Antitrust Law Daily Wrap Up, ANTITRUST—D.N.J.: Voice-over Internet Protocol service provider in India lacked standing to bring antitrust claims against Microsoft, (Jun 2, 2014)

By Linda O’Brien, J.D., LL.M.

A provider of Voice-over Internet Protocol services in India and its majority shareholder lacked standing to bring antitrust claims against Microsoft Corporation for conspiring to monopolize the market for voice-over calls between the United States and India, the federal district court in Newark has ruled (TI Investment Services, LLC v. Microsoft Corp., May 30, 2014, Wolfson, F.).

World Phone Internet Services provides Voice-over Internet Protocol (VoIP) services for calls made between the United States and India. VoIP enables users to make telephone calls over the Internet. World Phone entered into a license agreement for the provision of Internet services with the Ministry of Communications in India. Microsoft became a provider of VoIP services through its acquisition of Skype in 2011.

World Phone and its majority shareholder, TI Investment Services filed suit against Microsoft for violations of the Sherman Act and the New Jersey Antitrust Act. World Phone alleged that Microsoft intentionally did not comply with the India Ministry of Communications licensing regime, and by avoiding the licensing costs, was able to offer its VoIP services at a lower price than compliant providers. Microsoft moved for dismissal of the complaint.

Standing. The court found that World Phone lacked standing to sue under the Sherman Act due to its failure to allege an antitrust injury. According to the court, World Phone’s allegations that Microsoft charged a lower price for its VoIP services did not constitute a predatory price claim for antitrust injury since World Phone failed to allege that Microsoft priced its VoIP services below cost. Moreover, World Phone failed to (1) specify the statute or regulation alleged to be violated; (2) assert that Microsoft would increase its prices if required to comply with Indian licensing regulations; or (3) plausibly allege that there was a dangerous probability that Microsoft would recoup its investment in anticompetitive pricing once it achieved monopoly power.

TI Investments also lacked standing to assert a claim under the Sherman Act since the Act did not create a cause of action for indirect harm that TI Investments, as the major shareholder in World Phone, may have suffered through harm caused to the corporation. Antitrust standing was limited to consumers and competitors in a restrained market whose harm was the means by which the alleged conspirator sought to achieve its anticompetitive ends, the court noted.

Foreign Trade Antitrust Improvements Act. The Foreign Trade Antitrust Improvements Act (FTAIA) limits the Sherman Act by providing that the Act does not apply to conduct involving trade or commerce with foreign nations. The court noted that, although a Sherman Act claim regarding the sales of services to U.S. consumers was not sales in foreign commerce, World Phone made no allegations with respect to the domestic market. However, Microsoft’s sales of services to customers in India involved foreign commerce and World Phone failed to show that Microsoft’s conduct had a “direct, substantial, and reasonably foreseeable effect” on domestic commerce as to qualify as an exception to the FTAIA.

Relevant market. The court also determined that World Phone failed to adequately allege a relevant market. World Phone’s allegation that the relevant market was the market for VoIP “traffic originating or terminating between the United States and India” was not a coherent single market since it involved two forms of commerce – domestic and foreign – which were treated differently under the FTAIA. World Phone also failed to allege any injury from its VoIP business in the United States or assert any facts concerning possible substitutes or interchangeable products for VoIP services.

Conspiracy. Finally, World Phone’s conclusory allegation that Microsoft conspired with other non-compliant competitors to charge artificially low prices for VoIP services was insufficient to show a course of anticompetitive parallel conduct. World Phone alleged no facts to infer that the conduct of the non-compliant competitors was anything more than independent action, the court concluded.

The case is No. 3:13-cv-04823-FLW-TJB.

Attorneys: Jean-Marc Zimmerman (Zimmerman, Weiser & Paray, LLP) for TI Investment Services, LLC and World Phone Internet Services Pvt. Ltd. Ezra D. Rosenberg (Dechert LLP) for Microsoft Corporation.

Companies: TI Investment Services, LLC; World Phone Internet Services, Pvt. Ltd.; Microsoft Corp.

Cases: Antitrust NewJerseyNews