation for the industry. Because the scheme of
regulation varies from statute to statute, and the competitive situation varies
from industry to industry, there is no general doctrine of antitrust exemption for
regulated industries. In some cases, the agency charged with regulation is also
explicitly charged with the responsibility for maintaining competition,4 and in
others, as here, there is no such specific statutory delegation. In some
industries, the economic desirability of maintaining a natural monopoly in the

service being rendered precludes competition and instead substitutes pervasive

regulation, while in others there is room for both competition in and regulation
of the service.5 Thus the extent to which antitrust enforcement is consistent
with governmental regulation varies from industry to industry. The Sherman
Act, embodying as it does a preference for competition, has been since its
enactment almost an economic constitution for our complex national
economy.6 A fair approach in the accommodation between the seemingly
disparate goals of regulation and competition should be to assume that
competition, and thus antitrust law, does operate unless clearly displaced.7 In
determining whether antitrust law has been displaced, the starting point must be
the statute under which the industry in question is regulated, in this case the
Federal Communications Act of 1934, 47 U.S.C. 151-609 (1976).8
8A. The Federal Regulatory Scheme for Telecommunications
9

The first venture of the federal government into the regulation of

telecommunications was section 7 of the Mann-Elkins Act of 1910, ch. 309,
7, 36 Stat. 539 (1910), which added telephone and telegraph companies to the
list of common carriers subject to the jurisdiction of the Interstate Commerce
Commission (ICC).9 That venture, however, hardly subjected the
telecommunications industry to pervasive regulation. Indeed, prior to 1910 no
federal regulation of common carriers could be so described. The Interstate
Commerce Act of 1887 had required that railroads publish and file with the ICC
rates that were just and reasonable, and prohibited certain discriminations. See
Interstate Commerce Act, ch. 104, 1, 2, 3, 6, 24 Stat. 379 (1887). Tariffs
were generated solely by the carriers, and the role of the ICC was limited
essentially to the effectuation of consumer protection and the antidiscrimination
policy which were the chief purposes of the legislation. Id. In the Elkins Act of
1903, ch. 708, 32 Stat. 847 (1903), and the Hepburn Act of 1906, ch. 3591, 34
Stat. 584 (1906), the ICC was given more extensive tariff authority, including
the authority to set aside tariffs and to fix maximum rates.10 When the MannElkins Act made telecommunications companies common carriers, it imposed
upon them the obligation to provide service on request at just and reasonable
rates, without unjust discrimination or undue preference.11 They were made
subject, in other words, to the basic consumer protection and antidiscrimination
policy of the 1887 Act. The ICC was given jurisdiction to enforce these
obligations.12 But while the Mann-Elkins Act continued and enlarged the ICC
tariff jurisdiction over railroads, it did not subject telecommunications
companies to the broadened ICC tariff regulatory jurisdiction.13 Even the
existence of broadened ICC tariff regulatory jurisdiction over railroads was not,
as of 1912, deemed to exempt railroads from the antitrust laws.14 A fortiori the
less regulated telecommunications companies were not exempt. Finally, when

Congress, in 1914, enacted the Clayton Act, it was made expressly applicable
to all common carriers.
10

The Transportation Act of 1920, ch. 91, 41 Stat. 456 (1920), substantially
increased the already pervasive regulation of the railroad industry by the ICC.
It also made express provision for the authorization of pooling and other
anticompetitive provisions which might otherwise have violated the Sherman or
Clayton Acts.15 But the Transportation Act, except for a minor increase in ICC
power to enforce the anti-rebate duty,16 left the regulation of
telecommunications common carriers virtually unchanged.17 Thus under the
aegis of the ICC, the competition principle was being curtailed in the railroad
context in the interest of the economies thought to flow from the development
of such natural monopolies, while the telecommunications companies remained
fully subject to the antitrust laws.

11

Competition among telephone services in the same geographic area was, in the
early part of the century, a fact of life. The enactment in 1914 of the Clayton
Act's antimerger provisions18 presented a serious obstacle to the rationalization
of a national telephone network. The Willis-Graham Act addressed the problem
of competing local telephone exchanges, presenting as it did the specter of
waste and inconvenience from the duplication of facilities. See Willis-Graham
Act of 1921, ch. 20, 42 Stat. 27 (1921) (current version at 47 U.S.C. 221
(1976)). That statute authorized the ICC to approve the consolidation of
properties of telephone companies into single companies if such consolidation
is "of advantage to the persons to whom service is to be rendered and in the
public interest." Id. (current version at 47 U.S.C. 221(a)). The statute granted
express immunity from the antitrust laws for such consolidations. Id.

12

Thus, as of 1921, the telecommunications industry was by federal law

recognized as a common carrier, subject to the consumer protection and
antidiscrimination features of the Interstate Commerce Act, and exempt from
antitrust liability for consolidations of local competing service systems. It was,
however, otherwise subject to the antitrust laws. Indeed, a government antitrust
suit had in 1914 produced a consent decree against AT&T.19 Aside from the
ICC jurisdiction to enforce AT&T's obligation to provide service on request at
just and reasonable rates without undue discrimination or undue preference,
AT&T was free to determine its rates, its return on investment, and its service
obligation. Federal law did not even impose an obligation to interconnect with
other communications common carriers. AT&T's local subsidiaries were,
however, subject to regulation in other respects at the state level. This describes
the state of telecommunications law when Congress passed the Federal
Communications Act of 1934, 47 U.S.C. 151-609 (1976).

13

Before we turn to the particulars of that Act, it is worthwhile noting the

evolution of public utility regulation in the fifty years following the enactment
in 1877 of the Interstate Commerce Act. The earliest, and perhaps still most
common form of regulation, is the imposition on public utilities of the
obligation to offer their services to all customers on a more or less equal basis.
Ratemaking and the definition of service obligations were, absent
discrimination, left in the hands of the carriers, subject to the forces of the
marketplace, except for extreme abuses. The early ICC legislation took this
form. Later, however, as natural monopolies came to be recognized, utility
regulation took on a second aspect. In the absence of competition, government
regulation both of service obligation and of rates was added to the earlier
regulation of what, for want of a better term, can be called the
antidiscrimination obligation. By the time of the passage of the Transportation
Act of 1920, ICC regulation of railroads had evolved to such a stage that it
included both aspects: enforcement of the antidiscrimination obligation, and
detailed regulation of service obligations and rates. Telecommunications
regulation, on the other hand, at least on the federal level, had not, prior to
1934, progressed beyond the first stage.

14

In 1934 Congress created the Federal Communications Commission (FCC),

vesting it with all of the telecommunications jurisdiction theretofore vested in
the ICC, and with additional new authority. At the same time it imposed certain
new obligations on the industry. For the first time, federal law imposed an
obligation to interconnect or establish through routes with other common
carriers. See 47 U.S.C. 201(a) (1976). Many provisions of the 1934 Act were
carried forward almost verbatim from the Mann-Elkins Act of 1910.20 The
1934 Act also continued the previously applicable prohibition against unjust
and unreasonable discriminations.21

15

As to tariffs, the 1934 Act continued the prior practice that tariffs be generated,
at least in the first instance, by the carriers. Section 203 of the Act required that
they be filed with the FCC, 47 U.S.C. 203(a), that the FCC and the public be
given 30 days notice of any proposed change, Id. 203(b), and that no charge
be demanded or collected, refunded or remitted, or any service rendered, except
in accordance with a filed tariff. Id. 203(c). This section does no more than
carry forward the prior obligation of telecommunications common carriers to
avoid discriminations by adhering to filed tariffs. The FCC was, however,
given two specific powers with respect to tariffs. In section 204 it was
authorized, either after a complaint or on its own initiative, to conduct a hearing
concerning the lawfulness of a filed tariff, and pending the completion of that
hearing, to suspend its operation for no more than three months. 22 If at the end
of three months the hearing has not been completed, the carrier initiated tariff

would go into effect. In section 205(a) the FCC was authorized, after the
hearing, "to determine and prescribe what will be the just and reasonable
charge. . . . to be thereafter observed, and what classification, regulation, or
practice is or will be just, fair, and reasonable to be thereafter followed . . . ." 47
U.S.C. 205(a). Thus the tariff scheme of the 1934 Act carries forward the
pre-existing power of the ICC to review carrier initiated tariffs, and to enforce
the obligation of fair and reasonable charges. Possibly the scope of FCC
authority to review and change carrier initiated tariffs is somewhat broader than
that formerly held by the ICC, since it covers classifications, regulations, and
practices. But for reasons to which we refer hereafter, any difference in the
scope of the two authorities is not critical to the analysis of the antitrust
exemption issue.
16

Two other provisions of the 1934 Act bear on the exemption issue. The first is
section 221(a), which carries forward the Willis-Graham Act's limited
exemption from the Clayton Act for consolidations of local service properties.23
The other is section 414, which provides:

17
Nothing
in this chapter contained shall in any way abridge or alter the remedies now
existing at common law or by statute, but the provisions of this chapter are in
addition to such remedies.
18

47 U.S.C. 414 (1976). Finally, nothing in the 1934 Act expressly directs the
FCC when exercising its section 205(a) authority, to take into account antitrust
considerations, although undoubtedly they bear to some extent upon the
fairness or reasonableness of the charges, classifications, regulations or
practices of the carrier.

19

From the foregoing it appears that the 1934 Act, like the Interstate Commerce
Act prior to its amendment by the Transportation Act of 1920, is designed
essentially for the protection of telephone users in a rather limited way from
discrimination in rates or service and from excess charges. Nothing in the Act
suggests an intention on the part of Congress to regulate, or, indeed, to protect,
equipment sellers or other competitors except insofar as they may also be
customers for communication services. The Act does not impose on the
telecommunications industry the kind of comprehensive regulation which, after
1920, the ICC exercised over the railroads. Moreover, the express exemption of
the Willis-Graham Act carried forward in section 221(a), and the preservation
of other remedies in section 414, suggest, when read together, that no blanket
exemption from antitrust law was intended.24 We recognize, however, that a
given antitrust remedy might in specific instances present an actual or potential
conflict with a duty imposed by the FCC in the exercise of its customer

protective tariff jurisdiction.25 Whether the instant claim presents such a

conflict is the question to which we now turn.
B. The Antitrust Claims
20

Since the determination of a possible antitrust exemption turns, in our view, on

conflict, actual or potential, between an obligation imposed by the 1934 Act
and an antitrust remedy, analysis must necessarily be discrete. AT&T's primary
obligation under the 1934 Act is to adhere, in its dealings with customers, to its
filed tariffs. That primary obligation is the heart of public utility regulation,
because if carriers were free to depart from filed tariffs, the prohibition against
discrimination among customers could be evaded. However, the filed tariff rule
has little or nothing to do with AT&T's duties under the antitrust laws toward its
competitors in the equipment supply business; competitors are not the intended
beneficiaries of that rule of public utility regulation. This distinction was
recognized over fifty years ago by Justice Brandeis in the leading case of
Keogh v. Chicago & Northwestern Ry. Co., 260 U.S. 156, 43 S.Ct. 47, 67
L.Ed. 183 (1922). In that case a railroad customer (shipper) sued for money
damages under the antitrust laws alleging that the railroad tariffs filed with the
ICC had been arrived at as a result of an unlawful conspiracy. Brandeis for a
unanimous court sustained a demurrer to the complaint, observing:

21
Section
7 of the Anti-Trust Act gives a right of action to one who has been "injured
in his business or property." Injury implies violation of a legal right. The legal rights
of shipper as against carrier in respect to a rate are measured by the published tariff.
Unless and until suspended or set aside, this rate is made, for all purposes, the legal
rate, as between carrier and shipper. The rights as defined by the tariff cannot be
varied or enlarged by either contract or tort of the carrier. . . . And they are not
affected by the tort of a third party. . . . . This stringent rule prevails, because
otherwise the paramount purpose of Congress prevention of unjust discrimination
might be defeated. If a shipper could recover under 7 of the Anti-Trust Act for
damages resulting from the exaction of a rate higher than that which would
otherwise have prevailed, the amount recovered might, like a rebate, operate to give
him a preference over his trade competitors.
22

Id. at 163, 43 S.Ct. at 49-50. Brandeis was dealing in 1922 with the interaction
of a tariff scheme and an antitrust regime indistinguishable from the FCC tariff
scheme and the antitrust regime now before us. If this suit were brought by Bell
System customers for recovery of damages because the filed tariff imposed
excess costs upon them, we would probably have to conclude that the filed
tariff doctrine precluded treble damage recovery under section 4 of the Clayton
Act. But the filed tariff doctrine does not confer immunity from antitrust

liability generally.26 Indeed in the Keogh case Brandeis observed:

But under the Anti-Trust Act, a combination of carriers to fix reasonable and
23
nondiscriminatory rates may be illegal; and if so, the Government may have redress
by criminal proceedings under 3, by injunction under 4, and by forfeiture under
6. That was settled by United States v. Trans-Missouri Freight Association, 166 U.S.
290, (17 S.Ct. 540, 41 L.Ed. 1007,) and United States v. Joint Traffic Association,
171 U.S. 505 (, 19 S.Ct. 25, 43 L.Ed. 259.) The fact that these rates had been
approved by the Commission would not, it seems, bar proceedings by the
Government.
24

260 U.S. at 161-62, 43 S.Ct. at 49.

25

In this case the plaintiff is not suing in the capacity of a customer for
communications services. Essential seeks recovery for injury to its business or
property from actions taken by the defendants in formulating a tariff, and in
rendering customer services. The Bell System will not be asked to disgorge to
any customers any revenues derived under the filed tariff. Indeed, it can
continue to collect those revenues until a new tariff is filed. There is no policy
conflict, actual or potential, therefore, between the section 4 Clayton Act
remedy and the antidiscrimination purposes of the filed tariff rule.

26

Arguably the claim for injunctive relief, which will, of course, operate
prospectively, requires a different analysis than we have made respecting the
claim for damages for past activities, although Justice Brandeis, in Keogh,
apparently did not think so. As with the damage remedy, a discrete analysis is
helpful. Under the 1934 Act two different kinds of tariffs may be involved. The
first is a tariff initiated entirely by a carrier and filed pursuant to section 203. If
an antitrust plaintiff establishes that such a tariff was devised for an
anticompetitive purpose which cannot satisfy antitrust criteria, an injunction
under section 16 of the Clayton Act could, it seems to us, require the filing of a
new tariff, and the notice as required by section 203, without in any way
impinging upon the jurisdiction of the FCC. That agency's jurisdiction attaches
under sections 204 and 205 only after a carrier filing, and carriers under section
203 remain free to change their filed tariffs at any time on appropriate notice. If,
on the other hand, the FCC has conducted an investigation and made an order
under section 205, there may be a potential for conflict between the two
regulatory regimes. Here, again, the distinction between customer plaintiffs and
noncustomer plaintiffs is probably significant because of the interaction
between the common carrier's duty to offer service to all who seek it on
reasonable terms and conditions and the antitrust considerations involved in
permitting potential competitors in communication services to have access to

the Bell System network. However, the federal courts, not the FCC, have the
primary responsibility for the enforcement of the antitrust laws even in the
customer access context. Thus, abdication of the responsibility for examining
the prospective operation of a section 205 order ought not to be decided lightly.
In this case, where the antitrust claim for prospective relief is advanced on
behalf of an equipment supplier rather than a Bell System customer, undue
deference to the agency may be even less appropriate, since customers, not
equipment manufacturers, are the special responsibility of the FCC.
Undoubtedly, the terms of a section 205 order must be taken into account in
determining whether the restraint of trade charged in the complaint is unlawful,
and if so, what prospective relief is appropriate. But we do not think that the
presence of a section 205 order can wholly preclude a section 16 Clayton Act
lawsuit; the mere potential for such an order is an a fortiori case.27
C. The Commission's Tariff Activity
27

With the foregoing principles in mind, we turn to the FCC tariff activity as it
bears upon this case. Prior to 1968 only AT&T initiated tariffs were on file, and
those flatly prohibited communications service customers from connecting
electrically to Bell System lines any equipment not obtained from it.28 In 1965,
Thomas F. Carter filed a suit in the Northern District of Texas under the
antitrust laws seeking damages and injunctive relief from AT&T and others
because they would not permit Bell System customers to use his Carterfone
device. The district court denied preliminary injunctive relief pending a
determination by the FCC of the validity of the Bell System tariff, and the Fifth
Circuit affirmed that denial. Carter v. American Tel. & Tel. Co., 250 F.Supp.
188, 192 (N.D.Tex.), Aff'd, 365 F.2d 486 (5th Cir. 1966), Cert. denied, 385
U.S. 1008, 87 S.Ct. 714, 17 L.Ed.2d 546 (1967). Then, for the first time, the
FCC began an investigation, pursuant to sections 204 and 205, of the legality
under the 1934 Act of the prohibition against connection of equipment obtained
from other sources. In In re Use of the Carterfone Device, 13 F.C.C.2d 420,
Reconsideration denied, 14 F.C.C.2d 571 (1968), the FCC determined that the
tariff was unreasonable within the meaning of section 201(b) of the Act, and
requested the submission of new tariffs which would permit the use of other
source equipment by customers, but would not adversely affect the telephone
company's operations or the network's utility for others. In the proceedings
before the FCC, AT&T maintained that it was essential to the integrity of the
communications network that no electrical connection be made to it of
equipment which its operating companies or manufacturing subsidiary had not
examined and supplied. The 1968 FCC order rejected that contention, 13
F.C.C.2d at 423, 424, while recognizing that integrity of the network was a
legitimate concern. Id. at 425. In response to the FCC invitation, AT&T filed a

new tariff permitting Bell System customers to protect their own equipment if
they used carrier-supplied PCAs. The FCC was uncertain about the necessity
for use of PCAs for the protection of the network, but in the absence of
technical information it permitted the tariff to become effective without ruling
explicitly on its legality.29 Thus customers were required to lease PCAs from
Bell System operating companies if they wanted to use their own telephone
station equipment.
28

Between 1969 and 1972 the FCC conducted formal proceedings to assist in
evaluation of the technical issues relating to the impact on network integrity of
customer-owned equipment. On June 14, 1972, it instituted a Notice of Inquiry
and Proposed Rulemaking aimed at determining the best approach to the
problem.30 The proceedings continued for several years. On November 7, 1975,
two and one-half years after the filing of Essential's complaint in the district
court, the FCC proposed a registration program for customer-supplied
equipment. 31 That regulation permits direct attachment of customer-supplied
equipment if the PCA or equipment is so registered with the FCC.
Nonregistered equipment may be attached only through Bell System PCAs.

29

Thus the FCC activity which the defendants claim to be preemptive here is
divided into three stages. Prior to the FCC decision in Carterfone in 1968 there
was on file a carrier initiated tariff prohibiting any use of customer-supplied
equipment. Since Essential was not in business during that period, that tariff
bears on the issue of antitrust exemption only peripherally, if at all. Between
1968 and 1975 there was on file a carrier initiated tariff, filed in response to the
Carterfone decision, permitting use of customer-supplied equipment only in
conjunction with the use of Bell System PCAs. This is the period during which
Essential allegedly suffered an injury to its business or property. Therefore, it is
relevant to the viability of the section 4 Clayton Act claim. However, since the
tariff that was in effect during the 1968-1975 period is no longer in effect, it
will have no bearing upon the availability of prospective injunctive relief under
section 16 of the Clayton Act. Finally, the post-1975 tariff, in effect today, may
bear upon the scope of prospective injunctive relief sought under section 16.

30

The claim for money damages with respect to the 1968-1975 tariff is by a
noncustomer. Therefore, it does not run afoul of the previously discussed
binding effect, that exists between AT&T and its customers, of filed tariffs.
Moreover, because the FCC never Required the filing of the tariff in the form
presented, no issue is presented of action taken under compulsion of law.32

31

Similarly no issue is presented of FCC approval. The FCC never approved the
1968-1975 tariff. Instead of holding a hearing immediately after the filing as

permitted by the Act, the FCC told AT&T to file a tariff subject to later
approval or disapproval in accordance with certain independent studies
commissioned by the agency. In effect, the FCC suspended its judgment
pending further study. We do not feel that this course of conduct rises to the
level of agency approval that might require implied immunity. Postponement of
action by the agency cannot be construed as approval requiring a court to
refrain from enforcing the antitrust laws, especially where, as here, the agency
ultimately declared the defendant's interim conduct improper. Thus we find no
basis for the conclusion that the enforcement of section 4 of the Clayton Act in
the form of money damages would present a conflict with the policies of the
1934 Act.
32

As to the claim under section 16 for injunctive relief, we hold that its dismissal
on the pleadings cannot be affirmed. It is impossible to tell whether Essential
could prove facts entitling it to injunctive relief. If injunctive relief were
directed at NJ Bell's marketing and service activities, while refraining from
alteration of the tariff imposed by the FCC in 1975, there would be no conflict
between the tariff and the injunction. Moreover, while as between AT&T and
its customers the FCC has the final word in service classifications, we are not
prepared to hold, at the pleadings stage of an antitrust suit, that the FCC's tariff
took insufficient account of third party competitive interests and ought to be
modified. The separate question of whether a court before which a section 16
antitrust claim is pending is the appropriate forum for the consideration of such
third party interests, or whether instead, for prospective relief from the
operation of a tariff, Essential should be required to intervene in the FCC
proceedings, exhaust administrative remedies, and then seek judicial review
under 28 U.S.C. 2342(1) (1976) and 47 U.S.C. 402 (1976), is one which
need not be answered at this time. Any injunction which may be granted might
be narrow enough that that question will not arise. We hold only that the
plaintiff could under the complaint prove some state of facts which might
warrant injunctive relief under the antitrust laws, and that the complaint should
not have been dismissed on the ground that the FCC tariffs made the
defendants' activities exempt from antitrust scrutiny.

33

To the extent that the district court decisions in Phonotele, Inc. v. American
Tel. & Tel. Co., 435 F.Supp. 207 (C.D.Cal.1977), Appeal docketed No. 773877 (9th Cir. Dec. 14, 1977); DASA Corp. v. General Tel. Co., 1977-2 Trade
Cases P 61,610 (C.D.Cal.1977), Appeal docketed, No. 77-2936 (9th Cir. Aug.
23, 1977) (Phonotele and DASA argued May 18, 1979); Monitor Business
Machines, Inc. v. American Tel. & Tel. Co., 1978-1 Trade Cases P 62,030
(C.D.Cal.1978), and Western Elec. Co. v. Milgo Elec. Corp., 1978-1 Trade
Cases P 61,960 (S.D.Fla.1976), Appeal dismissed, 568 F.2d 1203 (5th Cir.)

Cert. denied, 439 U.S. 895, 99 S.Ct. 255, 58 L.Ed.2d 241 (1978), reach
different conclusions as to exemption, we find them unpersuasive.
III. EXEMPTION BY VIRTUE OF STATE LAW
34

In Part II we have disposed of the ground on which the district court relied in
dismissing the complaint. The defendants urge as a separate ground for
affirmance that the PCA tariff, and its predecessor prohibition of customersupplied equipment, merely paralleled the service obligations imposed upon it
by state law. They rely particularly upon decisions in Quick Action Collection
Co. v. New York Tel. Co., (1920D) Pub.U.Rep. (PUR) 137, 143-44
(N.J.Bd.Pub.Util.Comm'rs), and In re New Jersey Bell Tel. Co., 100
Pub.U.Rep. (PUR) 124, 127 (N.J.Bd.Pub.Util.Comm'rs 1953), which upheld
the provisions of state tariff filings prohibiting connection of customer-owned
equipment. Under the Parker v. Brown rule, they contend, these state law
tariffs confer antitrust exemption.

35

There are several difficulties with this argument. The first is that the typical
state regulatory scheme is essentially no different than that of the 1934 Act. It
permits carriers to initiate tariffs, requires them to adhere strictly thereto in
dealing with their customers, and permits their revision, in the interest of the
customers, by a state regulatory agency.33 The analysis which we made with
respect to any conflict between federal antitrust law and federal utility
regulation in Part II is equally applicable here. A second, and we think
insurmountable objection, is the holding in Cantor v. Detroit Edison Co., 428
U.S. 579, 96 S.Ct. 3110, 49 L.Ed.2d 1141 (1976) that the provisions of utility
initiated tariff filings do not furnish a predicate for a Parker v. Brown
exemption from antitrust claims by competitors injured as a result of
compliance with the tariffs. The court's analysis in Cantor is entirely consistent
with that which we made in Part II.

36

Finally, it is not at all clear that state law has any role in determining whether
the Bell System could exclude customer-supplied equipment from attachment
to its network. In the period between 1968 and 1975, while the FCC was
investigating the technical ramifications of the PCA tariff, seventeen different
state utility commissions undertook investigations of the same subject matter.
This proliferation of possibly conflicting regulatory activity led the FCC to
assert primacy in authority over the terms and conditions governing connection
of customer-supplied equipment to the national network.34 That ruling was
challenged by a state regulatory commission, but was affirmed by a divided
court.35 As we noted above, the New Jersey Public Utilities Commission,
following the Telerent holding, declined to pass upon the validity of the PCA

tariff. We need not in this case decide whether the FCC authority totally
preempts state authority in the field as the Fourth Circuit majority held, for
even if there is room for state tariff regulation there is no room for a Parker v.
Brown immunity from antitrust liability.
IV. CONCLUSION
37

Our rejection of the claim of antitrust exemption requires that the judgment
appealed from be reversed and the case remanded for further proceedings on
the merits. Our discussion of the antitrust issues does not, of course, suggest
that the conduct complained of would, if proved, necessarily be found to have
violated either section 1 or section 2 of the Sherman Act. We hold only that
neither the FCC nor the state tariff regulatory schemes provide a basis for an
implied exemption from those laws.

In re Use of the Carterfone Device, 13 F.C.C.2d 420, Reconsideration denied,

14 F.C.C.2d 571 (1968)

In re Telerent Leasing Corp., 45 F.C.C.2d 204 (1974) Aff'd sub nom. North
Carolina Util. Comm'n. v. FCC, 537 F.2d 787 (4th Cir.), Cert. denied, 429 U.S.
1027, 97 S.Ct. 651, 50 L.Ed.2d 631 (1976), Reconsideration denied, 552 F.2d
1036 (4th Cir.), Cert. denied, 434 U.S. 874, 98 S.Ct. 222, 54 L.Ed.2d 154
(1977)

The district court's opinion is reported at 446 F.Supp. 1090 (D.N.J.1978)

See, e. g., Hughes Tool Co. v. Trans World Airlines, 409 U.S. 363, 368, 93
S.Ct. 647, 34 L.Ed.2d 577 (1973) (Civil Aeronautics Board expressly required
to consider competition); Pan Am. World Airways, Inc. v. United States, 371
U.S. 296, 83 S.Ct. 476, 9 L.Ed.2d 325 (1963) (CAB statutory framework
specifically refers to competitive power)

Compare United States v. Nat'l Ass'n Sec. Dealers, 422 U.S. 694, 730, 95 S.Ct.
2427, 45 L.Ed.2d 486 (1975) (immunity inferred from pervasiveness) With
United States v. R. C. A., 358 U.S. 334, 339-46, 79 S.Ct. 457, 3 L.Ed.2d 354
(1959) (approval by FCC of exchange of television stations under license
jurisdiction of the Communications Act of 1934 did not foreclose civil action
by government under 4 of Sherman Act) and Cain v. Air Cargo, Inc., 599 F.2d
316 (9th Cir. 1979) (no implied antitrust immunity despite approval of CAB)

See Carnation Co. v. Pacific Westboard Conference, 383 U.S. 213, 218, 86
S.Ct. 781, 15 L.Ed.2d 709 (1966) (antitrust laws fundamental national

economic policy)
7

See United States v. Nat'l Ass'n Sec. Dealers, 422 U.S. at 719-20, 95 S.Ct. 2427
(implied immunity disfavored and antitrust and regulatory statutes should be
reconciled unless clear repugnancy); Gordon v. New York Stock Exchange,
422 U.S. 659, 682-83, 95 S.Ct. 2598, 45 L.Ed.2d 463 (1975) (implied repeal is
not favored and not casually allowed); Silver v. New York Stock Exchange, 373
U.S. 341, 357, 83 S.Ct. 1246, 1257, 10 L.Ed.2d 389 (1963) (preference to
"reconcile the operation of both statutory schemes with one another rather than
holding one completely ousted."); United States v. Philadelphia Nat'l Bank, 374
U.S. 321, 350-51, 83 S.Ct. 1715, 10 L.Ed.2d 915 (1963)

See United States v. Philadelphia Nat'l Bank, 374 U.S. 321, 352, 83 S.Ct. 1715,
10 L.Ed.2d 915 (1963). United States v. Borden Co., 308 U.S. 188, 198-99, 60
S.Ct. 182, 84 L.Ed. 181 (1939) (looking to legislative history to determine
whether statutory schemes repugnant); Intent to imply immunity can be
manifested by Congress in different ways, for example, through legislative
history, United States v. Nat'l Ass'n Sec. Dealers, 422 U.S. at 726, 95 S.Ct.
2427 (looking to Congress' intent), "plain repugnancy between antitrust and
regulatory provisions," United States v. Philadelphia Nat'l Bank, 374 U.S. at
351, 83 S.Ct. at 1735, or "pervasiveness" of the regulation, United States v.
Nat'l Ass'n Sec. Dealers, 422 U.S. at 730, 95 S.Ct. 2427. The mere fact of
federal regulation is not sufficient to imply immunity. See Cantor v. Detroit
Edison Co., 428 U.S. 579, 597 n.36, 96 S.Ct. 3110, 49 L.Ed.2d 1141 (1976)

Mann-Elkins Act of 1910, ch. 309, 7, 36 Stat. 545 (1910)

10

See Hepburn Act of 1906, ch. 3591, 4, 34 Stat. 584 (1906)

11

See Mann-Elkins Act 7, 12, ch. 309, 36 Stat. 539 (1910)

12

See Interstate Commerce Act, ch. 104, 8, 9, 12, 13, 24 Stat. 379 (1887);
Mann-Elkins Act of 1910, ch. 309, 12, 13, 36 Stat. 539 (1910)

13

See Western Union Tel. Co. v. Esteve Bros., 256 U.S. 566, 573, 41 S.Ct. 584,
65 L.Ed. 1094 (1921) (all common carriers subject to antidiscrimination
principle, but differences exist between railroads and telecommunications
carriers as to relationship with ICC)

14

See, e. g., United States v. Terminal R. R. Ass'n, 224 U.S. 383, 32 S.Ct. 507, 56
L.Ed. 810 (1912); United States v. Trans-Missouri Freight Ass'n, 166 U.S. 290,
17 S.Ct. 540, 41 L.Ed. 1007 (1897)

15

See Transportation Act of 1920, ch. 91, 407, 41 Stat. 456 (1920)

16

See id., 404, 41 Stat. 456

17

See H.R.Rep.No.456, 66th Cong., 1st Sess. 11 (1919); See also

H.R.Conf.Rep.No.650, 66th Cong., 2d Sess. 64-65 (1920)

18

Clayton Act, ch. 323, 11, 38 Stat. 730 (1914) (current version at 15 U.S.C.
21 (1976))

19

See United States v. American Tel. & Tel. Co., 1 Decrees & Judgments in Civil
Federal Antitrust Cases 554 (D.Ore.1914), Modified, 1 Decrees & Judgments in
Civil Federal Antitrust Cases 659 (D.Ore.1914), 1 Decrees & Judgments in
Civil Federal Antitrust Cases 572 (D.Ore.1918), 1 Decrees & Judgments in
Civil Federal Antitrust Cases 574 (D.Ore.1922)

20

Compare Mann-Elkins Act of 1910, ch. 309, 7, 36 Stat. 539 ("just and
reasonable" tariff requirement) With Communications Act of 1934, ch. 652,
201, 48 Stat. 1064 (1934) (current version at 47 U.S.C. 201(b))

21

Compare Mann-Elkins Act of 1910, ch. 309, 7, 12, 36 Stat. 539 (1910) With
Communications Act of 1934, ch. 652, 202, 43 Stat. 1064 (1934) (current
version at 47 U.S.C. 202(a))

22

47 U.S.C. 204, As amended, Pub.L.No.94-376, 2, 90 Stat. 1080 (1976)

(increasing period of suspension to five months)

23

47 U.S.C. 221(a) (1976) (originally enacted as Willis-Graham Act of 1921,

ch. 20, 42 Stat. 27 (1921); See 78 Cong.Rec. 8822 (May 15, 1934) (remarks of
Sen. Dill, sponsor) (with regard to areas outside specific exemption, bill
examined "line by line, to see that it covered so far as possible all the existing
law that is in the statutes which we are proposing to repeal, and also to see that
it did not seriously conflict.")

24

See United States v. Borden Co., 308 U.S. at 201, 60 S.Ct. 182 (express
immunity and surrounding legislative history implies congressional intent that
conduct not within exemption is subject to antitrust laws); Cain v. Air Cargo,
Inc., 599 F.2d 316 (9th Cir. 1979); Mt. Hood States, Inc. v. Greyhound Corp.,
555 F.2d 687, 691 (9th Cir. 1977), Cert. denied on this ground, 434 U.S. 1008,
98 S.Ct. 716, 54 L.Ed.2d 750 Rev'd on other grounds, 437 U.S. 322, 98 S.Ct.
2370, 57 L.Ed.2d 239 (1978). Although the existence of a savings clause will
not deter necessarily the implication of immunity, See Pan Am. World
Airways, Inc. v. United States, 371 U.S. at 321, 83 S.Ct. 476 (Brennan, J.,
dissenting) (implied immunity in CAB statutory framework that specifically
refers to competition), it does provide in this particular regulatory scheme an
affirmative statutory basis for applying the antitrust laws

25

See United States v. Nat'l Ass'n Sec. Dealers, 422 U.S. at 730-35, 95 S.Ct. 2427
(immunity may be inferred if agency's exercise of authority is sufficiently
pervasive to create actual or potential conflict)

26

See Sound, Inc. v. American Tel. & Tel. Co., No. 76-186-2 (S.D. Iowa, Sept.
28, 1979); MCI Communications Corp. v. American Tel. & Tel. Co., 462
F.Supp. 1072, 1080-81, 1093 (N.D.Ill.1978) (neither congressional intent nor
cases support a blanket immunity for communications carriers and
interconnection should not be impliedly immune) Aff'd sub nom. American Tel
& Tel. Co. v. Grady, 594 F.2d 594, Cert. denied, American Tel. & Tel. Co. v.
MCI Communications Corp., 440 U.S. 971, 99 S.Ct. 1533, 59 L.Ed.2d 787
(1979); Jarvis v. American Tel. & Tel. Co., 1978-1 Trade Cases P 62,197
(D.C.1978); United States v. American Tel. & Tel. Co., 427 F.Supp. 57, 60
(D.D.C.1976), Cert. denied, 434 U.S. 966, 98 S.Ct. 507, 54 L.Ed.2d 452 (1977)

27

See International Tel. & Tel. Corp. v. General Tel. & Elec. Corp., 518 F.2d 913,
918-19 (9th Cir. 1975) (Clayton Act proviso barring private injunction suit
against common carriers regulated by ICC did not bar private injunction suit
against telephone company regulated by FCC) On remand, 449 F.Supp. 1158,
1164-69 (D.C.Hawaii 1978); MCI Communications Corp. v. American Tel. &
Tel. Co., 462 F.Supp. at 1100-02 (Communications Act does not provide
exclusive remedies), Aff'd sub nom., American Tel. & Tel. Co. v. Grady, 594
F.2d 594, Cert. denied, American Tel. & Tel. v. MCI Communications Corp.,
440 U.S. 971, 99 S.Ct. 1533, 59 L.Ed.2d 787 (1979)

28

Tariff F.C.C. No. 132 P B.7, B.24 (filed April 16, 1957), superseded by Tariff
F.C.C. No. 263 P 2.6.1, 2.6.9 (filed January 2, 1968) (corresponding paragraphs
substantially the same)

29

In re American Tel. & Tel. Co., "Foreign Attachment" Tariff Revisions, 15

F.C.C.2d 605, 610, 611 (1968), Reconsideration denied, 18 F.C.C.2d 871, 874
(1969) (Tariff Nos. 259, 260, 263)

30

See In re Proposals for New or Revised Classes of Interstate and Foreign MTS
and WATS, 35 F.C.C.2d 539 (1972)

31

See 40 Fed.Reg. 53,022 (1975), Codified at 47 C.F.R. 68 (1978). See In re

Proposals for New or Revised Classes of Interstate and Foreign MTS and
WATS, First Report and Order (Registration Decision), 56 F.C.C.2d 593, 614622 (1975), On reconsideration, 57 F.C.C.2d 1216, 58 F.C.C.2d 716, 59
F.C.C.2d 83 (1976), Second Report and Order, 58 F.C.C.2d 736 (1976), On
reconsideration, 61 F.C.C.2d 396, 64 F.C.C.2d 1058, Aff'd sub nom. North
Carolina Util. Comm'n v. FCC, 552 F.2d 1036, 1056 (4th Cir.), Cert. denied,
434 U.S. 874, 98 S.Ct. 222, 54 L.Ed.2d 154 (1977)

32

Cf. Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943)
(compulsion under state law implies immunity)

33

See N.J.Stat.Ann. 48:2-1 to 72, 48:3-1 to 7.13 (West 1969)

34

See In re Telerent Leasing Corp., 45 F.C.C.2d 204 (1974)

35

North Carolina Util. Comm'n v. FCC, 537 F.2d 787 (4th Cir.), Cert. denied,
429 U.S. 1027 (1976), Reconsideration denied, 552 F.2d 1036 (4th Cir.), Cert.
denied, 434 U.S. 874, 98 S.Ct. 222, 54 L.Ed.2d 154 (1977)