                  FOR PUBLICATION
  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

LINKLINE COMMUNICATIONS, INC.;         
INREACH INTERNET LLC; OM
NETWORKS, dba Omsoft
Technologies, Inc.; NITELOG, INC.,
dba Red Shift Internet Services,             No. 05-56023
               Plaintiffs-Appellees,
                v.                            D.C. No.
                                           CV-03-05265-SVW
SBC CALIFORNIA, INC., fka Pacific              OPINION
Bell Telephone Company; PACIFIC
BELL INTERNET SERVICES; SBC
ADVANCED SOLUTIONS, INC.,
            Defendants-Appellants.
                                       
        Appeal from the United States District Court
            for the Central District of California
        Stephen V. Wilson, District Judge, Presiding

                  Argued and Submitted
            June 5, 2007—Pasadena, California

                 Filed September 11, 2007

  Before: Sidney R. Thomas, Kim McLane Wardlaw, and
             Ronald M. Gould, Circuit Judges.

                 Opinion by Judge Thomas;
                  Dissent by Judge Gould




                            12177
12180    LINKLINE COMMUNICATIONS v. SBC CALIFORNIA


                        COUNSEL

Robert A. Mittelstaedt and Craig E. Stewart, Jones Day, San
Francisco, California, for appellants SBC California, Inc.,
Pacific Bell Internet Services, and SBC Advanced Solutions,
Inc.

Maxwell M. Blecher and Gary M. Joye, Blecher & Collins,
P.C., Los Angeles, California, for appellees linkLine Commu-
nications, Inc., In-Reach Internet LLC, Om Networks, dba
Omsoft Technologies, Nitelog, Inc., dba Red Shift Internet
Services.

John Thorne and Paul J. Larkin, Jr., Verizon Communications
Inc., Arlington Virginia; Aaron M. Panner, Kellogg, Huber,
Hansen, Todd, Evans & Figel, P.L.L.C., Washington, D.C.;
and Richard G. Taranto, Farr & Taranto, Washington, D.C.,
for amicus curiae Verizon Communications, Inc.
           LINKLINE COMMUNICATIONS v. SBC CALIFORNIA                 12181
                               OPINION

THOMAS, Circuit Judge:

   This appeal presents the question of whether the Supreme
Court’s decision in Verizon Communications, Inc. v. Law
Offices of Curtis V. Trinko, LLP, 540 U.S. 398 (2004)
(“Trinko”), bars a plaintiff from claiming a violation of § 2 of
the Sherman Antitrust Act by virtue of an alleged price
squeeze perpetrated by a competitor who also serves as the
plaintiff’s supplier at the wholesale level, but who has no duty
to deal with the plaintiff absent statutory compulsion. We
conclude that it does not, and affirm the order of the district
court denying judgment on the pleadings.

                                     I

   This action was filed by linkLine Communications, Inc.,
In-Reach Internet LLC, Om Networks, and Nitelog, Inc. (col-
lectively “linkLine”), who are Internet Service Providers
(“ISPs”) who sell DSL1 access to the internet to retail customers.2
While some ISPs affiliated with local telephone companies
own their own infrastructure and facilities for transmitting
data between the internet and consumers, these four lease
those facilities variously from SBC California, Inc., Pacific
Bell Internet Services, and SBC Advanced Solutions, Inc.
(collectively “SBC Entities”).

   As is true in many regions, because of the development of
the telecommunications industry and the costs of building the
  1
     DSL (digital subscriber line) is one of three popular ways for consum-
ers to connect to the internet. The other two ways are dial-up service and
cable modem service. Both DSL and dial-up service use existing phone
lines to connect users to the internet, while cable uses the same cable lines
used to transmit cable television signals.
   2
     For the purposes of this appeal, we assume as true the facts pleaded in
linkLine’s amended complaint. See Fed. R. Civ. P. 12(c).
12182      LINKLINE COMMUNICATIONS v. SBC CALIFORNIA
necessary infrastructure, regional monopolies have developed
that own and control the lines necessary for the delivery of
telecommunication services.3 These regional telephone com-
panies are known as incumbent local exchange carriers
(“ILECs”). ILECs tend to own the local telephone network as
well as the telephone lines—known as the “last-mile”—that
connect each individual consumer to the network. Because
any company seeking to connect with users at the end of these
last mile connections must interconnect with the ILEC, the
ILEC’s facilities are commonly referred to as “bottleneck”
facilities.

   At the time of the filing of linkLine’s amended complaint,
the relevant ILEC in this case was SBC California, Inc.
(“SBC”), then a subsidiary of SBC Communications.4 At the
time of the filing of the amended complaint Pacific Bell Inter-
net Services (“PBIS”) was a subsidiary of SBC which sold
DSL internet access to retail consumers using SBC’s tele-
phone lines. In June 2000, SBC transferred responsibility for
the provisioning and billing of DSL facilities to SBC
Advanced Solutions, Inc. (“SBC-ASI”), an affiliate of SBC’s
and a subsidiary of SBC Communications. The SBC Entities
were thus organized so that they sold both wholesale DSL
access (“DSL transport services”) to independent ISPs as well
as retail DSL access (through PBIS and then SBC-ASI) to
individual consumers. At the time the amended complaint was
  3
     The story of how these regional monopolies evolved out of the nation-
wide monopoly held for decades by American Telephone and Telegraph
(AT&T) has been told many times. See, e.g., Joseph D. Kearney, From the
Fall of the Bell System to the Telecommunications Act: Regulation of Tele-
communications Under Judge Green, 50 Hastings L.J. 1395, 1403-18
(1999). However, this history is collateral to our review.
   4
     Subsequent to the filing of the instant action, through a series of merg-
ers and acquisitions, the SBC Entities have reorganized. Regulatory con-
siderations we will discuss later in this opinion likely drove the changing
structures. However, in this opinion we analyze the facts through the lens
of linkLine’s complaint.
           LINKLINE COMMUNICATIONS v. SBC CALIFORNIA              12183
filed, the SBC Entities were both a supplier to the Plaintiffs
at the wholesale level, and a competitor at the retail level.

   Linkline filed its original complaint on July 24, 2003, alleg-
ing that the SBC Entities, acting as a single entity, have
monopolized and attempted to monopolize the regional DSL
market in violation of § 2 of the Sherman Act.5 In support of
the § 2 claim, the complaint alleged that SBC Entities:

      (a) created a price squeeze by charging ISP a high
      wholesale price in relation to the price at which
      defendants were providing retail services;

      (b) intentionally adopted anticompetitive proce-
      dures and processes for handling customer ordering
      and installation to ISPs that are calculated to (i)
      cause ISP customer disruption and interruption in
      service, and (ii) create extraordinary and serious
      delays and a substantial backlog of orders, in the
      hope that the ISP customers will revert back to
      defendants;

      (c) purposefully created and imposed procedures
      that impeded, and/or caused significant delays and
      costs for, end user customers of defendant switching
      to the services of independent ISPs, including plain-
      tiffs;

      (d) misled, harassed and exhibited hostility toward
      customers of ISPs, including plaintiffs;

      (e) disparaged and created doubts about the effi-
      cacy and legality of ISPs, including plaintiffs; and
  5
    The complaint also alleged two state law claims that are not relevant
to this appeal.
12184      LINKLINE COMMUNICATIONS v. SBC CALIFORNIA
      (f) purposefully failed to bill properly for DSL ser-
      vices.

      In short, defendants adopted procedures carefully
      calculated to deny ISPs access to an essential facility
      and to preserve and maintain its monopoly control of
      DSL access to the Internet.

   On July 6, 2004, the SBC Entities filed a motion for judg-
ment on the pleadings. The district court read linkLine’s com-
plaint as alleging three different categories of anticompetitive
conduct: refusal to deal, denial of access to an essential facil-
ity, and price squeezing. In an order dated October 20, 2004,
the district court dismissed the first two as barred by the
Supreme Court’s decision in Trinko.6 With respect to the price
squeezing claim, it ordered the Plaintiffs to file an amended
complaint “limited to the price squeeze claim that details
beyond the normal requirements of Rule 8 specific facts sup-
porting Plaintiffs’ price-squeeze claim.” The first amended
complaint described the allegation as follows:

      (1) As set forth above defendants unlawfully manip-
      ulated their dual role as vertically integrated monop-
      olists as both a wholesale-monopoly supplier and
      retail competitor of plaintiffs for DSL by engaging
      in an unlawful price squeeze by intentionally charg-
  6
   As a predicate to so finding, the district court had to resolve a dispute
between the parties as to whether their dealings had been voluntary or
required by law. The district court determined that the Defendants were
obligated by law to offer their DSL transport facilities to the Plaintiffs
under the 1934 Telecommunications Act (“1934 Act”) and the FCC rules
implementing it. The 1934 Act, as amended, requires that Defendants pro-
vide Plaintiffs with access to their DSL transport services on a non-
discriminatory basis, see In the Matter of Review of Regulatory Require-
ments for Incumbent LEC Broadband Telecomm. Servs., 17 F.C.C.R.
27000, ¶ 18 (2002), and that “[a]ll charges, practices, classifications, and
regulations for and in connection with such communication service, shall
be just and reasonable . . . ,” 47 U.S.C. § 201(b). This determination is not
disputed on appeal.
     LINKLINE COMMUNICATIONS v. SBC CALIFORNIA        12185
ing independent ISPs wholesale prices that were too
high in relation to prices at which defendants were
providing retail DSL services and necessary equip-
ment to end-user customers — and for a period by
charging wholesale DSL prices to competing ISPs
(such as plaintiffs) that actually exceeded the prices
at which defendants retail affiliate (PBI) was charg-
ing retail end-user customers for DSL services and
necessary equipment — thereby making it impossi-
ble for independent ISP competitors such as plain-
tiffs to compete at the low retail prices set by
defendants for combined DSL-Internet Service and
necessary equipment provided to end-user custom-
ers.

(2) If plaintiffs charged retail DSL-Internet access
customers the same retail price as defendants’ retail
affiliate charged, plaintiffs could not cover the cost
of providing DSL service, which costs necessarily
includes the wholesale transport costs charged by
defendants.

(3) By the same token, if defendants themselves
charged their retail affiliates the same wholesale
costs for DSL transport that they charged their
wholesale ISP customers (such as plaintiffs), defen-
dants could not cover their wholesale costs and make
a profit from DSL service at their low retail prices
for their bundled offering of DSL, Internet Service
and necessary equipment (e.g., free modem and
installation), that were in some cases, and for some
period, even below the wholesale DSL transport
cost. Given the price margin relationship between
retail and wholesale prices, defendants are clearly
attempting to compensate for deliberately sacrificing
profits on the retail end of their operations (with off-
setting margins on the wholesale side) in order to sti-
fle, impede and exclude competition from
12186    LINKLINE COMMUNICATIONS v. SBC CALIFORNIA
    independent ISPs such as plaintiffs that are both
    wholesale customers and retail rivals.

In addition, the amended complaint also alleged that the
Defendants

    (1) intentionally adopted anticompetitive procedures
    and processes for handling customer ordering and
    installation to ISPs that are calculated to (i) cause
    ISP customer disruption and interruption in service,
    and (ii) create extraordinary and serious delays and
    a substantial backlog of orders, in the hope that the
    ISP customers will revert back to defendants;

    (2) purposefully created and imposed procedures
    that impeded, and/or caused significant delays and
    costs for, end user customers of defendant switching
    to the services of independent ISPs, including plain-
    tiffs, and imposed unreasonable and anticompetitive
    costs of DSL aggregation-backhaul circuits neces-
    sary for providing DSL service and particularly
    given the delays in processing orders, unfairly raised
    the per-customer costs of independent ISPs trying to
    compete with defendants.

    (3) misled, harassed and exhibited hostility toward
    customers of ISPs, including plaintiffs;

    (4) disparaged and created doubts about the effi-
    cacy and legality of ISPs, including plaintiffs; and

    (5) purposefully failed to bill properly for DSL ser-
    vices.

   In response, the SBC Entities filed various motions chal-
lenging the price squeeze allegations and other portions of the
amended complaint.
           LINKLINE COMMUNICATIONS v. SBC CALIFORNIA                 12187
   The district court granted in part the relief requested, but
denied the motion to dismiss for failure to state a claim. Act-
ing on the request of the SBC Entities, the district court certi-
fied the order for interlocutory appeal.

   We granted permission to appeal pursuant to 28 U.S.C.
§ 1292. We review the denial of a motion for judgment on the
pleadings de novo. Doe v. United States, 419 F.3d 1058, 1061
(9th Cir. 2005).

                                    II

   [1] In antitrust terms, a price squeeze occurs “when a verti-
cally integrated company sets its prices or rates at the first (or
‘upstream’) level so high that its customers cannot compete
with it in the second-level (or ‘downstream’) market.” Von
Kalinowski et al., 2 Antitrust Laws and Trade Regulation
§ 27.04[1], 27-40 (2d Ed. Matthew Bender 2007). For over
six decades, federal courts have recognized price squeeze
allegations as stating valid claims under the Sherman Act.7
See United States v. Aluminum Co. of Am., 148 F.2d 416, 437-
38 (2d Cir. 1945) (“ALCOA”) (holding price squeeze unlaw-
ful); see also Bonjorno v. Kaiser Aluminum & Chem. Corp.,
752 F.2d 802, 809-11 (3d Cir. 1984) (price squeeze is only an
antitrust violation if plaintiffs can show that “the defendants
deliberately produced the effect” to “destroy its competi-
tion”); Borough of Landsdale v. Philadelphia Elec. Co., 692
F.2d 307, 309-10 (3d Cir. 1982); City of Kirkwood v. Union
Elec. Co., 671 F.2d 1173, 1178-79 (8th Cir. 1982) (antitrust
liability can still lie for price squeezes even when rates are
  7
    Section 2 states that “[e]very person who shall monopolize, or attempt
to monopolize, or combine or conspire with any other person or persons,
to monopolize any part of the trade or commerce among the several States,
or with foreign nations, shall be deemed guilty of a felony, and, on convic-
tion thereof, shall be punished by fine not exceeding $100,000,000 if a
corporation, or, if any other person, $1,000,000, or by imprisonment not
exceeding 10 years, or by both said punishments, in the discretion of the
court.”
12188    LINKLINE COMMUNICATIONS v. SBC CALIFORNIA
regulated); City of Groton v. Conn. Light & Power Co., 662
F.2d 921 (2d Cir. 1981); City of Mishawaka v. Am. Elec.
Power Co., 616 F.2d 976, 983-85 (7th Cir. 1980) (antitrust
liability can lie for price squeezes in regulated industry upon
a showing of specific anticompetitive intent).

   [2] We have joined our sister circuits in holding that claims
of price squeezing under § 2 are viable against monopolists in
regulated industries. City of Anaheim v. Southern California
Edison Co., 955 F.2d 1373 (1992). In Anaheim, we held that
even in a business where prices were regulated at both the
wholesale and the retail level, it was possible for a price
squeeze to occur. Id. at 1377 (“[I]t is possible for a utility to
manipulate its filings and requests in a manner that causes a,
at least temporary, squeeze which might be just as effective
as one perpetrated by an unregulated actor.”).

   [3] In Trinko, however, the Supreme Court held that the
failure by a monopolist to deal with a competitor on certain
service terms when that monopolist was under no duty to deal
with the plaintiff competitor absent statutory compulsion, did
not state a claim under § 2 of the Sherman Act. This holding
raised the question of whether a price squeeze is merely
another term of the deal governed by the Supreme Court’s
analysis in Trinko, or whether it is something else. The D.C.
and Eleventh Circuits have offered conflicting answers to that
question. Compare Covad Communications Co. v. Bellsouth
Corp., 374 F.3d 1044, 1050 (11th Cir. 2004) (“Bellsouth”)
(holding that price squeeze claims survive Trinko), with
Covad Communications Co. v. Bell Atlantic Corp., 398 F.3d
666, 673 (D.C. Cir. 2005) (“Bell Atlantic”) (holding that they
do not).

  In Trinko, a customer of one of Verizon’s rivals sued Veri-
zon Communications, Inc., alleging that Verizon had engaged
in anticompetitive practices by discriminatorily delaying
orders placed by customers of Verizon’s competitors—orders
Verizon was required to fill by the Telecommunications Act
           LINKLINE COMMUNICATIONS v. SBC CALIFORNIA              12189
of 1996.8 540 U.S. at 404. Trinko alleged that by rendering
poor performance on orders placed through Verizon’s com-
petitors, it would sour those customers’ relationships with
their CLECs and drive them back to Verizon. Id. Trinko sued
Verizon after both the Federal Communications Commission
(“FCC”) and New York’s Public Services Commission
(“NYPSC”) had already investigated the matter, resulting in
a series of orders by the NYPSC and a consent decree with
the FCC.

   The Supreme Court held that “Verizon’s alleged insuffi-
cient assistance in the provision of service to rivals is not a
recognized antitrust claim under this Court’s existing refusal-
to-deal precedents.” Id. at 410. Trinko began from the premise
that the Telecommunications Act of 1996 neither added to nor
subtracted from the class of punishable conduct under tradi-
tional antitrust laws. Id. at 406 (quoting 47 U.S.C. § 152, note
(“nothing in [the 1996 Act] shall be construed to modify,
impair, or supersede the applicability of any of the antitrust
laws”)). Accordingly, the Court set out to determine whether
Trinko’s allegations made out an actionable antitrust claim
under the Court’s existing refusal-to-deal precedents, irre-
spective of Verizon’s statutory requirements under the 1996
Act.

   The Court reiterated that “the Sherman Act ‘does not
restrict the long recognized right of [a] trader or manufacturer
   8
     The Telecommunications Act of 1996 (“1996 Act”) established a
requirement that ILECs provide access to their networks to competitors in
the telecommunication services market (who became known as competi-
tive local exchange carriers, or “CLECs”). 47 U.S.C. § 251(c). ILECs
must offer CLECs access to each of their network elements on an “unbun-
dled” or individual basis. Id. ILECs must provide these unbundled net-
work elements (“UNEs”) “on rates, terms, and conditions that are just,
reasonable, and nondiscriminatory . . . .” Id. As part of this regulatory
regime, ILECs such as Verizon are required to service their competitor’s
customers when Verizon controls the infrastructure necessary to provide
the services at issue.
12190      LINKLINE COMMUNICATIONS v. SBC CALIFORNIA
engaged in an entirely private business, freely to exercise his
own independent discretion as to parties with whom he will
deal,’ ” id. at 408 (quoting United States v. Colgate & Co.,
250 U.S. 300, 307 (1919)), but that “the right to refuse to deal
with other firms does not mean that the right is unqualified,”
id. (quoting Aspen Skiing Co. v. Aspen Highlands Skiing
Corp., 472 U.S. 585, 601 (1985). The Court then stated that
it is “very cautious” when recognizing exceptions to the right
of refusing to deal and that Aspen Skiing was “at or near the
outer boundary of § 2 liability” for refusing to deal. Id. at 408-
09.9 In Aspen Skiing, the Court saw strong evidence that the
defendant’s sole purpose in refusing to deal was to attempt to
monopolize, “not by competitive zeal but by anticompetitive
malice.” Id. at 409. That evidence included that (1) the parties
had “voluntarily engaged in a course of dealing” (proving that
the defendant would have done so absent statutory compul-
sion); (2) the defendant refused even to sell highlands ski
passes at retail rates; and (3) the services it was withholding
were “otherwise marketed or available to the public.” Id. at
409-10. Having found no similar evidence in Trinko, the
Court held that Verizon’s alleged insufficient service failed to
state a valid antitrust claim since Verizon’s refusal to deal
  9
    Aspen Skiing involved a claim by the owner of one of the four ski
mountains in Aspen, known as Highlands, that the single owner of the
other three ski mountains was violating antitrust laws by refusing to sell
Highlands passes to its mountains to prevent Highlands from being able
to offer consumers a four-mountain multi-pack. 472 U.S. at 595. The two
companies had for years prior acted in partnership to offer skiers a four-
mountain multi-pack until the owner of the three mountains realized it
could freeze out the independently-owned fourth mountain by forcing con-
sumers to choose between a discounted, week-long pass for its three
mountains or higher priced individual daily tickets that would permit the
consumer to ski all four mountains. The plan worked, and when the owner
of the three mountains prevented any attempt by Highlands to sell four-
mountain multi-packs (by, among other things, even refusing to sell High-
lands passes to its mountains at retail rates), skiers forsook Highlands in
favor of the three mountain package. The Court held the owner of the
three mountains liable under the antitrust laws.
         LINKLINE COMMUNICATIONS v. SBC CALIFORNIA        12191
with its competitors at all could not even be seen as anticom-
petitive. Id. at 410.

   The Court went on to reason that not only did Trinko’s alle-
gations not make out a traditional antitrust claim, but that it
would not be justified in extending antitrust liability to
include Trinko’s case. In reaching this conclusion, it empha-
sized “the existence of a regulatory structure designed to deter
and remedy anticompetitive harm,” and the dangers of judi-
cial intervention. Id. at 412-14. The latter include the risk of
“false condemnations” that might “chill the very conduct the
antitrust laws are designed to protect.” Id. at 414 (quoting
Matsushita Elec. Industrial Co. v. Zenith Radio Corp., 475
U.S. 574, 594 (1986)). Importantly, the Court did not say that
the existence of a regulatory scheme was a per se bar to judi-
cial enforcement of the antitrust laws, only that “the existence
of a regulatory structure” is “[o]ne factor of particular impor-
tance.” Id. at 412 (emphasis added). Trinko never addressed
price squeeze claims specifically. However, Trinko is of sig-
nificant import. Indeed, we have already had occasion to
apply Trinko to bar antitrust liability when the complaint cen-
tered on allegedly anticompetitive price terms, albeit not price
squeezes. See MetroNet Servs Corp. v. Qwest Corp., 383 F.3d
1124 (9th Cir. 2004).

   [4] Given this background, we must decide whether Trinko
entitles the SBC Entities to judgment on the pleadings, which
in turn requires us to decide whether Anaheim remains viable
after Trinko. Normally, only our court, sitting en banc, may
overrule our precedent absent an intervening Supreme Court
decision or act of Congress. Cerrato v. San Francisco Cmty.
Coll. Dist., 26 F.3d 968, 972 n. 15 (9th Cir. 1994). However,
“where the reasoning or theory of our prior circuit authority
is clearly irreconcilable with the reasoning or theory of inter-
vening higher authority, a three-judge panel should consider
itself bound by the later and controlling authority, and should
reject the prior circuit opinion as having been effectively
12192    LINKLINE COMMUNICATIONS v. SBC CALIFORNIA
overruled.” Miller v. Gammie, 335 F.3d 889, 893 (9th Cir.
2003) (en banc).

   [5] Here, reconsideration of Anaheim is not required
because the reasoning and theory of Anaheim is not “clearly
irreconcilable with the reasoning or theory” of Trinko. First,
as the Eleventh Circuit has underscored, Trinko did not
involve a price squeezing theory. Indeed, Trinko took great
care to explain that in this particular regulatory context,
“claims that satisfy established antitrust standards” are pre-
served. 540 U.S. at 406 (citation omitted). Because a price
squeeze theory formed part of the fabric of traditional anti-
trust law prior to Trinko, those claims should remain viable
notwithstanding either the telecommunications statutes or
Trinko. See Bellsouth, 374 F.3d at 1050 (“price squeezing
claim survives [Trinko] because it is based on traditional anti-
trust doctrine”).

   [6] Second, Anaheim did not embrace an unlimited view of
§ 2 price squeeze liability in regulated industries. To the con-
trary, Anaheim rejected the idea that, in the case of regulated
industries, “a mere showing that a price squeeze developed
would suffice to cause antitrust liability.” 955 F.2d 1378.
Anaheim recognized that “courts should tread carefully” in
imposing antitrust standards on regulated industries, id. at
1378, and ultimately required a showing of specific intent on
the part of the wholesale monopoly holder to “serve its
monopolistic purposes at [retail competitors’] expense” in
order for § 2 liability to attach. Id. Thus, Anaheim recognized
the viability of the theory, but carefully circumscribed it.

   [7] Trinko did not, as the SBC Entities would argue, com-
pletely eliminate the viability of a § 2 price squeeze theory in
regulated industries. Were that the case, Trinko would not
have referred to the existence of a regulatory regime as only
“one factor” to consider in determining whether antitrust lia-
bility might also lie. 540 U.S. at 412. Moreover, the existence
of regulation does not always eliminate the danger of anti-
         LINKLINE COMMUNICATIONS v. SBC CALIFORNIA         12193
competitive harm. See Mishawaka, 616 F.2d at 983-84 (not-
ing that the presence of a regulatory structure offers price
squeezers a “ready made illegal opportunity with a legitimate
gloss”). The key, under Trinko, is the nature of the regulatory
structure at issue. As Justice Scalia observed:

    One factor of particular importance is the existence
    of a regulatory structure designed to deter and rem-
    edy anticompetitive harm. Where such a structure
    exists, the additional benefit to competition provided
    by antitrust enforcement will tend to be small, and it
    will be less plausible that the antitrust laws contem-
    plate such additional scrutiny. Where, by contrast,
    “[t]here is nothing built into the regulatory scheme
    which performances the antitrust function,” Silver v.
    New York Stock Exchange, 373 U.S. 341, 358
    (1963), the benefits of antitrust are worth its some-
    times considerable disadvantages.

   Thus, consistent with Trinko, 540 U.S. at 412, Anaheim
rejected the wholesale importation of antitrust theory as appli-
cable to regulated industries. In the particular industry at
hand, Anaheim recognized that, even in the regulatory scheme
at issue, “it is possible for a utility to manipulate its filings
and requests in a manner that causes a, at least temporary,
squeeze which might be just as effective as one perpetrated by
an unregulated actor.” 955 F.2d at 1377. Thus, Anaheim
undertook a Trinko-type analysis in the context of the particu-
lar industry and factual setting. Significantly, after examining
the particular pleadings, the Anaheim panel concluded that the
price squeeze theory was not viable in that case. Of course,
in any future application of Anaheim, we will have to ensure
consistency with Trinko. However, a careful reading of Ana-
heim does not demonstrate that the holding is “clearly irrecon-
cilable with the reasoning or theory” of Trinko.

  [8] When we apply Anaheim and Trinko to this case, the
soundness of the district court’s conclusion in denying judg-
12194      LINKLINE COMMUNICATIONS v. SBC CALIFORNIA
ment on the pleadings is clear. Here, unlike the circumstances
in Anaheim and Trinko, we are confronted with a partially
regulated industry. At the wholesale level, there are a series
of regulatory mechanisms and regulatory agencies charged
with assuring fair play. These regulations grew out of the
1934 Act and have been considered in a series of FCC deci-
sions known as the “Computer Inquiries.”10 In short, under
FCC rules in place at the time of the filing of the complaint,
the SBC Entities were subject to certain regulatory require-
ments if they wished to enter the enhanced services telecom-
munications market (i.e., offer DSL internet access).

   If an ILEC wished to offer DSL internet access, it could
choose one of two routes. It could form a separate subsidiary
through which it would offer DSL internet access, but which
had to obtain the infrastructure necessary to provision such
services from the ILEC on the same terms as unaffiliated
ISPs. See 47 C.F.R. § 64.702(c) (codifying the second “Com-
puter Inquiry”). Alternatively, an ILEC could provide DSL
internet access itself, but to do so it must file what is known
as a “Comparably Efficient Interconnection” plan (“CEI”)
with the FCC. See In re Computer III Further Remand Pro-
ceedings: Bell Operating Company Provision of Enhanced
Services, Report and Order, 14 FCC Rcd. 4289 (1999) [here-
inafter “Computer III” order]. These plans indicated how
ILECs planned on providing competing ISPs with equal
access to all the elements necessary to provide their own DSL
internet access services. Among the requirements for CEI
plans, ILECs had to “provide competitors with interconnec-
tion facilities that minimize transport costs. This provision
ensures that [ILECs] cannot require competitive ISPs to pur-
chase unnecessarily expensive methods of interconnection
  10
    For a comprehensive explanation of how the regulatory structure oper-
ates, see Robert Cannon, Where Internet Service Providers and Telephone
Companies Compete: A Guide to the Computer Inquiries, Enhanced Ser-
vice Providers and Information Service Providers, 9 Comm. Law Con-
spectus 49 (2001) [hereinafter “Guide to the Computer Inquiries”].
           LINKLINE COMMUNICATIONS v. SBC CALIFORNIA               12195
with the [ILECs] network.” Id.11 The 1934 Act also required
that “[a]ll charges, practices, classifications, and regulations
for and in connection with such communication service, shall
be just and reasonable . . . .” 47 U.S.C. § 201(b).

   The 1934 Act charged the FCC with enforcing these regu-
lations and, in some cases, parties can also bring complaints
before state public utility commissions. Aggrieved parties can
either file a complaint in federal district court or before the
Commission. 47 U.S.C. § 207. The FCC may also initiate its
own enforcement proceedings and craft remedies as it deems
appropriate. 47 U.S.C. § 205. In practice, however, the FCC
tends to rely on market players bringing complaints to its
attention. See Cannon, Guide to the Computer Inquires at 70.

   [9] All of this regulation, however, applies only to the
wholesale prices the SBC Entities charged linkLine; there is
no comparable regulatory attention paid to the retail DSL
market. Any restrictions on pricing at the retail level derive
primarily from the antitrust laws. It is unclear at this juncture
the extent to which linkLine is basing its § 2 price squeezing
theory on wholesale pricing, retail pricing, or both. However,
since linkLine could prove facts, consistent with its com-
plaint, that involve only unregulated behavior at the retail
level, its action or lawsuit survives a motion for judgment on
the pleadings. We do not preclude the district court, however,
from re-examining the viability of this claim on summary
judgment after the record is more fully developed and it is
clear whether the complained of behavior took place at the
regulated wholesale level, the unregulated retail level, or
some combination of the two, and to what extent, if any, the
  11
     Under an intervening FCC decision, incumbent LECs are no longer
required to allow their competitors to interconnect. See In re Appropriate
Framework for Broadband Access to the Internet over Wireline Facilities,
36 Comm. Reg. (P&F) 944, 2005 WL 2347773 (Sept. 25, 2005). This
change, however, does not apply to the instant suit and the details of the
rationale supporting the change are beyond the scope of this opinion.
12196      LINKLINE COMMUNICATIONS v. SBC CALIFORNIA
responsible agencies have devoted attention to or had involve-
ment in the complained of conduct.12 Based on the record
before us at this time, we are able to conclude that the district
court was correct to deny the SBC Entities’ motion for judg-
ment on the pleadings because linkLine’s allegation that the
pricing scheme created an anticompetitive price squeeze
states a potentially valid claim under § 2 of the Sherman Act.

  AFFIRMED.



GOULD, Circuit Judge, dissenting:

   I respectfully dissent, concluding that the amended com-
plaint should have been dismissed for failure to state a claim,
in light of dispositive Supreme Court precedent, notwithstand-
ing the permissive standard by which we assess a complaint
when confronted with a motion to dismiss on the pleadings.

   As the court correctly notes, we assume the facts pleaded
in linkLine’s amended complaint to be true. As a general mat-
ter it is not correct to dismiss the complaint if any facts might
be proved under which the complaint would be valid. How-
ever, the complaint only generally alleges a “price squeeze”
and related exclusionary conduct. The complaint does not
allege that the SBC Entities had any market power to set or
influence the retail price for internet service. So it seems quite
odd to say they could have violated the antitrust laws in part
because of retail pricing; if SBC has no power to set its retail
prices above the price at which it has sold its wholesale con-
nection, it does not make sense to consider its pricing an ille-
  12
    In MetroNet, we found relevant that the responsible agencies’ “atten-
tiveness to the alleged anticompetitive conduct.” 383 F.3d 1124. In Trinko
as well, both the FCC and the NYPSC had already addressed Verizon’s
anticompetitive conduct. Where the regulatory agencies have failed to pre-
vent or remedy anticompetitive conduct, the balance may tilt in favor of
judicial intervention.
           LINKLINE COMMUNICATIONS v. SBC CALIFORNIA                12197
gal “price squeeze” under the antitrust laws. Given that SBC’s
DSL internet connections compete with connections by cable
and by satellite, it is by no means clear that SBC has the mar-
ket power to influence the retail market price.

   Moreover, the complaint does not allege that the prices at
which the SBC Entities sold retail “DSL” internet connections
were below cost, under any measure of cost; yet to the extent
the concern is with predation at the retail level, then it would
seem that, in current antitrust theory, below-cost sales must be
shown. The complaint does not allege that the SBC Entities,
to the extent they had losses by selling below cost in the retail
market, had any realistic prospect of recouping losses; yet
again, this prospect of recoupment is an integral element of a
predation analysis under current Supreme Court doctrine.

   Because of the expense and burden of proceeding in the
antitrust litigation, it would be inefficient and unwise to per-
mit the complaint to proceed on the general allegations of
price squeeze, absent allegation of critical facts that in my
view are needed for liability. To put the matter practically, it
seems to me that the Supreme Court’s decision in Verizon
Communications, Inc. v. Law Offices of Curtis V. Trinko,
LLP, 540 U.S. 398 (2004) (“Trinko”) in essence takes the
issues of wholesale pricing out of the case, and thus trans-
forms what is left of any claim of “price squeeze.” If so, and
if plaintiffs in good faith cannot allege market power, below
cost sales and probable potential for recoupment in the retail
market, then the case should not proceed. Conversely, if
plaintiffs are able to allege that the SBC Entities had market
power in the retail market to set or influence the price, and
that their retail sales of internet connection were predatory in
the sense of being below cost with a real prospect of recoup-
ment, then the case should proceed for factual development.1
  1
   It might then be resolved at the summary judgment stage if there were
no genuine issue of material fact, but it would warrant trial if there were
any disputed material fact issues.
12198    LINKLINE COMMUNICATIONS v. SBC CALIFORNIA
After Trinko and Brooke Group v. Brown & Williamson
Tobacco Corp., 509 U.S. 209 (1993) (“Brooke Group”), the
case doesn’t get out of the antitrust law starting blocks if
plaintiffs cannot make allegations showing that the retail
prices charged by the SBC Entities were predatory in a sense
forbidden by the antitrust laws.

   The district court dismissed most of the allegations of the
complaint, but let stand the “price squeeze” allegation. As the
majority opinion notes, “At the time the amended complaint
was filed, the SBC Entities were both a supplier to the Plain-
tiffs at the wholesale level, and a competitor at the retail
level.” The majority opinion also correctly explains: “In anti-
trust terms, a price squeeze occurs ‘when a vertically inte-
grated company sets its prices or rates at the first (or
‘upstream’) level so high that its customers cannot compete
with it in the second-level (or ‘downstream’) market.’ ” Yet,
the notion of a “price squeeze” is itself in a squeeze between
two recent Supreme Court precedents.

   Let us look first at the part of the “price squeeze” repre-
sented by SBC setting the upstream price at which it would
sell use of its land lines to linkLine and the other ISPs here
suing. The Supreme Court’s decision in Trinko, upholding the
ability of a regulated monopolist to deal with a competitor on
certain service terms, means that if SBC set its wholesale
price, the upstream price, too high, that cannot be challenged
under the antitrust laws by analogy to permissible refusals to
deal. I substantially and substantively agree with the position
taken by the D.C. Circuit in Covad Communications Co. v.
Bell Atlantic Corp., wherein the court adopted the reasoning
of a major treatise on antitrust law that “ ‘it makes no sense
to prohibit a predatory price squeeze in circumstances where
the integrated monopolist is free to refuse to deal.’ ” Covad
Commc’ns Co. v. Bell Atl. Corp., 398 F.3d 666, 673 (D.C.
Cir. 2005) (quoting 3A Areeda & Hovenkamp, Antitrust Law
P767c3, at 129-30 (2d ed. 2002)). I am in agreement with this
          LINKLINE COMMUNICATIONS v. SBC CALIFORNIA         12199
reasoning so far as it goes: Trinko insulates from antitrust
review the setting of the upstream price.

   However, although the D.C. Circuit concluded from this
that “price squeeze” allegations should be dismissed, in this
respect I would disagree if the key allegations I have identi-
fied could be made, because part of the “price squeeze” alle-
gation is based on the retail price set in the “downstream”
market. Thus, here linkLine is complaining about its inability
to buy use of wholesale service lines at the price set by SBC
when it cannot compete with the retail price at which SBC
itself sells DSL internet connections to consumers.

   SBC’s setting of its sale price of the use of its land lines by
ISPs in a wholesale transaction cannot be the basis of an anti-
trust claim in light of Trinko. That, however, does not dispose
of scrutiny of SBC’s conduct in the retail market, for it is the
price at which SBC sells DSL service to its retail customers
that squeezes linkLine’s ability to resell internet connections
at a profit. Thus the “price squeeze” contention boils down to
a claim of a predatory pricing on sales of internet connections
by SBC in the retail market. If all that remains of the “price
squeeze” claim is a challenge to the retail prices set by SBC
on sale of DSL internet connection service, then it seems to
me essentially a predatory pricing claim, and it can only be
viable in the first instance if the SBC Entities have some real
market power sufficient to set or influence prices in the retail
market.

   Moreover, even beyond the need for alleging and proving
some degree of market power in the retail market, if that is the
true locus of the antitrust complaint after Trinko, the retail
side of a price squeeze cannot be considered to create an anti-
trust violation if the retail pricing does not satisfy the require-
ments of Brooke Group, which set unmistakable limits on
what can be considered to be predatory within the meaning of
the antitrust laws. In that case the Supreme Court held that a
predatory pricing claim could proceed only if there were alle-
12200      LINKLINE COMMUNICATIONS v. SBC CALIFORNIA
gations (1) that the prices set were below an appropriate mea-
sure of the seller’s costs; and (2) that the seller had a
reasonable prospect, or, under § 2 of the Sherman Act, a dan-
gerous probability, of later recouping losses. Id. at 222-24.
Here, plaintiffs in their “price squeeze” contentions in the
amended complaint did not allege that the seller had the mar-
ket power to set prices for internet connection in the retail
market, that SBC’s retail price, contributing to the squeeze,
was set below cost, and that losses could later be recouped.

   Because we have not heretofore held that there must be a
showing of market power in the retail market, nor held that
the standards of Brooke Group must be applied in assessing
predation in the retail side of a “price squeeze,” I do not think
it would be correct to dismiss the complaint on the pleadings
with prejudice. Instead, after dismissal, plaintiffs should have
been free to amend their complaint if they could assert in
good faith the allegations that are requisite here, after Trinko,
for antitrust liability.2

  Thus I respectfully dissent, believing that the Supreme
Court’s precedents in Trinko and Brooke Group have so
hemmed in the potential for “price squeeze” liability that the
specific allegations I have identified are necessary to state an
antitrust claim in the context of the “price squeeze” alleged.




   2
     There is just enough possibility of an injury occurring for reasons cul-
pable under the antitrust laws, see Brunswick Corp. v. Pueblo Bowl-O-
Mat, 429 U.S. 477 (1977), so that in my view, while the district court
should have granted a motion to dismiss on the pleadings, the district court
also should have permitted amendment in case the critical allegations can
be made by the plaintiffs.
