A 2-1 panel of the Ninth Circuit today held that a "price squeeze" theory of monopolization under section 2 of the Sherman Act survived the decision in Verizon Communications, Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398 (2004). LinkLine Commmunications, Inc. v. SBC California, Inc., No. 05-56023 (9th Cir. Sept. 11, 2007). The court thus joined the Eleventh Circuit, see Covad Communications Co. v. BellSouth Corp., 374 F.3d 1044, 1050 (11th Cir. 2004), and parted ways with the D.C. Circuit, see Covad Communications Co. v. Bell Atlantic Corp., 398 F.3d 666, 673 (D.C. Cir. 2005).
For those among us who don’t know a price squeeze from a nice breeze, the former refers to a tactic by which a dominant supplier squeezes all the profit out of a retail competitor’s business. The little guy has to pay a wholesale price to the big guy for goods or services that the little guy then sells to retail customers in competition with the retail operation of the big guy. If the big guy charges high wholesale prices to little guy but the same or only slightly higher prices to retail customers, he’s got the little guy in a vise, and before long the little guy’s business tanks.
In the case before the Ninth Circuit, LinkLine alleged that SBC did just that. The district court declined to grant SBC judgment on the pleadings but certified the price squeeze question for interlocutory appeal. The Ninth Circuit affirmed.