Antitrust's “State Action” Doctrine and the Policy of the Commerce Clause

• Author: Frank P. Spinella
• Published date: 01 September 1994
• Date: 01 September 1994
• DOI: http://doi.org/10.1177/0003603X9403900302
• Subject Matter: Domestic Antitrust

The Antitrust Bulletin/Fall 1994

Antitrust's "state action" doctrine

and the policy

of

the

commerce clause

BY FRANK P. SPINELLA, JR. *

653

The relief

of

the citizens

of

each state from the burden

of

monopoly and the evils resulting from the restraint

of

trade

among such citizens was left to the States to deal

with.

. . .

Chief Justice Fuller in United States v.

E.C. Knight Company,

156 U.S. 1, 11 (1895).

The language quoted above is from the first Sherman Act! case to

reach the United States Supreme Court, an action challenging the

acquisition

of

four Pennsylvania

sugar

refiners through

which

defendant obtained control over virtually all United States sugar

refining capacity. The Supreme Court affirmed adismissal of the

case on the ground that the indictment alleged only monopoliza-

*Frank P. Spinella, Jr., Hibbard &Spinella, P.A., Concord, NH.

15 U.S.C. §1.

©1994 by Federal Legal Publications. Inc.

654

The antitrust bulletin

tion

of

the

manufacture

of sugar, and no interstate commerce (as

distinguished from manufacture) could be restrained by the acqui-

sition of manufacturing operations wholly within a single state.s

To

hold

otherwise,

according

to

the

Court,

would

mean

that

"Congress would be invested, to the exclusion of the States, with

the power to regulate

...

every branch of human industry."3

Without

question,

current

conceptions

of

the

Commerce

Clause would preclude such a sweeping conclusion today; Com-

merce Clause jurisprudence has undergone arevolution since this

decision.' However, the line between permissible state regulation

of

interstate commerce and encroachment on the uniquely federal

power to do so has been drawn almost entirely by cases uncon-

cerned with antitrust law.' The one area of antitrust inquiry that

has straddled this line is the so-called state action doctrine, first

formulated by the Supreme Court's decision in

Parker

v.

Browns

In this case and its progeny, we find the sole surviving vestiges

of

E.C.

Knight.

In

Parker,

California raisin producers sued under the Sherman

Act to enjoin enforcement of a California law requiring raisin pro-

ducers to deliver over two-thirds of their crop to a committee that

controlled the marketing of raisins so as to eliminate competition

among producers

and

raise prices. Because nearly 95%

of

the

raisins were shipped out of California, there was a clear effect on

156 U.S. at 16.

Id. at 14.

4"As interstate commerce has become ubiquitous, activities once

considered purely local have come to have effects on the national econ-

omy, and have accordingly come within the scope of Congress' com-

merce power." New York v, U.S., 112 S. Ct. 2408, 2419 (1992). See

Schwartz, Commerce, the States, and the Burger Court, 74 Nw. U.

L.

REV.

409 (1979); Epstein, The Proper Scope

of

the Commerce Power, 73

VA.

L.

REV.

1387 (1987); 1

R.

ROTUNDA,

ETAL.,

TREATISE ON

CONSTITU-

TIONAL

LAW:

SUBSTANCE AND PROCEDURE §§ 4.1-10 (1986).

But see. Northern Securities Co. v. United States, 193 U.S. 197

(1904); Swift & Co. v. United States, 196 U.S. 375 (1905).

6317 U.S. 341 (1943).

Commerce clause:

655

interstate

commerce." The Court rejected aCommerce Clause

attack, finding the state's policy to be congruent with federal agri-

cultural policy favoring diminished production.! It also disposed

of

the

Sherman

Act

claim

by

holding

that

the

Act

was

not

intended to apply to state actors," thus avoiding any construction

of

the

Act

that

might

implicate

the

policy

of

the

Commerce

Clause.

Every subsequent Supreme Court opinion applying the Parker

state action doctrine'? has ignored the interplay of the Sherman

Act and the Commerce Clause;" only once since 1978 has

the

[d. at 345.

"It

thus appears that whatever effect the operation of the Califor-

nia program may have on interstate commerce, it is one that it has been

the policy

of

Congress to aid and encourage through federal agencies in

conformity to the Agricultural Marketing Agreement Act and sec. 302

of

the

Agricultural

Adjustment

Act. Nor is the

effect

on the

commerce

greater than or substantially different in kind from that contemplated by

the stabilization programs authorized by federal statutes." [d. at 368.

9"[N]othing in the language of the Sherman Act or in its history

. . . suggests that its purpose was to restrain astate or its officers or

agents from activities directed by its legislature." [d. at 350-51.

10 See, e.g., Goldfarb v. Virginia State Bar, 421 U.S. 773 (1975);

Cantor v. Detroit Edison Co., 428 U.S. 579 (1976); Bates v. State Bar

of

Arizona, 433 U.S. 350 (1977); City of Lafayette v. Louisiana Power &

Light Co., 435 U.S. 389 (1978); Exxon Corp. v. Governor

of

Maryland,

437 U.S. 117 (1978); New Motor Vehicle Bd. of California v. Orrin W.

Fox Co., 439 U.S. 96 (1978); California Retail Liquor Dealers

Ass'n

v.

Midcal Aluminum, Inc., 445 U.S. 97 (1980); Community Communica-

tions

Co.

v.

City

of

Boulder,

455 U.S. 40

(1982);

Rice

v.

Norman

Williams Co., 458 U.S. 654 (1982); Hoover v. Ronwin, 466 U.S. 558

(1984); Hallie v. City

of

Eau Claire, 471 U.S. 34 (1985); Southern Motor

Carriers

Rate

Conference

v. United

States,

471 U.S. 48 (1985);

324

Liquor Corp. v. Duffy, 479 U.S. 335 (1987); Patrick v. Burget, 486 U.S.

94 (1988); City of Columbia v. Omni Outdoor Advertising, Inc., 499 U.S.

365 (1991); FTC v. Ticor Title Ins. Co., 112 S. Ct. 2169 (1992).

11 "Since Parker the Court has not even hinted that antitrust scrutiny

might depend on whether the effects of [the state's] program are broad-

cast outside the state's borders. It has left all scrutiny of interstate effects

to the jurisprudence of the Commerce Clause." Easterbrook, Antitrust and

the Economics

of

Federalism, 26 J. L. &Ecos. 23,

39-40

(1983).