The Baby Bells that were named in the suit, filed in U.S. District Court in Washington, D.C., are Ameritech, BellSouth, Nynex, Pacific Bell, and US West.
The suit follows a letter written to the Justice Department and Rep. Edward Markey (D-Massachusetts) by online yellow page provider Switchboard in August, which called the companies' same alliance unfair. (See related story) Today's suit is likely to rekindle the controversy, which may test the application of long-standing antitrust laws to emerging businesses on the Internet, according to some legal specialists.
The five Bells, along with Netscape and Yahoo, have denied the charges. They say such promotional agreements not only are legal but common on the Net.
"We believe the lawsuit is totally without merit," said a spokeswoman for US West.
"We are familiar with the facts related to this complaint, and we are confident that Netscape has not violated any law," said a Netscape representative.
But GTE contends the following: "The [Baby Bells], beginning in 1997, illegally agreed to create a joint national Internet yellow pages rather than compete against each other, as they had been doing, and instead [agreed] to divide up the national market among themselves in keeping with their traditional regional territories."
The suit charges that the Baby Bells "paid a substantial premium to Netscape and Yahoo to exclude GTE and other competitors from their existing spots on the Netscape Guide by Yahoo and other locations."
In addition, GTE asks the court to block the Baby Bells from continuing their joint Internet yellow pages and return GTE to the Internet access position it held prior to the agreement. It also asks for an expedited 60-day discovery process so that the court can rule on a request for injunctive relief.
"It is clear that these anticompetitive actions that the rBOCs [regional Bell operating companies] seek to create an old Bell system-type monopoly in the nationwide Internet yellow pages market," said William Barr, GTE executive vice president and general counsel. "It is unfair to consumers and advertisers as well as competitors."
While the Net is a "new frontier," it is subject to many of the same antitrust laws that already are on the books, added Barr.
As previously reported, GTE already has filed suit against Netscape and Yahoo, charging Netscape with violating its contract with GTE "by giving the [Baby Bells] a monopoly on prime access."
When Switchboard raised strikingly similar concerns, US West responded by saying that online directory businesses are free to enter into promotional agreements with any Web site. The alliance doesn't foreclose others from joining, either, the company said. Some analysts also agreed that the antitrust claims would be hard to prove.