## Facts

- MCI, a new long-distance carrier, sought to compete in long-distance telecommunications but depended on interconnection with AT&T-controlled local exchange facilities to originate and terminate calls.
- AT&T, a vertically integrated incumbent, controlled key network inputs through the Bell System and provided both local and long-distance services.
- MCI sued in 1974 alleging violations of Sherman Act §§ 1–2 and seeking treble damages under Clayton Act § 4 based on 22 categories of alleged exclusionary conduct, including pricing practices, interconnection denials, and bad-faith regulatory activity.
- The case was tried to a jury in 1980; the district court removed some alleged acts from the case, and 15 § 2 theories were submitted to the jury.
- The jury found AT&T liable on 10 of the submitted § 2 theories and returned a $600 million lump-sum damages verdict; the district court trebled the award to $1.8 billion.
- AT&T appealed, challenging (among other matters) liability for predatory pricing and interconnection-related conduct and arguing the damages proof improperly aggregated injuries from actionable and nonactionable conduct.

## Issues

1. What legal and evidentiary standard governs predatory pricing claims under Sherman Act § 2, and were the jury instructions and proof sufficient?
2. Whether AT&T’s refusal, delay, degradation, or discriminatory conditioning of interconnections constituted exclusionary conduct supporting § 2 monopolization liability under an essential-facilities theory.
3. Whether federal and state telecommunications regulation impliedly immunized AT&T from antitrust liability for challenged conduct.
4. Whether a lump-sum antitrust damages verdict may stand when it fails to segregate harm attributable to unlawful conduct from harm attributable to lawful or inadequately proven conduct.

## Decision

- The court reversed the predatory pricing liability findings, concluding the instructions and proof did not meet a proper cost-based predation standard.
- The court largely affirmed liability findings based on interconnection-related exclusionary conduct, including denial or restriction of interconnections necessary for MCI’s competition.
- The court rejected broad implied antitrust immunity based on telecommunications regulation, holding regulation did not displace antitrust absent clear incompatibility.
- The court vacated the unallocated damages award and remanded for a new trial on damages limited to injuries caused by the surviving unlawful conduct.

## Legal Principles

- Predatory pricing under Sherman Act § 2 requires proof of prices below an appropriate measure of cost (commonly framed in incremental or variable-cost terms) and cannot rest solely on assertions of cross-subsidization without adequate below-cost evidence.
- A monopolist’s control over a facility or input that competitors cannot practically duplicate and must access to compete can support § 2 liability when access is denied, delayed, degraded, or offered on discriminatory terms without legitimate justification.
- Regulation does not automatically confer antitrust immunity; implied immunity applies only when antitrust enforcement is clearly incompatible with the regulatory scheme.
- Antitrust damages must be tied to injury caused by unlawful conduct; where liability theories are rejected on appeal, a lump-sum verdict that does not allocate damages between lawful and unlawful conduct cannot stand.

## Conclusion

The Seventh Circuit sustained § 2 liability primarily for exclusionary interconnection practices, rejected predatory pricing findings for failure to satisfy a cost-based predation standard, and required a new damages trial because the jury’s lump-sum award did not separate harm attributable to actionable conduct from harm attributable to nonactionable or inadequately proven theories.


MCI Communications Corp. v. American Tel. & Tel. Co., 708 F.2d 1081 (7th Cir. 1983)