Applying the Antitrust Laws to Local Governments: Congress Changes the Approach

• Date: 01 December 1985
• Author: Jeffrey H. Howard
• Published date: 01 December 1985
• DOI: 10.1177/0003603X8503000401
• Subject Matter: Article

The Antitrust Bulletin/Winter 1985

Applying the antitrust laws

to local governments:

Congress changes the approach

BY

JEFFREY

H. HOWARD*

745

Decisions by the United States Supreme Court since 1978 have

made it easier for private parties to bring treble damage actions

against local governments under the federal antitrust laws. The

Court has restricted the availability of the so-called "state action"

defense to such antitrust claims. As a result, since

1978

more than

100 antitrust actions have been brought against cities, counties,

and their officials challenging local regulation

of

solid waste

disposal, cable television, taxicabs, zoning, health care, airport

operation, public utilities, and other activities. While many

of

these challenges were dismissed on the basis

of

state action

immunity, some have resulted in widely publicized treble damage

awards. In Chicago, for example, a federal jury returned a $28.5

million treble damage verdict against a county and its officials for

an alleged anticompetitive denial

of

sewer service to a developer.

Responding to these developments, Congress passed the Local

Government Antitrust Act of 1984, restricting the availability

of

antitrust treble damages against local governments and their

officials.' Section I of this article analyzes the principal policy

choices faced by Congress and explains the legislative history

of

this new statute. Section II analyzes how this statute will be

applied by the courts.

Davis,

Graham

&Stubbs, Washington,

D.C.

15

U.S.C.

§§ 34-36.

746 The antitrust bulletin

I.

The legislative history

of

the Local Government Antitrust

Act

of

1984

For

88 years it was assumed

that

the federal antitrust laws did

not apply to the acts of state and local governments. This

so-called "state action" doctrine was first recognized in Parker v.

Brown,' ACalifornia statute had created acontrolled agricultural

market for raisins "so as to restrict competition among the

growers and maintain prices in the distribution of their commodi-

ties to packers."] Mr. Parker, aCalifornia raisin grower, brought

an action under the Sherman Act to enjoin enforcement of the

1940 raisin marketing plan. The United States Supreme Court

reversed an injunction

of

the plan, holding that:

"The

state in

adopting and enforcing the prorate program made no contract or

agreement and entered into no conspiracy in restraint

of

trade or

to establish monopoly but, as sovereign, imposed the restraint as

an act

of

government which the Sherman

Act

did not undertake

to prohibit?"

Over the ensuing years, the Supreme Court has recognized the

state action doctrine in a variety

of

cases.'

It

was not until 1978,

however, that the Court addressed the question

of

how this

doctrine applied to political subdivisions

of

astate. In City

of

Lafayette v. Louisiana Power &Light

CO.,6

the Court concluded

that

the Parker exemption for state action would be available for

municipal action only when the local government's acts

"'are

comprehended within the power granted to it by the legisla-

ture.'

"7

The plurality opinion in this decision concluded that state

2317 U.S. 341 (1943).

Id. at 346.

4Id, at 352 (citations omitted; emphasis added).

5See, e.g., Bates v. State Bar

of

Arizona, 433 U.S. 350 (1977)

(finding state action immunity); New Motor Vehicle Board v. Orrin

W.

Fox Co., 439 U.S. 96 (1978) (finding state action immunity).

6435 U.S. 389 (1978).

7Id. at 394 (quoting the Fifth Circuit in the opinion below).

Local governments: 747

action immunity extended to local governmental acts taken "pur-

suant to state policy to displace competition with regulation or

monopoly public service.:"

In Community Communications Company, Inc. v. City

oj

Boulder.' the Court denied state action immunity to a home rule

city acting without specific statutory authority for its actions. In

so doing, however, the Court held that a local government's

action would be immune from antitrust attack when "it consti-

tutes the action of the State . . . itself in its sovereign capacity,

see Parker,

or.

. . it constitutes municipal action in furtherance

or implementation of clearly articulated and affirmatively ex-

pressed state policy, see City

oj

Lafayette.?"

Since the Boulder decision was announced in January 1982,

federal courts have struggled to apply the state action doctrine to

shield local governments from antitrust attack in a number

of

circumstances.

II

However, immunity has not been recognized in

all cases, and the number

of

antitrust actions against local

governments has exploded."

8Id. at 413.

9455 U.S. 40 (1982).

10 Id. at 53.

11 See, e.g., Hybud Equipment Corp. v. City

of

Akron, 742 F.2d

949 (6th Cir. 1984) (immunity for "reasonable and foreseeable exercise

of

delegated powers"), cert. denied, 105 S. Ct. 1866 (1985); Scott v. City

of

Sioux City, 736 F.2d 1207 (8th Cir. 1984) (legislative intent to displace

competition inferred for "necessary and reasonable consequences"

of

delegated powers), cert. denied, 105 S. Ct. 1864 (1985); Central Iowa

Refuse Systems, Inc. v. Des Moines Metropolitan Solid Waste Agency,

715 F.2d 419 (8th Cir. 1983), cert. denied, 105 S. Ct. 1862 (1985); Gold

Cross Ambulance and Transfer and Standby Service, Inc. v. City

of

Kansas City, 705 F.2d 1005 (8th Cir. 1983), cert. denied, 105 S. Ct. 1864

(1985).

12 Since the adoption

of

the Local Government Antitrust Act

of

1984, the Supreme Court affirmed state action antitrust immunity in

Town

of

Hallie v. City

of

Eau Claire, 105 S. Ct. 1713 (1985), holding

that: (1) imrnunjty was available so long as the challenged anticornpeti-