MCI TELECOMMUNICATIONS CORP. v. AMERICAN TELEPHONE & TELEGRAPH CO.

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Argument of Christopher J. Wright

Chief Justice Rehnquist: Well, we'll hear argument now in No. 93-356, MCI Telecommunications Corporation v. AT&T and United States v. AT&T.

Now, Mr. Wright.

Mr. Wright: Mr. Chief Justice, and may it please the Court:

Under section 203(a) of the Communications Act, telephone companies are required to file tariffs.

The issue in this case is whether the Federal Communications Commission has authority to relieve nondominant long distance companies of the requirement that they file tariffs.

In our view, that question is answered by section 203(b)(2) of the Act, which provides that the Commission may modify any requirement of section 203.

Since the Commission may modify any requirement of section 203, it may modify the tariff filing requirement established by section 203(a).

Unknown Speaker: Could it go so far as to say nobody has to file a tariff?

Mr. Wright: That is the position that the FCC has taken, and, of course, the D.C. Circuit struck that down.

Now, we believe that "modify any requirement" would mean that.

Let me point out, in response to your question, that the FCC has not gone nearly that far.

The--

Unknown Speaker: Modify including AT&T or just the nondominant carriers?

Could you do away with the rate filing altogether, or is your position just that you can do away with it with respect to nondominant carriers?

Mr. Wright: --Well, that's certainly all we're arguing about today.

Now, I guess I'd interpreted Justice Souter's question as sort of assuming that AT&T would become nondominant at some point in the future.

I don't know any rationale for eliminating the tariff filing requirement for a dominant carrier like AT&T.

Unknown Speaker: Why do you draw the distinction, market power?

Mr. Wright: Yes, that's exactly the--

Unknown Speaker: That's a reason, but where do you find that in the text?

Mr. Wright: --Well, the Commission has the authority.

Under our broadest reading of the statute, the Commission has the authority to modify any requirement.

There would be a question as to whether or not it was reasonable to relieve dominant carriers of the authority.

Unknown Speaker: And your position would be it would not be reasonable.

Mr. Wright: I don't... I... the Commission hasn't taken any view on that.

Unknown Speaker: You think it would be reasonable for us to take the position that it would not be reasonable.

Mr. Wright: Well, right now the Commission has not articulated any reason for relieving dominant carriers of such a requirement, but--

Unknown Speaker: No, but I think we just want to know whether we accept your position here... and if your position here, do we, in effect, and by implication, go the whole hog?

Mr. Wright: --Our reading of the statute, "modify any requirement", yes, would allow the Commission, for appropriate reasons, to relieve all carriers of the tariff filing requirement.

Unknown Speaker: Sort of the Act is no longer necessary, it's a fully competitive industry, and we'll simply modify the Act to no longer exist.

Mr. Wright: If and when it happens that the industry is fully competitive, then we believe Congress has authorized the Commission to do away with a tool to enforce just and reasonable rates that would no longer have a purpose.

Unknown Speaker: Well, why is it that... I think you acknowledged that the only purpose of the... that the purpose of the Act is not only to assure reasonable rates, but also to prevent price discrimination, and I don't know why it is so self-evident that when there is competition there cannot be effective price discrimination.

I don't understand that at all.

Mr. Wright: Well, I--

Unknown Speaker: Have you ever bought a new car?

A very competitive industry, but unless you're a good negotiator you're not going to get as good a price as somebody who is.

Mr. Wright: --Well, unreasonably discriminatory, as construed by the Commission, includes... I'm sorry, competition assumes that there'll be give-and-take of negotiation, and that... the fact that different rates get determined does not necessarily show that something's unreasonably discriminatory.

I'd like to rely on AT&T's submission to the Commission to answer your question, though.

I mean, they said that by definition, nondominant carriers lack sufficient market power to be able to engage in improper price discrimination without suffering the discipline of the marketplace.

Unknown Speaker: You're not urging us to believe AT&T, are you?

Mr. Wright: In this particular instance, Your Honor.

Unknown Speaker: In this particular.

Mr. Wright: I also wanted to make the point, in response to Justice Souter's question, that so far all the Commission has done is relieve part of one of three markets of the tariff filing requirement.

It has not been lifted for international calls.

It has not been lifted, by and large, for the local exchange carriers, which do 99 percent of the interstate access service.

It's only been lifted for 40 percent of the long distance market not served by AT&T, and with respect to that 40 percent, nondominant carriers like MCI frequently choose to file tariffs, especially with respect to residential customer services.

Unknown Speaker: So another way to put it is that it's been eliminated for all of the interstate market except AT&T.

Mr. Wright: For... and for carriers who choose to... choose to file tariffs, and--

Unknown Speaker: The requirement's eliminated for everybody in that whole market except AT&T.

Mr. Wright: --Yes.

It's not mandatory for the nondominant carriers.

AT&T reads the statute differently.

It says that it doesn't apply to any requirement.

Specifically, it doesn't apply to the tariff filing requirement, because that's a core requirement of the Act.

In AT&T's view, the statute only allows the FCC to modify formalities.

We have two responses.

First, that's not what the statute says.

The statute doesn't say anything about core requirements or formalities.

And, in fact, it's not at all clear that such a rule would be needed for formalities.

Section 203(a) says very little about formalities, and what it does say is the following:

"Tariffs shall contain such other information and be printed in such form and be posted and kept open for public inspection in such places as the Commission may by regulation require. "

So there's another provision that gives the... another provision in section 203 that gives the Commission authority over... over those formalities.

Unknown Speaker: There was a time when the Commission took a different view of 203, was there not, that 203 required rates to be filed?

Mr. Wright: There's a 1980 order of the Commission that in the text says something that sounds like that, and in the accompanying footnote says, but, of course, section 203 is very broad.

And the issue in that case was not whether or not... you know, that was dicta in that case.

Both of those contradictory statements were dicta in that case.

Since 1980, the Commission has been firmly of the view that it has authority to lift this requirement.

Unknown Speaker: Well, was the 1980 case a case where the Commission had been requested to modify the requirement?

Mr. Wright: No, Your Honor.

No, it was a different matter.

Unknown Speaker: To give "modify" a very broad reading... and you are explicit about that, you say it means more than the word "exempt", is that your position?

Mr. Wright: Well, yes, we define it in light of Webster's Ninth New Collegiate Dictionary.

Unknown Speaker: But, yet, in legal litany modify is usually a kind of an inbetween word, like courts have authority to affirm, modify, or reverse a lower court decision.

Mr. Wright: And I would concede even that one of "modify" 's meanings would even be more limited than that.

In some cases it would only mean circumscribed alterations.

But there are different--

Unknown Speaker: Not one of its meanings.

It's its normal meaning.

I mean, you say you have Ninth... there are bad dictionaries, just like there are bad regulations.

There are a whole bunch of English words that come from the same Latin root, all of which have a connotation of limitation.

Moderate, modulate, even the word modest, it all comes from the same root, and they all... a root which means measure, and they all contain that limitation of measured, limited, and it seems to me that "modify" bears that same connotation as all of them.

I don't care what one edition of Webster's might have said about it.

Mr. Wright: --Well, Justice Scalia, Webster's Collegiate Dictionary very clearly... the FCC's construction fits within its definition.

And this is not an obscure dictionary; this is one this Court's relied on.

This Court's favorite dictionary is Webster's Third New World Dictionary.

You've relied on it as recently as January, you relied on it 9 or 10 times last term, and it includes a definition

"to make a basic or important change in. "

So--

Unknown Speaker: To make a basic or important change, that's what "modify" means, to make a basic change?

Mr. Wright: --That is one of the definitions--

Unknown Speaker: Which meaning is that in terms of numbers?

Mr. Wright: --I'm not sure, Your Honor.

Unknown Speaker: And wasn't there a point made that at the time this Act was passed perhaps that definition wasn't there?

Mr. Wright: Well, AT&T has not actually said this.

It suggested that perhaps 1934, but actually the definitions that they cite from the thirties all say "alter".

Now we'd be happy if you want... if this means FCC has authority to alter any provision.

Unknown Speaker: There's a wonderful... wonderful line sung by the bass in the Messiah, Mr. Wright, where it says "and we shall be changed".

There's a feeling of transformation about it, and you say that could be sung "and we shall be modified".

[Laughter]

They really convey the same notion.

Mr. Wright: Well, on a practical level, it's occurred to me that before I went to law school I thought edit meant, you know, change a few tenses.

Then after seeing what a law review would do to something I wrote, I realized that it means rewrite.

Now, if somebody on a law review told me they were going to modify rather than edit what I was submitting, I'd really be scared about what was happening.

[Laughter]

Let me also say that this case is very similar to the Amtrak case, the case decided 2 years ago, National Passenger Railroad v. Boston & Maine.

The issue in that case was what the word "required" meant.

The D.C. Circuit had said that it had to mean necessary, that "required" meant necessary, that's the first definition.

The ICC had said, no, we're going to interpret it just to mean useful in this context; we're going to give it what was effectively a broader meaning.

This Court said that few phrases in a complex scheme of regulation are so clear as to be beyond the need for interpretation when implied in a real context, and went on to say that the existence of alternative dictionary definitions of the word "required", each making some sense under the statute, itself indicates that the statute is open to interpretation.

In this case, you can put "modify" in place of "required" and reach the exact same conclusion.

Let me add in that respect that AT&T has cited the... even though we devoted a few pages of our brief to it, has cited that case only in a footnote where they say that the reason it's distinguishable is because our definition of the statute makes no sense at all.

Unknown Speaker: What about the other language, Mr. Wright?

It not only says "modify" but also says "in special circumstances".

Do I have the language right?

Mr. Wright: That's one of... it says

"in its discretion and for good cause shown, modify any requirement either in particular instances or by general order applicable to special circumstances-- "

Unknown Speaker: And you say the "special circumstances" could be that the entire industry is now competitive.

The special circumstance is, what, 1993?

Mr. Wright: --Well, we think looking at the situation today from what Congress saw in 1934, that--

Unknown Speaker: Today is a special circumstance.

Mr. Wright: --The fact that AT&T no longer holds a monopoly over long distance service, but that there are 481 other nondominant carriers--

Unknown Speaker: They're not specified circumstances.

It says "special circumstances".

Don't you think that contains a connotation of limitation; not general circumstances applicable to the entire industry, but special circumstances, some limit?

Mr. Wright: --Well, it's not yet... I mean, as I've said, it's only applicable to one part of one of three markets here.

The fact that there's competition there has not gotten--

Unknown Speaker: Well, okay, now we're just arguing about how special "special" has to be, but that already backs you off of your initial position, which is that really it could extend to the entire--

Mr. Wright: --No... well, that's another... we would think that the Commission has authority to define what 1934, that... when there was really no competition at all, that today's telecommunications world is very different.

Unknown Speaker: --So "special circumstances" can include everything; the entire realm of communications can be special circumstances?

Mr. Wright: If, in fact--

Unknown Speaker: Yes, if the Commission says so.

Mr. Wright: --If, in fact, the communications industry has changed that dramatically.

Unknown Speaker: So your rule is that when the general circumstances are different from the predicate for the original legislation, as long as this modification power is in there, in effect the legislation can, in effect, be repealed by the Commission.

Mr. Wright: Well, I wouldn't phrase it that way, but--

Unknown Speaker: Well, I wouldn't either, if I were arguing your side of the case.

[Laughter]

But, I mean, that's where you go, isn't it?

Mr. Wright: --But, look it, in this... in 203 there are... there are seven sentences.

One of them is 203(b).

Five of the others contain a direction that carriers shall do something.

The verb "shall" is used in five of those sentences.

The Commission has said that... is told that it may modify any of those requirements.

It seems clear to us that the Commission may change the rules, that that's what Congress has authorized it to do.

And, in fact, I don't think I quite made the point that how little AT&T's view allows the Commission to do under "modify any requirement".

As I say, all it says is that we may modify formalities, and we already have authority to modify most of the formalities.

They... Congress expressly delegated that to the Commission as well.

AT&T reads this to modify some requirements.

Unknown Speaker: Well, maybe you're both wrong.

I mean maybe they can affect tariffs, but not all of them.

Maybe they can suspend one now and then or whatnot.

I don't think we're driven to take either view in particular.

Mr. Wright: Well, the logic of AT&T's position may be that we can go as far as we've gone and detariff part of one of three markets and not go as far as to detariff it if that becomes appropriate, but I don't really think that they've made that argument.

Unknown Speaker: Have we held, Mr. Wright, that Chevron deference is equally applicable to an independent commission as is to an agency of the Government?

Mr. Wright: I believe so.

Certainly the Amtrak case that I just cited was an ICC case, and, if anything, it would seem that more deference would be appropriate, but I'm not asking for any more, just the same amount.

Unknown Speaker: More deference is due to a body that is not controlled by elected representatives directly?

Mr. Wright: Well, I'll stand on the Amtrak case and the fact that that case is almost exactly like this one.

If I may, I'd like to reserve the remainder of my time for rebuttal.

Unknown Speaker: Very well, Mr. Wright.

Mr. Verrilli.

Argument of Donald B. Verrilli, Jr.

Mr. Verrilli Jr.: Mr. Chief Justice and may it please the Court:

I'd like to start, if I could, with the text of 203(b).

I think it's clear that, as a practical matter, what the Commission has done here is not to eliminate the tariff filing requirement.

We think that's also true as a textual matter.

What the Commission has done here is to make the requirement conditional.

In theory, this requirement continues to exist and operate for every carrier.

The question is whether the carrier meets the conditions that trigger the requirement.

It seems to us it is as much a modification of a requirement to change the conditions that trigger it as to change the obligations that are, in fact, triggered.

The Commission has done no more than that here.

Additionally, we think that section 203(c), in fact in particular the first sentence of 203(c), makes clear that the Commission has the power to remove the tariff obligation entirely, because it says that service must be provided under tariff unless otherwise provided by or under the authority of the Act.

Plainly, section 203(b)(2), in our view, which is the very preceding sentence in the Act, is authority conferred in the Act to remove the tariff filing obligation.

Unknown Speaker: Mr. Verrilli, in terms of the MCI's position that the FCC must require rate filing and it could not do away with that requirement either on a mandatory or even a permissive basis?

Mr. Verrilli Jr.: 10 years ago, Your Honor, MCI took that position in the court of appeals.

We now think that that position is wrong.

We've thought that position was wrong for many years, and we tried to indicate that in our brief at footnote 5, our reply brief.

In any event, it's our view now that this statute is capable of the meaning that the Commission has ascribed to it, which under Chevron is all that ought to be required to trigger deference.

But, yes, Your Honor--

Unknown Speaker: I just wanted to establish that the 10 years ago, so at least you found a plausible basis for making the argument that you made successfully 10 years ago.

Mr. Verrilli Jr.: --Yes, Your Honor, 10 years ago MCI made that argument.

We think, though, that the reading that we're advancing today is the better reading, particular given section 203(c), which makes clear that the requirement can be removed.

Unknown Speaker: Well, all that that gets you is that you can remove some... you can modify tariffs, just as you can modify other things.

It doesn't necessarily show that you can make the kind of massive modification to, in effect, detariff an entire segment of the industry, save for one provider, right?

Mr. Verrilli Jr.: But--

Unknown Speaker: I mean, all it shows is that you can affect tariffs.

Mr. Verrilli Jr.: --It shows--

Unknown Speaker: You're still left with the problem of, you know, how far "modify" takes you and what are "special circumstances".

Mr. Verrilli Jr.: --Yes, Your Honor, that's correct.

But it seems to us that the logic must be that if the Commission has the authority to remove it in some circumstances, therefore the necessary implication is that it's not in those circumstances indispensable to the functioning of title II if the logic that would allow the Commission to take that step exists with respect to 10 carriers and also exists with respect to a hundred or four hundred carriers, that there's no natural stopping place.

That if the logic works for that... for the small number of carriers and the logic works equally well for the large number of carriers, the Commission ought to have the discretion to expand that power to include a large number of carriers.

There's simply no policy justification for saying, well, it's okay to exempt 10, but it's not okay to exempt 400.

Unknown Speaker: Just a textual justification, the word "modify" and the word "special circumstances".

Mr. Verrilli Jr.: Well, Your Honor, so long... there are special circumstances here, which is the lack of market power.

The requirement hasn't been eliminated, it's been made conditional, so the Commission has remained faithful to the text.

And as long as it has done that--

Unknown Speaker: Are you still of the view that the mandatory no filing would be impermissible, so that you--

Mr. Verrilli Jr.: --No, Your Honor, we're not.

I think the logic of our position is that mandatory detariffing would, as a matter of statutory interpretation, be a permissible step.

Unknown Speaker: --So you really have come 180 degrees.

Mr. Verrilli Jr.: With respect to the meaning of section 203, yes, that's correct, Your Honor.

Unknown Speaker: But then so has the Commission, so has AT&T.

I mean there's enough of that to go around, isn't there?

[Laughter]

Mr. Verrilli Jr.: Thank you, Justice Scalia, I think that's correct.

I'd also like to focus for a minute on what I take to be AT&T's central argument, which is--

Unknown Speaker: Of course, the position you advocate today is advocated by an older, wiser, and more experienced lawyer.

[Laughter]

Mr. Verrilli Jr.: --That's correct, thank you.

What I take to be AT&T's central argument is that title II of the Act cannot be enforced absent tariff filings.

We think that that is simply wrong.

Although tariff filing is one method of enforcing an antidiscrimination provision, it is clearly not the only method.

The Commission has made a decision here, in its discretion, that it wants to use the complaint process as the statutory... as the principal enforcement method.

That is a decision that is owed substantial deference.

It's a reasonable policy decision, particularly given AT&T's concession that nondominant carriers can't charge unreasonable or discriminatory rates.

Indeed, many non... many price discrimination statutes, the antitrust laws, the Robinson-Patman Act, State unfair competition laws, are routinely enforced without any requirement of published rates.

The logic that allows those statutes to function is a logic on which the Commission ought to be entitled to rely here.

Unknown Speaker: Well, it's also... those statutes are applied to competitive industries as well.

I'm not sure those statutes help you.

I mean, they... those statutes operate on the assumption that the mere presence of competition does not eliminate price discrimination.

Indeed, the price discrimination is a tool that's often used most often in fiercely competitive industries.

Mr. Verrilli Jr.: But they do operate on the assumption, Justice Scalia, that the very existence of competitors is likely to ferret out the price discrimination, and that competitors have an incentive to find out what the other competitors are charging, and that customers have an incentive to disclose the best offers they're getting from one competitor in order that another competitor can come in and meet or beat that price.

And therefore it's a matter of disclosure of the rates being offered that counts here, that makes the enforcement mechanism work, and that's the kind of logic the Commission relied on here.

In our judgment, that was plainly a reasonable decision.

The third point I'd like to make is... if I could, is that it would, in our view, be an unwarranted extension of the filed rate doctrine to apply Maislin here.

In our view, by far more... the case most on point is Permian Basin.

In Permian Basin this Court faced an analog to the question faced today; does an agency have the statutory authority to remove a tariff obligation, in that case, the tariff obligations of section 4 of the Natural Gas Act.

In Permian, this Court squarely held that the Federal Power Commission had that authority.

And it did so in a statute, section 4 of the Federal Power Act, that imposed an unequivocal obligation on every carrier to file all rates.

Section 4 of the Natural Gas Act also imposed a nondiscrimination and a reasonable pricing requirement, just as does the Communications Act.

In fact, the Natural Gas Act was modeled on the Interstate Commerce Act and was passed in 1938.

Despite all that, this Court concluded that the Federal Power Commission did not exceed its statutory authority in removing that requirement for small producers of natural gas.

Now, that exemption from the tariff requirement in Permian Basin, if one goes back and reads the agency decision at 34 Federal Power Commission 235, applied to 2,000 of the 2,100 producers of natural gas who, in the aggregate, produced 15 percent of the natural gas supply.

Unknown Speaker: You want to let... you want us to allow the FCC to do for communications what the Federal Power Commission did for the energy industry?

Mr. Verrilli Jr.: We think that the proper role of the agency ought to be respected here, just as it was in Permian Basin, recognizing that the tariff mechanism needs to be adjusted in light of changed circumstances.

Unknown Speaker: My impression is that Permian Basin was the first step to a real regulatory diaster which we've ended up sorting out during the past decade with great difficulty.

Mr. Verrilli Jr.: Well, that may or may not be correct, Justice Scalia, but that seems to me to be in the bailiwick of the agency.

The agency's made a decision that this... that removal of tariffs in this circumstance will advance the public interest, will make this market more efficient and more competitive, and in our view that's a judgment that ought to be respected.

We think there's just a fundamental difference between the question that was at issue in Maislin, whether a filed rate must be followed, and the question at issue here, where the agency... whether the agency has the statutory authority to remove that.

We think, as we said, that the text of 203, particularly focusing on that first sentence of 203(c), makes clear that the FCC has that authority.

If there are no further questions, I'd like to reserve the balance of my time.

Unknown Speaker: Thank you, Mr. Verrilli.

Mr. Carpenter, we'll hear from you.

Argument of David W. Carpenter

Mr. Carpenter: Mr. Chief Justice and may it please the Court:

The issue in this case is whether Congress has given the FCC the power to exempt a broad and concededly potentially unlimited class of communications common carriers from a statutory requirement that was copied, almost verbatim, from those of the Interstate Commerce Act, and that is utterly central to the statutory scheme for the same reasons this Court identified in the Maislin case.

And we submit that it's very clear from the language of the Act, both 203 looked at in isolation and in context of the Act as a whole, and from its history, that the Communications Act just isn't susceptible to the FCC's interpretation, which was the basis for the court of appeals' decision.

But that even if the statutory terms were ambiguous, a century of decisions of this Court, reaffirmed recently in Maislin and the '86 Square D decision, established that exceptions to statutory filed rate requirements can't be inferred from general or ambiguous provisions, and there's no way that section 203(b) is an explicit exemption.

The statute--

Unknown Speaker: Excuse me, I don't... I really didn't... I didn't follow you there.

Mr. Carpenter: --Didn't follow that.

Unknown Speaker: Yes.

Why is it not an explicit exemption?

I can understand how you can quarrel about the scope of it, but surely it's an explicit exemption.

Mr. Carpenter: Well, as I say, we say the statute is not... 203(b) can't be read as authorizing what they want to authorize, which is exempting carriers from the requirement of 203(a) that they file all their rates, or the requirement of 203(c) that they charge only filed rates.

Unknown Speaker: And your position is that they cannot exempt any carrier at any time, no matter the circumstance and no matter how narrow the circumstance, right?

Mr. Carpenter: That is our position, that's correct.

They cannot exempt.

They can modify the requirement, but they can't exempt.

Unknown Speaker: Well, what's the difference between modification and exempting?

Mr. Carpenter: They cannot remove the requirement that carriers file all their charges somehow, someplace, somewhere, and the requirement that they charge only the rates that they'd filed, except in the situations where the statute explicitly authorizes exceptions, and there are many such exceptions.

Unknown Speaker: Then what does exemption mean, which you say they can't do?

Mr. Carpenter: They cannot do.

They cannot remove the requirement that every carrier file all its charges, and they can't remove the parallel requirement that carriers charge only filed rates.

That's our position, and that follows from the terms of the statute.

203(a) requires every carrier to file all charges.

203(c), just the flip side, prohibits a carrier from charging unfiled rates, and 203(b) only requires that the FCC may modify any requirement of the statute in particular circumstances.

Unknown Speaker: May I ask, Mr. Carpenter, do you think they could modify the filing requirement by changing the agency where the rates are filed?

Mr. Carpenter: Yes.

Yes, in fact, both circuits that have adopted the interpretation that we're advocating, the Second Circuit and the D.C. Circuit, have allowed precisely that.

Unknown Speaker: What if they said we'll file them in the sales office of corporate headquarters?

Mr. Carpenter: Well, we're now quibbling... we're now quibbling about the--

Unknown Speaker: Well, I'm not quibbling, because I imagine they may do that.

They may... they may have all their people know what the rates are, just file them, and have them open for public inspection at the home office.

Mr. Carpenter: --Well, the question ultimately... I think they have to be filed in some public... public agency, but the question ultimately boils down to this, you cannot enforce the other provisions of the statute--

Unknown Speaker: Well, let me just interrupt you a minute.

Mr. Carpenter: --Yeah.

Unknown Speaker: If you will agree they don't have to file them with the Commission, what is it in the statute that says they must file them with some other public agency?

Mr. Carpenter: What is it... what is... my position ultimately is that they can modify the requirements of 203(b), and... but they can't modify the other provisions of the statute, which they concede, and the courts have, you know, long held that the publication and filing of the rates somehow, someplace, somewhere, is ultimate... is central to the enforcement of all these other provisions of the statute that can't be modified: the ban on unreasonable discrimination, the requirement that rates be just and reasonable.

So unless the rates are filed and published somewhere, those other provisions can't be enforced and won't... the statutory--

Unknown Speaker: Somewhere must... could not be their own corporate offices open to the public if anybody wants to come in and look at it?

Mr. Carpenter: --The... that being so far from this case, I'm... you know, I guess my position is it should be a public agency because I'm not confident that they really would be open anywhere else.

But that's so far from this case--

Unknown Speaker: But as I understand, your opponents' position is that we should really treat this as sort of a Robinson-Patman Act; as long as they're nondiscriminatory and they adhere to uniform rates and so forth, that the purpose of the statute is served.

Mr. Carpenter: --No, the purpose of the statute wouldn't be served in that event because the purpose of the statute is to assure that all similarly situated customers pay equal rates.

And what... and these quotations of AT&T positions taken out of context, you know, we freely acknowledge that if there's no market power, that you obviously won't have rate differences that result from exercises of market power.

But for the reasons that I understood Justice Scalia to be identifying, in a competitive market you are always going to have rate differences.

And you have rate--

Unknown Speaker: Yes, but most economists take the view that in a true competitive market there cannot be economic discrimination.

Mr. Carpenter: --There... absolutely, there cannot be economic discrimination and there cannot be anticompetitive discrimination in a competitive market, but there will be rate differences between similarly situated customers, and this statute rests on the ground that you want to prevent those.

And the certain and direct method of preventing those kinds of rate differences, which is what the statute is directed at, is requiring that they be published so that all similarly situated customers can known of them and demand them.

And that this Court's held many many years that that was the congressionally prescribed means of carrying out the statute, and it's for this reason that in Maislin you held that exceptions to the rate-filing requirements can't be inferred even from facially applicable provisions.

There it was the ban on reasonable practices, and the conduct at issue there was, in my view, fraudulent, was an unreasonable practice under normal interpretation of that term.

But you refused to... the Court refused to construe the term broadly because that would undercut the central provision of the statute, essential to achieving all these other purposes, and that you said you wouldn't allow exceptions to the rate-filing requirements unless they were explicit in the statute.

And that rule, we submit, would control here if you reached the issue, but I would submit you don't have to, that the D.C. Circuit was correct that you cannot construe the term "modify" broadly to allow the removal of the rate-filing requirements for any carrier.

As we point out in the brief... you know, this battle of the dictionaries is one we've been fighting... certainly the ordinary meaning of the term and the term in effect in the dictionaries at the time the statute... the definition in effect when the statute was passed wouldn't allow exemptions.

MCI has this argument now that "modify" means make conditional, which means that it authorized conditional exemptions.

That's not a definition of "modify", but even if it were the text of the statute forecloses this because it says modify in special conditions.

As they say, page 8 of their brief, they want to read "modify" so it means remove the tariff-filing requirements in special conditions.

They're just rewriting the statute.

The statute says modify particular circumstances or conditions, and they want to rewrite it to say remove.

Unknown Speaker: Well, Mr. Carpenter, what provisions do you think the modification provision applies to?

If it doesn't apply to tariff, what does it apply to, what--

Mr. Carpenter: What provisions of 203 can be modified?

Unknown Speaker: --Yes.

Mr. Carpenter: Yes.

Well, I got in trouble when I referred to the first one, which is where the rates be filed.

And the other one, which is... has been a big issue in the past is what constitutes a rate schedule.

Obviously, in the ordinary meaning a rate schedule or a tariff is a price list, and it's something that you can place an order under.

You see the list of prices and you go to the carrier and you place an order under the tariff.

Well, the ICC has interpreted the statute to allow the filing of ordinary contracts, contracts between customers and carriers, which aren't, you know, price lists that you can place an order under; they only apply between the parties.

And the courts have held that that's... that that's a permissible modification because it doesn't undercut the other purposes of the statute, because the rates are filed so similarly situated customers can request them.

Unknown Speaker: Yeah, but the point I'm getting at is are you willing to apply your categorical notion that modify cannot include elimination, not even elimination in narrow circumstances.

For example... to the other things that it covers.

For example, to whether you have to apply schedules to each of your connecting carriers.

I suppose you're compelled to take the position that there can be no exceptions, no complete exceptions to say that this--

Mr. Carpenter: I fear I may be, to some extent, misleading you.

Our position is they can modify the requirements... the filing requirements of the statute, and that in deciding what that means you have to look at the other provisions of the statute for... to which the filing requirements are centrally important.

And the key thing, as you said in Maislin, is that the rates charged each customer be stated in or ascertainable from the public filing.

So if that purpose is being served, I think they can do lots of things to these other requirements, so long as that purpose is served.

And the example I just gave you, where they allowed things that aren't traditional rate schedules, would be an example of the modification of the requirements of the statute that does modify the requirements of 203 but's consistent with the statute as a whole because it doesn't affect the enforcement of the other provisions that the filing requirement is designed to serve.

So there's all sorts of things that I could imagine being done in modifying the requirements of 203, but the one thing that can't be done, which is that there can't be any modification of the requirement that the rates and the terms and conditions affecting the rates be filed so that similarly situated customers are in a position where they can know what they are and demand them.

Which is what... what this Court's held really for a century, going back... you know, all the decisions you cited in Maislin stand for the proposition that this rate-filing requirement that the rates be filed somehow, someplace, somewhere, is utterly central to the statute as a whole.

Unknown Speaker: --Suppose a Federal Agency gets into the telecommunications business and its rates are published in the Federal Register pursuant to its statute, could the FCC say that the rates of that particular carrier do not have to be filed under the Act?

Mr. Carpenter: Well, to answer your hypothetical question, I could imagine someone arguing that the statutory purposes were adequately served in that circumstance.

Happily, in this circumstance there's no dispute that the statutory purposes aren't being served, because the rates--

Unknown Speaker: No, but I'm just testing about whether you're really categorical--

Mr. Carpenter: --Right.

Unknown Speaker: --About you must file tariffs.

I find--

Mr. Carpenter: What I'm categorical... no, Your Honor--

Unknown Speaker: --I find that a very hard argument to sustain.

Mr. Carpenter: --Well, I think you... I think what I'm categorical about is that carriers cannot be excused from the obligation that they file their rates.

They don't have to look like tariffs, they maybe don't have to be filed at the FCC.

I'm categorical about the fact that the requirements of the statute can be modified up to the point that there's no interference with the core of the statute which is... goes to the whole statute, not just 203, that the rates be published so that everyone knows what they are and so the antidiscrimination provisions of the statute can be enforced.

And--

Unknown Speaker: What about the argument put forward by the FCC that the statute would be redundant if all that 203(d) would do that job?

Mr. Carpenter: --203(c).

Unknown Speaker: Is it... 203(c).

Mr. Carpenter: Yeah.

Well, this is Mr. Verrilli's argument, that the language of section 203... and the FCC's, that the language of section 203 shows that you have to read section 203(b) to authorize the kind of exemptions that we say are prohibited.

But that's just wrong.

I mean, section 203(c) says that carriers have to charge only filed rates, except as provided... unless otherwise provided by or under the authority of this chapter.

It says chapter, not section.

If it were referring to 203(b), it would say section.

And it's argued in the reply that there's no other provision in the statute that authorizes exceptions to the requirement... that... in which the FCC is authorized to create exceptions to the requirement that carriers charge only filed rates, but that's just untrue too.

In our brief, page 20, note 26, we list a number of examples, and in each of them the FCC is delegated authority to enter orders or take other actions that will have the affect of excusing carriers from the obligation that they file... they charge only filed rates.

Just to take one of them, the first one we list is 201(b) and 211, which say... 201(b) which is page 1a of our statutory appendix, says that nothing in this chapter will prohibit contracts between carriers for exchanges of service if the FCC enters an order that it's in the public interest.

So under this procedure, you file a contract with the FCC, if it approves then you're authorized... the carriers are authorized to swap services with one other and not charge each other filed rates.

That's true of each... every other example we list.

In each of those other provisions, 205, 210, and the newly enacted 332, the FCC is authorized to take specific action that will have the effect of relieving carriers from the requirement that they charge only filed rates.

And the fact that Congress enacts these specific exemptions just shows that the modification authority isn't as broad.

And if you want contemporaneous evidence that Congress didn't understand the modification authority to include the authority to exempt people from the rate-filing requirements whatsoever, at the same time Congress enacted the Communications Act, or the year... the next year it enacted the Motor Carrier Act, and it has the same filing requirements, same modification provisions applicable both to motor common carriers, that's section 217 of the Act, and motor contract carriers, that's 218.

And in the contract carrier provision, it has the rate-filing requirement, then it has the modification provision, then after that there's a provision that says:

"The ICC is authorized to grant relief from the requirements of this statute. "

That clearly shows that Congress didn't understand the modification authority reaches as broad as they say, because it enacted a specific additional provision authorizing them to grant relief.

So whatever the scope of modification--

Unknown Speaker: Was the additional provision subject to any restrictions?

That seems like an extremely broad--

Mr. Carpenter: --It was subject to the restriction the ICC had to find it to be in the public interest and consistent with, I believe it said national transportation policy.

So, I mean, when Congress wants to authorize exemptions from the statutory rate-filing requirements, it uses different language, it doesn't say "modify".

In fact, in the court of appeals opinion that's really at issue here, an '85 opinion, the court of appeals goes on... at pages 16 and... through 18... to describe all sorts of statutes where there's explicit exceptions to the rate-filing requirements, and each of those have the same sort of modification provisions that are at issue here.

Unknown Speaker: --Mr. Carpenter, just on the example you just gave us about the grant relief and how broad that, when did Congress enact that statute?

Mr. Carpenter: 1935.

Unknown Speaker: Oh, that's in the original, okay.

Mr. Carpenter: Yes.

No, that's the original Motor Carrier Act, and that was obviously carried through.

In fact, in Maislin among your reasons for declining to allow the FCC to create an exception to the rate-filing requirements under the unreasonable practices ban is the fact that Congress had adopted explicit exemptions for motor contract carriers.

And that was also at issue in the regular common carrier decision that was relied on in Maislin, and I believe judge... then Judge Scalia wrote in a former life.

Unknown Speaker: Mr. Carpenter, what do you respond to the argument that the existence of competition is a special circumstance?

Mr. Carpenter: There's no doubt that the existence of competition is an extremely significant fact in this regulatory scheme.

As we have said, in trying to get deregulation for ourself, it justifies modifications of the rate-filing requirements, it justifies elimination of cost-support requirements with the filings, it eliminates... it justifies eliminating active forms of cost-of-service regulation, shortening the notice period to as little as 1 day.

So it's a very significant fact, but the statute says you can modify in particular circumstances, not exempt, and all... all competition allows within... under 203 is the sorts of streamlined regulation that we are seeking in this petition that we filed that people keep misquoting.

So competition is very significant, but it doesn't eliminate the need for the rate-filing requirements for the reasons that I said earlier, because you'll have price differences even in competitive markets.

They're not anticompetitive, but they are price differences that Congress sought to eliminate.

Congress wanted equal rates for similarly situated customers, and decided the way to achieve that is making everyone file rates so that all customers would know what they were and could demand them.

Unknown Speaker: Does the FCC have a developed body of law to define what is a dominant participant in an industry, or is this a category... a juridical category that is new for this regulation only?

Mr. Carpenter: The FCC has had this classification for a number of years, I believe it dated from the early 1980's, and they define dominant carriers as carriers possessing market power, and it has significance for tarrifying requirements and for other provisions, because dominant carriers are subject to some FCC regulations, I believe, that others--

Unknown Speaker: Is there support in the statute for that category in these areas where the FCC has been applying it?

Mr. Carpenter: --We, I don't believe, have ever argued that the FCC doesn't have the authority to make that distinction for some purposes.

Our point here... and I... our point here is only that whatever the significant of that distinction for other purposes, you can't be... it can't be a basis to exempt carriers from what the statute unambiguously requires that all do, which is to charge only filed rates.

As I've said, that we think this case, even if you were to disagree with us that the statute is susceptible to the FCC's interpretation, we think this case is controlled by the decision in Maislin.

Because it establishes, as, you know, many prior cases had, that rate-filing requirements are so central to the statutory scheme that even broad and facially applicable provisions of the law, like the ban on unreasonable practices at issue there, can't be construed to authorize exceptions to the great filing requirement unless Congress has explicitly so provided.

I believe today, and certainly in the reply belief, that Mr. Verrilli tried to distinguish Maislin by saying that it didn't involve the requirement that rates be filed, but only a requirement... which is a requirement of section 203(a) of the statute... that involved only a requirement that carriers follow whatever tariffs they've filed and that they not charge rates that are different from those that are set forth in the tariff.

And they say there's a fundamental distinction in the statute between the two.

Now, even if that were true it wouldn't do these petitioners any good, because they're doing exactly what they say what Maislin said they couldn't do, they're charging lower rates than those set forth in the tariff.

That's what MCI did in the underlying litigation that led to this; it was negotiating discounts of 5 to 10 percent below its generally applicable tariff rates.

And the FCC and MCI each explain in their brief that the consequence of their position is that carriers can go off and cut secret deals, rebates, all the things that 203(c) of the statute prohibit.

So even if there were the distinction that they're positing, it wouldn't xx them any good here because this order allows exactly what Maislin prohibits.

But the more fundamental point is that there's no distinction in the statute between merely filing rates, which they say is a 203 obligation, and merely following tariffs, which they say is the 203(c) duty.

The two obligations are absolutely parallel.

They're just different ways of saying the same thing; they're opposite sides of the same coin.

If you charge a customer a rate that's lower than that set forth in your tariff and don't file the lower negotiated rate, you're violating both section 203 and 20... both section 203(a) and section 203(c).

You're violating 203(a) because you're not filing all your charges.

You're violating 203(c) because you're charging a customer a rate that's not filed.

The two obligations are parallel and they overlap and there's a violation of each, and for that reason Maislin relied both on the duty to file and on the duty to follow.

At page 126 of the opinion, 497 U.S. at 126, the Court said that the negotiated rates policy was inconsistent with both, quote, the duty to file rates with the Commission, citing the counterpart to 203(a), and the obligation to charge only those rates, citing the counterpart to 203(c).

So what this case ultimately boils down this... and this is, you know, really more in the reply briefs than the argument today... is they're arguing that you shouldn't follow the Maislin precedent here because the case involves, they say, a different industry and a different statute.

And in arguing that, they're asking you to overrule another line of cases which says that statutes that are modeled on the Interstate Commerce Act are to be construed the same way unless there's material differences.

That principle dates back at least to the 1932 U.S. Navigation case, which we cite in our brief, and it was the basis for Maislin.

Because in the--

Unknown Speaker: But Mr. Verrilli said that our guide should be Permian Basin and not Maislin.

Mr. Carpenter: --Yes, he did.

Now, that's a curious citation, because Permian Basin didn't involve exceptions to rate-filing requirements, but there was a subsequent followup to Permian Basin that did, and that's the FTC v. Texaco case, 417 U.S. 380, and that involved the kind of modifications of the rate-filing requirements that we say are permissible, that involved small gas producers who didn't deal with ultimate consumers and sold their output exclusively to pipelines whose rates were regulated.

And the Court didn't exempt the filing of those rates.

It allowed the large... the pipeline with whom the small producers sold to file the rates, and the Court said that that would be consistent with the statute if it were the case... and it was a remand, but if were the case that in regulating the rates of the large producer, it could be assured that the small producers' rates were just and reasonable.

No issue of discrimination there because it dealt... the small producers dealt only with the pipelines.

Unknown Speaker: They didn't file at all.

The small producers did not file.

Mr. Carpenter: The small producers did not file.

The rates were filed by the pipelines that each sold its output to exclusively.

The small producers didn't deal with ultimate consumers at all.

Unknown Speaker: And that's okay, you think?

Mr. Carpenter: I think if you could ever have a situation like that, comparable to that in the telecommunications industry... which I can't imagine, but if you ever could it would okay because the rates would be on file and the Commission would be in a position to assure that the rates were lawful.

So I don't think... and the Texaco case that they cite says that the Commission cannot exempt carriers.

It says they cannot be exempt, carriers, from the requirements of section 204, which is where the rate-filing requirement lives.

So it's a curious citation.

So I think their position ultimately boils down to an argument that you shouldn't follow the Interstate Commerce Act precedents because this case involves a different statute.

But Maislin rejected that, because there the Court applied pre-1935 decisions under the original Interstate Commerce Act, which applied only to railroads, and they applied it to motor carriers who were operating under a statute which to them was a successor to the 1935 Motor Carrier Act.

And in this situation, the Interstate Commerce Act precedents absolutely should apply because the statute was... the provisions we're dealing with here, sections 201 to 210, were copied almost verbatim from those in the Interstate Commerce Act, and this is a case like Laurilar v. Ponds where Congress exhibited, you know, detailed knowledge of the provisions of another statute, copied those provisions it wanted to follow, and then departed from other provisions it didn't want to follow.

Sections 201 to 210 of the Communications Act were copied from those of the Interstate Commerce Act, and then they didn't want to allow the FCC to preempt State regulation in the ways that the ICC had been allowed to do under an earlier precedent of this Court that was at issue in the 1986 Louisiana v. FCC case, so they put other provisions in the statute to make sure that the FCC wouldn't in those limited respects have the same powers the ICC had and wouldn't be subject to the same restrictions.

Unknown Speaker: Mr. Carpenter, I'm a little troubled about TOCSIA.

Do we use an acronym for that?

Mr. Carpenter: Yeah, that's our acronym.

Unknown Speaker: Telephone TOCSIA.

Mr. Carpenter: Yes.

Unknown Speaker: It seems to me that that legislation did assume that there was no filing requirement.

Do you contest that?

Mr. Carpenter: No, I do contest that.

In the first place, there... it's argued that that was assuming an FCC rule was valid, but as the court of appeals held here, it wasn't until 1992 that the FCC even said that this... that it had adopted a rule that it relieved carriers from the rate-filing requirement.

And the only interpretations of xx statute that were in existence in the time... at the time that was enacted was the 1985 decision of the D.C. Circuit which says that carriers couldn't be exempted.

Unknown Speaker: But why did the legislation make any sense, then--

Mr. Carpenter: The legislation--

Unknown Speaker: --If there was a filing requirement?

Mr. Carpenter: --The legislation made absolute sense.

The problem the statute addressed... it didn't have anything to do with whether rates were filed or not.

The problem was that a new sort of cottage industry had arose which involved both entities that weren't common carriers and weren't subject to the filing requirement and entities like AT&T... in theory like AT&T and MCI, that were.

And what Congress did in that statute was it made everybody who provided operator services... including those who weren't carriers and weren't subject to the statute, made everybody file information.

Some of it was information required by 203, rates, and some of it was other information that wasn't required by 203--

Unknown Speaker: And you'd say the carriers would have had to... in addition to that, although it overlapped, would have to comply in it... with 203 generally?

Mr. Carpenter: --Oh, absolutely, absolutely.

It imposed additional obligations.

It imposed obligations on carriers because it made them file information that wasn't required by 203, i.e. commissions, and it imposed obligations on noncarriers who weren't subject to any requirement at all.

Unknown Speaker: Noncarriers.

Mr. Carpenter: And the problem that led to the statute wasn't that the FCC wasn't receiving rate filings.

The problem was the FCC wasn't doing anything at all to combat something that had become a massive problem, which was the sort of new fly-by-night companies cutting deals with hotels and ending up charging people rates that were two or three times those that AT&T and MCI charged.

So that's what that statute addressed, and the statute explicitly said that nothing in it could be construed as altering the obligations of any provision in the statute.

And given that at the time 203 was construed--

Unknown Speaker: Thank you, Mr. Carpenter.

Mr. Carpenter: --Thank you.

Unknown Speaker: Mr. Verrilli, you have 4... or Mr. Wright or Mr. Verrilli, whoever wants to take the rebuttal time, you have 4 minutes left.

Rebuttal of Christopher J. Wright

Mr. Wright: Thank you, Mr. Chief Justice.

In response to AT&T's comments about Maislin and the filed rate doctrine, it is true, as has been pointed out, that that's a different issue arising under a different statute.

I'd also like to suggest that it's instructive to consider what... how... what would happen if the Communications Act said that the FCC may modify any requirement, including the tariff-filing requirement.

If the statute said that, I think there'd be no doubt... we wouldn't be here today, it would be clear that we could modify the tariff-filing requirement if the statute said modify any requirement, including the tariff-filing requirement.

Now, in this hypothetical statute, in that circumstance what had been said in a different context arising under a different statute wouldn't matter.

In fact, that phrase including the tariff-filing requirement would be redundant.

The statute says "modify any requirement", and it would be a peculiar rule of statutory construction that required Congress to be redundant.

Now, one thing that's clearly come out--

Unknown Speaker: I don't think your opponent would agree that that's... I don't think your opponent would agree that that statute would be... you would be right under that statute, because he says this is not a modification requirement, including the filing requirement.

Mr. Wright: --Well, I was going to say one thing that's come out is that AT&T clearly thinks that under no circumstances at all can the FCC lift the tariff-filing requirement.

Unknown Speaker: No.

Well, they would allow it to be filed by somebody else, so long as it's out there somewhere, and that's eliminating the tariff filing.

Mr. Wright: Well, the first requirement is that they shall be filed, and AT&T says that we... that the FCC doesn't have that authority.

We think that it's clear that it therefore reads 203(b)(2) to say modify some requirements, not any requirement, and that is what the statute says.

One final point, if I may.

You know, the... it's been suggested that Congress would... couldn't imagine a detariffed world.

Well, just last summer with respect to commercial mobile carriers like cellular carriers in section 332(c), Congress authorized... what Congress did was say that these cellular companies are generally subject to the title II requirements we've been discussing today, but it said that the Commission may waive any requirement, including the tariff-filing requirement, except for three that it specified: 201, 202, and 208.

202 is the one that prohibits unreasonable discrimination.

So Congress, as shown last year in its enactment concerning cellular telephones, clearly envisions that unreasonable discrimination may be prohibited without tariffs.

Unknown Speaker: Do you know if a provision like this existed under the Civil Aeronautics Act?

Mr. Wright: I do not know that, Your Honor.

In any event, as I've also already pointed out, there's really no answer to the fact that the Amtrak case... under the Amtrak case in the... with different dictionary definitions... and I've been informed that in APF Freight, the NLRB, this term the Court has applied Chevron to an independent agency.

The FCC ought to have discretion to reasonably interpret "modify any requirement" to mean what it says.

Thank you.

Chief Justice Rehnquist: Thank you, Mr. Wright.

The case is submitted.

Unknown Speaker: The honorable court is now adjourned until tomorrow at ten o'clock.

Print this transcript Transcript: 

Argument of Speaker

Mr. Verrilli Jr.: The opinion of the Court in No. 93-356, MCI Telecommunications Corporation versus AT&T and a companion case will be announced by Justice Scalia.

Argument of Justice Scalia

Mr. Scalia: These cases are here on writ of certiorari to the United States Court of Appeals for the District of Columbia Circuit.

Title 47 of the United States Code Section 203(a) requires communication's common carriers to file tariffs with the Federal Communications Commission, and Section 203(b)(2) authorizes the Commission to "modify any requirement made by or under this section".

Relying on its modification authority, the Commission issued an order reaffirming its decision to make the tariff filing requirement of Section 203(a) optional for all non-dominant carriers, which, in the long distance market, means every carrier accept respondent, AT&T.

AT&T filed a motion with the Court of Appeals seeking summary reversal of the FCC's order.

The Court of Appeals granted that motion based on its prior decision which had determined that the Commission's policy of permissive detariffing violated Section 203(a).

In a decision announced today, we affirm the judgment of the District of Columbia Circuit.

The Commission's policy of permissive detariffing exceeds its authority to modify any requirement of this Section.

Virtually every dictionary in use currently and at the time the statute was enacted defines modify to mean to change moderately or in a minor degree.

The conclusion that Section 203(b)(2) does not contemplate major or fundamental changes as supported by the fact that its only exception deals with a minor matter.

The Commission, by virtue of that exception, may not lengthen the required period for giving notice of tariff changes beyond 120 days.

The Commission's permissive detariffing policy does not qualify as a non-fundamental modification.

The tariff filing requirement is the heart of the Communications Act and the elimination of it for all but one long distance carrier and for 40% of long distance customers is not a mere modification.

Likewise, a condition that applies to that many carriers is not special and the Commission's authority to modify by general order which is what happened here is limited to special circumstances or conditions.

The Commission's attempt to include its permissive detariffing policy within the meaning of modify is more than that statutory term can bear.

Accordingly, its interpretation is not entitled to deference.

Both sides point to legislation that they claim was premised on their view of the statute, but there has been no consistent history of legislation to which either side's interpretation is essential.

Finally, although the petitioners offer several arguments, suggesting that their interpretation better serves the Act's broad goal of promoting efficient telephone service, those arguments should be addressed to Congress.

Justice Stevens has filed a dissenting opinion in which Justices Blackmun and Souter have joined.

Justice O'Connor took no part in the consideration or decision of the case.