(Slip Opinion) OCTOBER TERM, 2008 1 Syllabus NOTE: Where it is feasible, a syllabus (headnote) will be released, as is being done in connection with this case, at the time the opinion is issued. The syllabus constitutes no part of the opinion of the Court but has been prepared by the Reporter of Decisions for the convenience of the reader. See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337. SUPREME COURT OF THE UNITED STATES Syllabus PACIFIC BELL TELEPHONE CO., DBA AT&T CALI- FORNIA, ET AL. v. LINKLINE COMMUNICATIONS, INC., ET AL. CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT No. 07–512. Argued December 8, 2008—Decided February 25, 2009 Petitioners (hereinafter AT&T) own infrastructure and facilities needed to provide “DSL” service, a method of connecting to the Internet at high speeds over telephone lines. As a condition for a recent merger, the Federal Communications Commission requires AT&T to provide wholesale DSL transport service to independent firms at a price no greater than the retail price of AT&T’s DSL service. The plaintiffs in this case, respondents here, are independent Internet service provid- ers that compete with AT&T in the retail DSL market in California. The plaintiffs do not own all the facilities needed to supply DSL ser- vice, and must lease wholesale DSL transport service from AT&T. They filed suit under §2 of the Sherman Act, asserting that AT&T unlawfully “squeezed” their profit margins by setting a high price for the wholesale DSL transport service it sells and a low price for its own retail DSL service. This maneuver allegedly placed the plaintiffs at a competitive disadvantage, allowing AT&T to maintain monopoly power in the DSL market. AT&T moved for judgment on the plead- ings, arguing that the plaintiffs’ claims were foreclosed by Verizon Communications Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U. S. 398, 410, in which this Court held that a firm with no antitrust duty to deal with its rivals has no obligation to provide those rivals with a “sufficient” level of service. The District Court found that AT&T had no antitrust duty to deal with the plaintiffs, but nonethe- less denied the motion, holding that Trinko did not address price- squeeze claims. The court certified its order for interlocutory appeal on the question whether Trinko bars price-squeeze claims when the parties are required to deal by federal communications law, but not 2 PACIFIC BELL TELEPHONE CO. v. LINKLINE COMMUNICATIONS, INC. Syllabus antitrust law. The Ninth Circuit affirmed, holding that Trinko did not address the viability of price-squeeze claims, and thus the plain- tiffs’ complaint stated a potentially valid §2 claim. Held: 1. The case is not moot. The plaintiffs now agree that their claims must meet the Brooke Group test for predatory pricing, apparently apart from their price-squeeze theory. That test established two re- quirements for predatory pricing: below-cost retail pricing and a “ ‘dangerous probability’ ” that the defendant will recoup any lost profits, see Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U. S. 209, 222–224. Despite the plaintiffs’ new position, the par- ties continue to seek different relief: AT&T seeks reversal of the deci- sion below and dismissal of the complaint, while the plaintiffs seek leave to amend their complaint to allege a Brooke Group claim. It is also not clear that the plaintiffs have unequivocally abandoned their price-squeeze claims. Prudential concerns favor answering the ques- tion presented; absent a decision on the merits, the Circuit conflict that this Court granted certiorari to resolve would persist. Pp. 5–7. 2. A price-squeeze claim may not be brought under §2 when the de- fendant has no antitrust duty to deal with the plaintiff at wholesale. Pp. 7–17. (a) Businesses are generally free to choose the parties with whom they will deal, as well as the prices, terms, and conditions of that dealing. See United States v. Colgate & Co., 250 U. S. 300, 307. But in rare circumstances, a dominant firm may incur antitrust liability for purely unilateral conduct, such as charging “predatory” prices. Brooke Group, supra, at 222–224. There are also limited circum- stances in which a firm’s unilateral refusal to deal with its rivals can give rise to antitrust liability. See Aspen Skiing Co. v. Aspen High- lands Skiing Corp., 472 U. S. 585, 608–611. Here, plaintiffs do not allege predatory pricing, and the District Court concluded that there was no antitrust duty to deal. Plaintiffs challenge a different type of unilateral conduct in which a firm “squeezes” its competitors’ profit margins. This requires the defendant to operate in both the whole- sale (“upstream”) and retail (“downstream”) markets. By raising the wholesale price of inputs while cutting its own retail prices, the de- fendant can raise competitors’ costs while putting downward pres- sure on their revenues. Price-squeeze plaintiffs assert that defen- dants must leave them a “fair” or “adequate” margin between wholesale and retail prices. Pp. 7–9. (b) Where there is no duty to deal at the wholesale level and no predatory pricing at the retail level, a firm is not required to price both of these services in a manner that preserves its rivals’ profit margins. Pp. 9–12. Cite as: 555 U. S. ____ (2009) 3 Syllabus (1) Any challenge to AT&T’s wholesale prices is foreclosed by a straightforward application of Trinko. The claim in Trinko addressed the quality of Verizon’s support services, while the claims in this case challenge AT&T’s pricing structure. But for antitrust purposes, there is no meaningful distinction between price and nonprice components of a transaction. The nub of the complaint in both cases is identical— the plaintiffs alleged that the defendants (upstream monopolists) abused their power in the wholesale market to prevent rival firms from competing effectively in the retail market. But a firm with no antitrust duty to deal in the wholesale market has no obligation to deal under terms and conditions favorable to its competitors. See Trinko, supra, at 410. Had AT&T simply stopped providing DSL transport service to the plaintiffs, it would not have run afoul of the Sherman Act. Thus, it was not required to offer this service at the wholesale prices the plaintiffs would have preferred. Pp. 9–10. (2) The other component of a price-squeeze claim is the asser- tion that the defendant’s retail prices are “too low.” Here too plain- tiffs’ claims find no support in existing antitrust doctrine. “[C]utting prices in order to increase business often is the very essence of com- petition.” Matsushita Elec. Industrial Co. v. Zenith Radio Corp., 475 U. S. 574, 594. To avoid chilling aggressive price competition, the Court has carefully limited the circumstances under which plaintiffs can state a Sherman Act claim by alleging that the defendant’s prices are too low. See Brooke Group, supra, at 222–224. The complaint at issue here has no allegation that AT&T’s conduct met either Brooke Group requirement. Recognizing a price-squeeze claim where the de- fendant’s retail price remains above cost would invite the precise harm the Court sought to avoid in Brooke Group: Firms might raise retail prices or refrain from aggressive price competition to avoid po- tential antitrust liability. See 509 U. S., at 223. Pp. 11–12. (c) Institutional concerns also counsel against recognizing such claims. This Court has repeatedly emphasized the importance of clear rules in antitrust law. Recognizing price-squeeze claims would require courts simultaneously to police both the wholesale and retail prices to ensure that rival firms are not being squeezed. Courts would be aiming at a moving target, since it is the interaction be- tween these two prices that may result in a squeeze. Moreover, firms seeking to avoid price-squeeze liability will have no safe harbor for their pricing practices. The most commonly articulated standard for price squeezes is that the defendant must leave its rivals a “fair” or “adequate” margin between wholesale and retail prices; this test is nearly impossible for courts to apply without conducting complex pro- ceedings like rate-setting agencies. Some amici argue that a price squeeze should be presumed if the defendant’s wholesale price ex- 4 PACIFIC BELL TELEPHONE CO. v. LINKLINE COMMUNICATIONS, INC. Syllabus ceeds its retail price. But if both the wholesale price and the retail price are independently lawful, there is no basis for imposing anti- trust liability simply because a vertically integrated firm’s wholesale price is greater than or equal to its retail price. Pp. 12–15. (d) The District Court on remand should consider whether an amended complaint filed by the plaintiffs states a claim upon which relief may be granted under the pleading standard articulated in Bell Atlantic Corp. v. Twombly, 550 U. S. 544, 561–563; whether plaintiffs should be given leave to amend their complaint to bring a Brooke Group claim; and such other matters properly before it. Pp. 15–17. 503 F. 3d 876, reversed and remanded. ROBERTS, C. J., delivered the opinion of the Court, in which SCALIA, KENNEDY, THOMAS, and ALITO, JJ., joined. BREYER, J., filed an opinion concurring in the judgment, in which STEVENS, SOUTER, and GINSBURG, JJ., joined. Cite as: 555 U. S. ____ (2009) 1 Opinion of the Court NOTICE: This opinion is subject to formal revision before publication in the preliminary print of the United States Reports. Readers are requested to notify the Reporter of Decisions, Supreme Court of the United States, Wash­ ington, D. C. 20543, of any typographical or other formal errors, in order that corrections may be made before the preliminary print goes to press. SUPREME COURT OF THE UNITED STATES _________________ No. 07–512 _________________ PACIFIC BELL TELEPHONE COMPANY, DBA AT&T CALIFORNIA, ET AL., PETITIONERS v. LINKLINE COMMUNICATIONS, INC., ET AL. ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT [February 25, 2009] CHIEF JUSTICE ROBERTS delivered the opinion of the Court. The plaintiffs in this case, respondents here, allege that a competitor subjected them to a “price squeeze” in viola­ tion of §2 of the Sherman Act. They assert that such a claim can arise when a vertically integrated firm sells inputs at wholesale and also sells finished goods or ser­ vices at retail. If that firm has power in the wholesale market, it can simultaneously raise the wholesale price of inputs and cut the retail price of the finished good. This will have the effect of “squeezing” the profit margins of any competitors in the retail market. Those firms will have to pay more for the inputs they need; at the same time, they will have to cut their retail prices to match the other firm’s prices. The question before us is whether such a price-squeeze claim may be brought under §2 of the Sherman Act when the defendant is under no antitrust obligation to sell the inputs to the plaintiff in the first place. We hold that no such claim may be brought. 2 PACIFIC BELL TELEPHONE CO. v. LINKLINE COMMUNICATIONS, INC. Opinion of the Court I This case involves the market for digital subscriber line (DSL) service, which is a method of connecting to the Internet at high speeds over telephone lines. AT&T1 owns much of the infrastructure and facilities needed to provide DSL service in California. In particular, AT&T controls most of what is known as the “last mile”—the lines that connect homes and businesses to the telephone network. Competing DSL providers must generally obtain access to AT&T’s facilities in order to serve their customers. Until recently, the Federal Communications Commis­ sion (FCC) required incumbent phone companies such as AT&T to sell transmission service to independent DSL providers, under the theory that this would spur competi­ tion. See In re Appropriate Framework for Broadband Access to Internet over Wireline Facilities, 20 FCC Rcd. 14853, 14868 (2005). In 2005, the Commission largely abandoned this forced-sharing requirement in light of the emergence of a competitive market beyond DSL for high­ speed Internet service; DSL now faces robust competition from cable companies and wireless and satellite services. Id., at 14879–14887. As a condition for a recent merger, however, AT&T remains bound by the mandatory inter­ connection requirements, and is obligated to provide wholesale “DSL transport” service to independent firms at a price no greater than the retail price of AT&T’s DSL service. In re AT&T Inc. and BellSouth Corp., 22 FCC Rcd. 5662, 5814 (2007). The plaintiffs are four independent Internet service providers (ISPs) that compete with AT&T in the retail DSL market. Plaintiffs do not own all the facilities needed —————— 1Petitioners consist of several corporate entities and subsidiaries, and their names and corporate structures have changed frequently over the course of this litigation. For simplicity, we will refer to all the petitioners as “AT&T.” Cite as: 555 U. S. ____ (2009) 3 Opinion of the Court to supply their customers with this service. They instead lease DSL transport service from AT&T pursuant to the merger conditions described above. AT&T thus partici­ pates in the DSL market at both the wholesale and retail levels; it provides plaintiffs and other independent ISPs with wholesale DSL transport service, and it also sells DSL service directly to consumers at retail. In July 2003, the plaintiffs brought suit in District Court, alleging that AT&T violated §2 of the Sherman Act, 15 U. S. C. §2, by monopolizing the DSL market in Cali­ fornia. The complaint alleges that AT&T refused to deal with the plaintiffs, denied the plaintiffs access to essential facilities, and engaged in a “price squeeze.” App. 18–19. Specifically, plaintiffs contend that AT&T squeezed their profit margins by setting a high wholesale price for DSL transport and a low retail price for DSL Internet service. This maneuver allegedly “exclude[d] and unreasonably impede[d] competition,” thus allowing AT&T to “preserve and maintain its monopoly control of DSL access to the Internet.” Ibid. In Verizon Communications Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U. S. 398, 410 (2004), we held that a firm with no antitrust duty to deal with its rivals at all is under no obligation to provide those rivals with a “suffi­ cient” level of service. Shortly after we issued that deci­ sion, AT&T moved for judgment on the pleadings, arguing that the plaintiffs’ claims in this case were foreclosed by Trinko. The District Court held that AT&T had no anti­ trust duty to deal with the plaintiffs, App. to Pet. for Cert. 77a–85a, but it denied the motion to dismiss with respect to the price-squeeze claims, id., at 86a–90a. The court acknowledged that AT&T’s argument “has a certain logic to it,” but held that Trinko “simply does not involve price­ squeeze claims.” Id., at 86a. The District Court also noted that price-squeeze claims have been recognized by several Circuits and “are cognizable under existing antitrust 4 PACIFIC BELL TELEPHONE CO. v. LINKLINE COMMUNICATIONS, INC. Opinion of the Court standards.” Id., at 89a, and n. 27. At the District Court’s request, plaintiffs then filed an amended complaint providing greater detail about their price-squeeze claims. AT&T again moved to dismiss, arguing that price-squeeze claims could only proceed if they met the two established requirements for predatory pricing: below-cost retail pricing and a “‘dangerous prob­ ability’” that the defendant will recoup any lost profits. See Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U. S. 209, 222–224 (1993). The District Court did not reach the issue whether all price-squeeze claims must meet the Brooke Group requirements, because it concluded that the amended complaint, “generously con­ strued,” satisfied those criteria. App. to Pet. for Cert. 46a– 49a, 56a. The court also certified its earlier order for interlocutory appeal on the question whether “Trinko bars price squeeze claims where the parties are compelled to deal under the federal communications laws.” Id., at 56a– 57a. On interlocutory appeal, the Court of Appeals for the Ninth Circuit affirmed the District Court’s denial of AT&T’s motion for judgment on the pleadings on the price­ squeeze claims. 503 F. 3d 876 (2007). The court empha­ sized that “Trinko did not involve a price squeezing the­ ory.” Id., at 883. Because “a price squeeze theory formed part of the fabric of traditional antitrust law prior to Trinko,” the Court of Appeals concluded that “those claims should remain viable notwithstanding either the telecom­ munications statutes or Trinko.” Ibid. Based on the record before it, the court held that plaintiffs’ original complaint stated a potentially valid claim under §2 of the Sherman Act. Judge Gould dissented, noting that “the notion of a ‘price squeeze’ is itself in a squeeze between two recent Supreme Court precedents.” Id., at 886. A price-squeeze claim involves allegations of both a high wholesale price Cite as: 555 U. S. ____ (2009) 5 Opinion of the Court and a low retail price, so Judge Gould analyzed each component separately. He concluded that “Trinko insu­ lates from antitrust review the setting of the upstream price.” Id., at 886–887. With respect to the downstream price, he argued that “the retail side of a price squeeze cannot be considered to create an antitrust violation if the retail pricing does not satisfy the requirements of Brooke Group, which set unmistakable limits on what can be considered to be predatory within the meaning of the antitrust laws.” Id., at 887 (citing Brooke Group, supra, at 222–224). Judge Gould concluded that the plaintiffs’ complaint did not satisfy these requirements because it contained no allegations that the retail price was set below cost and that those losses could later be recouped. 503 F. 3d, at 887. Judge Gould would have allowed the plain­ tiffs to amend their complaint if they could, in good faith, raise predatory pricing claims meeting the Brooke Group requirements. Ibid. We granted certiorari, 554 U. S. ___ (2008), to resolve a conflict over whether a plaintiff can bring price-squeeze claims under §2 of the Sherman Act when the defendant has no antitrust duty to deal with the plaintiff. See Covad Communications Co. v. Bell Atlantic Co., 398 F. 3d 666, 673–674 (CADC 2005) (holding that Trinko bars such claims). We reverse. II This case has assumed an unusual posture. The plain­ tiffs now assert that they agree with Judge Gould’s dis­ senting position that price-squeeze claims must meet the Brooke Group requirements for predatory pricing. They ask us to vacate the decision below in their favor and remand with instructions that they be given leave to amend their complaint to allege a Brooke Group claim. In other words, plaintiffs are no longer pleased with their initial theory of the case, and ask for a mulligan to try 6 PACIFIC BELL TELEPHONE CO. v. LINKLINE COMMUNICATIONS, INC. Opinion of the Court again under a different theory. Some amici argue that the case is moot in light of this confession of error. They contend that “[w]ith both petitioners and respondents now aligned on [the same] side of the question presented, no party with a concrete stake in this case’s outcome is advo­ cating for the contrary position.” Brief for COMPTEL 6. We do not think this case is moot. First, the parties continue to seek different relief. AT&T asks us to reverse the judgment of the Court of Appeals and remand with instructions to dismiss the complaint at issue. The plain­ tiffs ask that we vacate the judgment and remand with instructions that they be given leave to amend their com­ plaint. The parties thus continue to be adverse not only in the litigation as a whole, but in the specific proceedings before this Court. Second, it is not clear that the plaintiffs have unequivo­ cally abandoned their price-squeeze claims. In their brief and at oral argument, the plaintiffs continue to refer to their “pricing squeeze claim.” See Brief for Respondents 13. They appear to acknowledge that those claims must meet the Brooke Group requirements, but it is not clear whether they believe the necessary showing can be made in at least partial reliance on the sort of price squeeze theory accepted by the Court of Appeals. At one point, for example, the plaintiffs suggest that “the DSL transport price” may be pertinent to their claims going forward under the theory of Judge Gould’s dissent; that opinion, however, concluded that Trinko “in essence takes the issu[e] of wholesale pricing out of the case.” 503 F. 3d, at 886. Given this ambiguity, the case before us remains a live dispute appropriate for decision. Cf. Friends of Earth, Inc. v. Laidlaw Environmental Services (TOC), Inc., 528 U. S. 167, 189 (2000) (a party’s voluntary conduct renders a case moot only if it is “‘absolutely clear’” the party will take that course of action). Amici also argue that we should dismiss the writ of