Antitrust Developments in 1990-91: U.s. Supreme Court Decisions
| Publication year | 1992 |
| Pages | 235 |
| Citation | Vol. 21 No. 2 Pg. 235 |
1992, February, Pg. 235. Antitrust Developments in 1990-91: U.S. Supreme Court Decisions
In its 1990-91 term, the U.S. Supreme Court summarily reversed a court of appeals' failure to condemn a price-fixing, territorial allocation scheme by competing bar review courses (who presumably should have known better). More importantly, the Court handed down two decisions that appeared to resolve, once and for all, major issues involving the application of federal antitrust laws to regulatory conduct undertaken by municipalities at the behest of private parties and to localized health care disputes.
This article discusses the issues and implications of these three decisions. While it is difficult to find a common thread among them, it may be noteworthy that the Court's most recent appointees voted as a block in each case.
In an unusual summary disposition, the Court refused an invitation to undermine the per se rule against horizontal price-fixing and market allocation agreements between competitors. Palmer v. BRG of Georgia, Inc.(fn1) concerned two competing organizations offering bar review courses in Georgia. The organizations agreed that one of them (HBJ) would withdraw from that state, that the other (BRG) would share its Georgia earnings with HBJ and that BRG would not compete with HBJ outside Georgia. Immediately after entering into this agreement, BRG flexed its newly acquired monopoly power by raising the fees for its course from $150 to $400. (The timing of this price hike left little room for debate over issues of causation or measurement of damages.)
In a suit brought by bar review students, the district court granted summary judgment for HBJ and BRG. The Eleventh Circuit affirmed, holding that the per se rule against price-fixing applied only when there was an explicit agreement on the prices to be charged or an agreement that one party have the right to be consulted about the other's prices. It also held that the per se rule against market allocations required a showing that the defendants had divided between themselves a market in which they had competed previously.(fn2)
Palmer came to the U.S. Supreme Court on a petition for writ of certiorari. Without benefit of oral argument or briefs on the merits, the Court granted the petition and summarily reversed the Eleventh Circuit.(fn3) The Court disagreed with the Court of Appeals on the applicability of the per se rule in both the price-fixing and market allocation contexts. With respect to price-fixing, the Court reiterated its fifty-year-old holding in U.S. v. Socony-Vacuum Oil Co. that any "combination formed for the purpose and with the effect of raising, depressing, fixing, pegging, or stabilizing the price of a commodity" is illegal per se.(fn4) The Court had no difficulty in concluding that the fee-sharing agreement between the defendants, combined with the immediate price increase imposed by BRG when HBJ ceased competing in Georgia, had a per se illegal purpose and effect.
With respect to the parties' agreement not to compete in each other's territory, the Court looked to its decision in U.S. v. Topco Associates, Inc.(fn5) Topco referred to agreements between competitors to allocate territories in order to minimize competition as a classic example of a per se violation. Accordingly, the Court in Palmer held that the agreement between BRG and HBJ was
Strengthening Municipalities' Defensesanticompetitive regardless of whether the parties split a market within which both do business or whether they merely reserve one market for one and another for the other.(fn6)
The 1980s saw municipalities struggle as their costs increased in the face of decreasing revenues. The U.S. Supreme Court's 1978 decision in Lafayette v. Louisiana Power & Light Co.(fn7) and 1982 decision in Community Communications Co. v. Boulder(fn8) further strained scarce municipal financial resources. In Lafayette, the Court held that the "state action" immunity
Those two cases enabled disappointed developers, cable television system operators, taxi companies, ambulance companies and other unsuccessful entrepreneurs to bring a flood of antitrust lawsuits against hundreds of municipalities across the country. This burden on municipal finances was lessened somewhat by two developments in the mid-1980s. First, Congress enacted the Local Government Antitrust Act of 1984,(fn12) which barred the filing of antitrust damage actions against cities, towns and other local government units. Second, the Supreme Court held in Hallie v. Eau Claire that the authorizing state legislation required by the "clear articulation" standard need not permit explicitly the displacement of competition if suppression of competition is the foreseeable result of what the legislation authorizes.(fn13)
In the following years, the lower courts were battlegrounds for disputes regarding whether (1) the statutory authorization was specific enough, (2) the municipality had exceeded its statutory authority, (3) municipal officials had conspired with private parties and (4) efforts to procure the passage of anticompetitive ordinances were immune. These questions were disposed of largely in the 1991 Supreme Court decision in Columbia v. Omni Outdoor Advertising, Inc.(fn14) As a result of this decision, plaintiffs will have considerable difficulty establishing antitrust liability based on municipal regulation.
The plaintiff in Omni ("COA") controlled more than 95 percent of the billboard business in Columbia, South Carolina, when the respondent ("Omni") began putting up its own billboards in the metropolitan area. As part of its response to this unaccustomed competition, COA lobbied city officials to enact zoning ordinances that restricted billboardconstruction. South Carolina statutes generally authorized municipalities to regulate the use of land and the construction of buildings and other structures. In this instance, the ordinances adopted by the city included an initial moratorium on the construction of billboards, followed by restrictions on their size, location and spacing. These measures favored COA, with its established billboards, and "severely hindered Omni's ability to compete."(fn15)
Omni sued COA and the city under Sherman Act §§ 1 and 2.(fn16) The suit alleged that COA had conspired with the mayor and other city officials to restrain trade and to monopolize the market. Omni claimed that COA's owner was a personal friend of the mayor and other city...
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