Cities and states as agents in restraint of trade

AuthorJames W. Mullenix,George W. Douglas
Published date01 June 1986
Date01 June 1986
DOIhttp://doi.org/10.1177/0003603X8603100212
Subject MatterArticle
The Antitrust Bulletin/Summer 1986
Cities and states as agents
in restraint
of
trade
BY GEORGE
W.
DOUGLAS* and JAMES W. MULLENIX**
505
When the power
of
a state or local government is harnessed to an
anticompetitive purpose, the results can be formidable indeed.
While purely private collusive schemes are apt to disintegrate over
time, monopoly power may remain entrenched indefinitely when
it is protected by the legal machinery of a government. Moreover,
state-supported anticompetitive actions may be more likely
than
private monopolies to generate secondary inefficiencies as firms
"compete" for the right to earn monopoly profits. Because
of
the
pervasive nature
of
governmental economic regulation, anti-
competitive acts by state and local governments represent one
of
the most significant examples
of
the effective creation and main-
tenance
of
monopoly power in the U.S. economy.
The seriousness of this threat leads us to conclude that
anticompetitive actions by state and local governments will be a
major arena
of
antitrust activity over the next decade. Much
attention will be focused on the state-action doctrine, which
assumes that the federal antitrust laws are inapplicable under
certain circumstances to acts by state officials and private parties
President, George W. Douglas and Company and, formerly,
Commissioner, Federal Trade Commission.
•• Attorney, Federal Trade Commission.
AUTHORS' NOTE: The views expressed in this article are those
of
the
authors and do not necessarily reflect the views
of
the Federal
Trade
Commission or
of
any commissioner.
©1986 by Federal Legal Publications, Inc.
506 The antitrust bulletin
when those acts were committed under color
of
state law. In
recent years the Supreme Court and lower federal courts have
grappled unsuccessfully with the contours
of
this doctrine. The
most recent cases suggest that the courts have now gone too far in
allowing state and local governments to immunize their citizens
from the consequences of antitrust violations.
The next 10 years will also see a rise in the number
of
cases
turning on the Noerr-Pennington doctrine, under which private
parties may combine to petition the government even if their
purpose in doing so is anticompetitive. Governmental involve-
ment in economic activities, either as an actor or as a regulator,
has long been on the increase, and private parties thus face
increasing incentives to turn that involvement to private advan-
tage. The first signs
of
an upsurge in reliance on the
Noerr-Pennington defense have been manifested in cases in the
lower federal courts and the Federal Trade Commission. The
significance
of
the interests at stake and the confusion generated
by prior judicial formulations
of
this doctrine suggest
that
the
Supreme Court will soon be required to address this issue as well.
While conceptually distinct, the Noerr-Pennington and state-
action doctrines are united in their effects on one another and on
the potential costs
of
anticompetitive state and local actions. An
unnecessarily permissive construction
of
the Noerr-Pennington
doctrine will encourage the aggressive pursuit
of
competitive
advantages conferred by government, advantages that depend for
their validity on the state-action doctrine. Too expensive a read-
ing
of
the state-action doctrine will in turn provide incentives for
an undesirable form
of
"competition"
-intense
competition for
governmental favor, which to some extent is protected by the
Noerr-Pennington doctrine. Both doctrines, if loosely applied,
thus threaten economic efficiency directly through the anti-
competitive effects
of
governmental actions and indirectly
through the aggravation of those effects as firms petition to take
advantage of unusual profit opportunities.
This article will explore very briefly the relationships among
the federal antitrust laws, state and local governments, and
private parties who seek to use governmental power to achieve

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT