Development of the Doctrine

The state action doctrine has grown from a relatively minor part of a
1943 Supreme Court decision into an important antitrust exemption and a
significant component of recent jurisprudence regarding the appropriate
balance of power between both state and national governments and the
judicial and legislative branches. Much of that development took place
in a series of Supreme Court decisions between 1975 and 1992 and in
two important decisions between 2013 to 2015. This chapter examines
the history of the doctrine through the decisions that were most important
to its development.
A. The Doctrines Origin
1. Introduction in Parker v. Brown (1943)1
In 1933, the California legislature enacted the Agricultural Prorate
Act to authorize the establishment of programs for the marketing of the
states agricultural goods so as to restrict competition among the
growers and maintain prices in the distribution of their commodities to
packers.2 The act established a process by which commodity-specific
program committees would be formed with a majority membership of
persons nominated by producers of the commodity. This committee, in
turn, would establish a so-called proration marketing program, which, if
ratified by a supermajority of the producers, would be enforceable by
criminal (misdemeanor) and civil liability sanctions.
1. 317 U.S. 341 (1943). As Justice Stewart explained in his dissent in Cantor
v. Detroit Edison Co., 428 U.S. 579, 615 n.3 (1976) (Cantor), the
progenitor of the state action doctrine was Olsen v. Smith, 195 U.S. 332
(1904), a decisionupholding a Texas statute fixing rates char ged by pilots
operating in the Port of Galvestonrelied on by the Parker Court for the
proposition that when a state, acting as sovereign, imposes a restraint on
commerce, such restraint does not violate the Sherman Act. See Parker,
317 U.S. at 352.
2. Parker, 317 U.S. at 346.
8 State Action Practice Manual
The proration marketing program at issue in Parker required that
raisin producersmarketing efforts for the 1940 raisin crop be subject to
a variety of restrictions. Porter L. Brown was engaged in producing,
purchasing, and packing raisins for interstate sale and shipment. He
challenged the validity of the raisin program as a violation of the
Commerce Clause and the Sherman Act.3 After a three-judge district
court panel permanently enjoined the program,4 the Supreme Court
granted review.5
The Supreme Court reversed the injunction, finding that the raisin
marketing program was not rendered invalid by the Sherman Act,6 the
Agricultural Marketing Agreement Act of 1937,7 or the Commerce
Clause of the U.S. Constitution.8 In its abbreviated discussion of the
Sherman Act,9 the unanimous Court found “nothing in the language of
the Sherman Act or in its history which suggests that its purpose was to
restrain a state or its officers or agents from activities directed by its
legislature.10 Becausean unexpressed purpose to nullify a state’s
control over its officers and agents is not lightly to be attributed to
Congress, the Sherman Act would be interpreted as “a prohibition of
3. Id. at 346-50.
4. Brown v. Parker, 39 F. Supp.895, 902 (S.D. Cal. 1941).
5. 317 U.S. at 345. Petitioner W.B. Parker was the California Director of
Agriculture, a state official i ntegral to the working of the Agricultural
Prorate Act.
6. Id. at 352.
7. Id. at 358. The opinion assumed that a stabilization program adopted
under the Agricul tural Marketi ng Agreement Act would supersede t he state
act,but noted that the federal Secretary of Agriculture had not proposed
or promulgated any order regulating raisins. Id. at 353. The Court
concluded: We find no co nflict between t he two acts and no such
occupation of the legislative field by the mere adoption of the Agricultural
Marketing Agreement Act, without the issuance of any order by the
Secretary putting it into effect, as would preclude the effective operation of
the state act. Id. at 358.
8. Id. at 368 ([W]hatever effect the operation of the California program may
have on interstate commerce, it is one which it has been the policy of
Congress to aid and encourage . . . . Nor is the effect on the commerce
greater than or s ubstantially di fferent in kind fro m that contemplated by the
stabilization programs authoriz ed by federal statutes.).
9. See id. at 350-52.
10. Id. at 350-51.
Development of the Doctrine 9
individual and not state action.”11 Determining that the states act ion
was critical to the marketing program, the Court noted:
It is the state which has created the mac hinery for establishing the
prorate program. Although the organization of a prorate zone is
proposed by producers, and a prorate program, approved by the
Commission, must also be approved by referendum of producers, it is
the state, acting thro ugh the Commission, which adopts the pro gram
and which enforces it with penal sanctions, in the execution of a
governmental policy . . . . T he state itself exercises its legislative
authority in making the regulation and in pre scribing the conditi ons of
its application.12
Californias involvement in raisin marketing restrictions
distinguished the program from a situation in which a state might attempt
to “give i mmunity to those who violate the Sherman Act by authorizing
them to violate it, or by declaring that their action is lawful,13 or in
which a state or municipality becomes “a participant in a private
agreement or combination by others for restraint of trade.14 Instead,
California imposed the restraint as an act of government which the
Sherman Act did not undertake to prohibit.”15
The Parker holding that the Sherman Act was directed against
individual not state actionis the bedrock principle of the state action
doctrine. The decision remains consistent with the doctrine as it has
developed over the last seventy years. Furthermore, the opinion
anticipated how the doctrine would evolve, addressing, for instance,
situations in which the state attempts to immunize private
anticompetitive actions by fiat or a governmental actor becomes a
participant in an essentially private anticompetitive scheme.
The Parker opinion, nonetheless, did not expressly consider whether
the raisin program impermissibly conflicted with the policies and goals
of the federal antitrust laws. The Court assumed that the state program
would violate the Sherman Act if it were organized and made effective
solely by virtue of a contract, combination or conspiracy of private
11. Id. at 351-52.
12. Id. at 352.
13. Id. at 351 (citing N. Sec. Co. v. United States, 193 U.S. 197, 332, 344-47
14. Id. at 351-52 (citing Union Pac. R.R. Co. v. United States, 313 U.S. 450
15. Id. at 352 (citing Olsen v. Smith, 195 U.S. 332, 344-45 (1904);
Lowenstein v. Evans, 69 F. 908, 910 (1895)).

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