Nynex Corp. v. Discon, Inc.

Discon Incorporated sold services to remove obsolete telephone equipment to Material Enterprises Company, a subsidiary of NYNEX Corporation. When Material Enterprises started to buy removal services from AT&T Technologies instead, Discon filed suit alleging NYNEX had engaged in unfair and anticompetitive practices. Discon claimed that Material Enterprises paid AT&T more than Discon would have received. Material Enterprises passed on the extra cost to the customers of NYNEX. Material Enterprises then received a rebate from AT&T and shared it with NYNEX. Discon alleged these practices were intended to them and to benefit their competitor, AT&T, because Discon refused to participate in the scheme. The District Court dismissed the suit for failure to state a claim. The Court of Appeals affirmed the dismissal, but held Discon's claims were founded under the Sherman Act. Discon had a valid claim in antitrust rules that prohibit group boycotts because the practices were anticompetitive. Moreover, the complaint stated a valid conspiracy to monopolize. NYNEX argued that this case did not constitute a group boycott and therefore it could not proceed.