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12/30/94 CONTINENTAL MOBILE TELEPHONE COMPANY v.

December 30, 1994

CONTINENTAL MOBILE TELEPHONE COMPANY, INC., APPELLANT,
v.
ILLINOIS COMMERCE COMMISSION AND CHICAGO SMSA LIMITED PARTNERSHIP, APPELLEES.



APPEAL FROM THE ILLINOIS COMMERCE COMMISSION. No. 91-0079.

Released for Publication February 16, 1995.

Presiding Justice Hoffman delivered the opinion of the court: Cahill and Theis, JJ., concur.

The opinion of the court was delivered by: Hoffman

PRESIDING JUSTICE HOFFMAN delivered the opinion of the court:

Continental Mobile Telephone Company, Inc. (Continental) appeals from an order of the Illinois Commerce Commission (Commission) which found that Chicago SMSA Limited Partnership (CSLP) did not engage in unfair and anti-competitive practices in providing Continental with cellular radio service. We consider: (1) whether this court should review the Commission's decision de novo because the successor hearing examiner who issued the proposed decision did not conduct the hearing; (2) whether the assignment of a successor hearing officer who did not hear the testimony (a) cannot be challenged on appeal because Continental did not object until after the proposed order was issued, (b) rendered the Commission's order void because it was not authorized by statute, or (c) violated due process; (3) whether the Commission's decision was supported by substantial evidence; and (4) whether the Commission appropriately applied section 13-203of the Universal Telephone Service Protection Law of 1985 (220 ILCS 5/13-203 (West 1992)). For the following reasons, we affirm.

Continental is a reseller of cellular radio service. It purchases the service in bulk at wholesale prices from CSLP, operating under the trade name Ameritech, and Cellular One, which are the two facilities-based carriers in the Chicago area licensed by the Federal Communications Commission (FCC). In turn, Continental resells the service at retail prices to its customers. Continental's profit is based on the difference between the wholesale rate at which it buys the service and the retail rate at which it sells the service to consumers. CSLP and Cellular One also sell the service at retail, and when doing so, compete directly with Continental and other resellers.

Continental filed a complaint with the Commission on March 6, 1991, alleging that CSLP engaged in unfair and anti-competitive practices when it offered certain discount plans without offering Continental a wholesale rate on the plans and when it offered equipment to customers for little or no cost in exchange for an agreement that the customer maintain his service with CSLP, a practice known as "bundling." Continental requested that the Commission order CSLP to provide Continental with a competitive wholesale rate for each retail rate and plan CSLP offered to consumers.

In a hearing before the Commission, the following evidence was presented. The direct and rebuttal testimony of five witnesses was submitted in written form and they were cross-examined before the hearing examiner.

Before 1987, the Commission regulated the rates charged by the carriers, including CSLP, and the margin between Continental's wholesale rates and the retail rates was about 24%. On CSLP's petition and over the objections of Continental and other resellers, the Commission excluded cellular radio service from active regulatory oversight in 1987 based on its finding that regulation was unnecessary due to the competitiveness of the marketplace. In its order, the Commission recognized that resellers contribute to the competitiveness of the cellular market. It also stated that: "the ability of the reseller to function in the cellular market is dependent on the margin between the facilities-based carriers' wholesale and retail rates, and that without direct Commission supervision over the rates of the carriers they have the ability to reduce the margin in an attempt to squeeze the resellers out of the market" which would have an anti-competitive effect. After deregulation, CSLP continued to provide Continental with a margin of about 24% between the wholesale and retail rates until mid-1989.

Beginning in 1989, CSLP offered discount plans to target certaingroups of retail customers such as realtors, printers, and small business owners. The plans were offered in response to similar plans offered by Cellular One. The discounted price was 20% less than the standard retail rate CSLP offered and despite Continental's request, CSLP did not offer it a discounted wholesale rate on these plans. Continental believed it could not effectively compete with CSLP for the customers targeted in the group plans.

CSLP and Continental entered into an agreement on rates in October 1989 under which there were two pricing options. Option A allowed Continental a 23.5% margin on seven specific retail plans that CSLP offered at the time, excluding the discounted group plans. Option B allowed Continental a margin of at least 23.5% and up to 30% on CSLP's blended retail rate, which was a weighted average price charged to CSLP's retail and discount customers, depending on Continental's sales. Continental chose option B.

Subsequently, CSLP announced it would increase its retail rates. After Continental and other resellers attacked the price increase in advertisements, CSLP rescinded the price increase and on the same day, offered a new discounted group plan aimed at businesses. CSLP did not offer resellers a discounted wholesale rate on the business plan. The business customers were the most desirable retail customers because they used the service more than other customers. CSLP did not offer Continental a wholesale rate on the business plan because it would have been difficult to compete with Continental. In addition, CSLP offered a Chicago Mercantile Exchange plan and did not offer resellers a discounted wholesale rate off that plan.

In response, Continental filed a complaint in the circuit court for declaratory, injunctive, and other relief. Summary judgment was granted on one count and the other counts were dismissed for failure to state a cause of action. That decision was affirmed on appeal. ( Continental Mobile Telephone Co. v. Chicago SMSA Limited Partnership (1992), 225 Ill. App. 3d 317, 587 N.E.2d 1169, 167 Ill. Dec. 554.) While that case was pending, Continental filed its complaint with the Commission.

After the hearings on Continental's complaint with the Commission, the hearing examiner who heard the testimony resigned and a successor hearing examiner was assigned to the case. The successor hearing examiner issued a proposed order recommending that the Commission dismiss Continental's complaint with prejudice. There was no reference in the proposed order that the examiner who heard the testimony conveyed her findings, impressions, and conclusions to the successor hearing examiner.

Continental filed a brief on its exceptions to the proposed order arguing, among other things, that it was denied due process becausethe hearing examiner who issued the proposed order did not preside over the hearing. The hearing examiner then issued a modified proposed order to the Commission recommending that it deny Continental's complaint. The Commission adopted the proposed order and denied the complaint. After its application for rehearing was denied, Continental filed a timely petition for review with this court.

On appeal from an order of the Commission, the reviewing court must consider the Commission's findings of fact as prima facie true and its rules, regulations, orders, and decisions as prima facie reasonable. (220 ILCS 5/10-201(d) (West 1992).) The appellant bears the burden of proof on all issues raised in the appeal. (220 ILCS 5/10-201(d) (West 1992).) The Commission's order shall be reversed if its findings were not supported by substantial evidence, it did not have jurisdiction to issue the order, the order violated the State or Federal constitution or laws, or the proceedings or manner in which the order was considered and decided violated the State or Federal constitution or laws to the prejudice of the appellant. (220 ILCS 5/10-201(e)(iv) (West 1992).) However, the Commission's ...


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