Southern Rate Conf. v. United StatesAnnotate this Case
471 U.S. 48 (1985)
U.S. Supreme Court
Southern Rate Conf. v. United States, 471 U.S. 48 (1985)
Southern Motor Carriers Rate Conference, Inc. v. United States
Argued November 26, 1984
Decided March 27, 1985
471 U.S. 48
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE
Petitioner Southern Motor Carriers Rate Conference and petitioner North Carolina Motor Carriers Association (petitioners), "rate bureaus" composed of motor common carriers operating in North Carolina, Georgia, Tennessee, and Mississippi, submit, on behalf of their members, joint rate proposals to the Public Service Commission in each State. This collective ratemaking is authorized, but not compelled, by the respective States. The United States, contending that petitioners' collective ratemaking violates the federal antitrust laws, filed an action in Federal District Court to enjoin it. Petitioners responded that their conduct was immune from the federal antitrust laws by virtue of the "state action" doctrine of Parker v. Brown,317 U. S. 341. The District Court entered a summary judgment in the Government's favor. The Court of Appeals affirmed, holding that compulsion is a threshold requirement to a finding of Parker immunity. The court reasoned that the two-pronged test of California Retail Dealers Assn. v. Midcal Aluminum, Inc.,445 U. S. 97, for determining whether state regulation of private parties is shielded from the federal antitrust laws -- the challenged restraint must be one clearly articulated and affirmatively expressed as a state policy, and the State must supervise actively any private anticompetitive conduct -- is inapplicable to suits against private parties; that even if Midcal is applicable, private conduct that is not compelled cannot be taken pursuant to a "clearly articulated state policy" within the meaning of Midcal's first prong; and that, because Goldfarb v. Virginia State Bar,421 U. S. 773, which held that a State Bar, acting alone, could not immunize from the federal antitrust laws its anticompetitive conduct in fixing minimum fees for lawyers -- was cited with approval in Midcal, the Midcal Court endorsed the continued validity of a "compulsion requirement."
Held: Petitioners' collective ratemaking activities, although not compelled by the respective States, are immune from federal antitrust liability under the state action doctrine. The Midcal test should be used to determine whether the private rate bureaus' collective ratemaking activities are protected under the federal antitrust laws. Moreover, the actions of a private party can be attributed to a "clearly articulated state
policy," within the meaning of the Midcal test's first prong, even in the absence of compulsion. The anticompetitive conduct is taken pursuant to a "clearly articulated state policy" under the first prong of the Midcal test. Here, North Carolina, Georgia, and Tennessee statutes expressly permit collective ratemaking. Mississippi, while not expressly approving of collective ratemaking, has clearly articulated its intent to displace price competition among common carriers with a regulatory structure. Because the Government conceded that there was adequate state supervision, both prongs of the Midcal test are satisfied. Pp. 471 U. S. 55-66.
702 F.2d 532, reversed.
POWELL, J., delivered the opinion of the Court, in which BURGER, C.J., and BRENNAN, MARSHALL, BLACKMUN, REHNQUIST, and O'CONNOR, JJ., joined. STEVENS, J., filed a dissenting opinion, in which WHITE, J., joined, post p. 471 U. S. 66.
JUSTICE POWELL delivered the opinion of the Court.
Southern Motor Carriers Rate Conference, Inc. (SMCRC), and North Carolina Motor Carriers Association, Inc. (NCMCA), petitioners, are "rate bureaus" composed of motor common carriers operating in four Southeastern States. The rate bureaus, on behalf of their members, submit joint rate proposals to the Public Service Commission in each State for approval or rejection. This collective ratemaking is authorized, but not compelled, by the States in which the rate bureaus operate. The United States, contending that collective ratemaking violates the federal antitrust laws, filed this action to enjoin the rate bureaus' alleged anticompetitive practices. We here consider whether the petitioners' collective ratemaking activities, though not compelled by the States, are entitled to Sherman Act immunity under the "state action" doctrine of Parker v. Brown,317 U. S. 341 (1943).
In North Carolina, Georgia, Mississippi, and Tennessee, Public Service Commissions set motor common carriers' rates for the intrastate transportation of general commodities. [Footnote 1] Common carriers are required to submit proposed rates to the relevant Commission for approval. [Footnote 2] A proposed
rate becomes effective if the state agency takes no action within a specified period of time. If a hearing is scheduled, however, a rate will become effective only after affirmative agency approval. [Footnote 3] The State Public Service Commissions thus have and exercise ultimate authority and control over all intrastate rates.
In all four States, common carriers are allowed to agree on rate proposals prior to their joint submission to the regulatory agency. [Footnote 4] By reducing the number of proposals, collective ratemaking permits the agency to consider more carefully each submission. In fact, some Public Service Commissions have stated that, without collective ratemaking, they would be unable to function effectively as rate-setting bodies. [Footnote 5] Nevertheless, collective ratemaking is not compelled by any of the States; every common carrier remains free to submit individual rate proposals to the Public Service Commissions. [Footnote 6]
As indicated above, SMCRC and NCMCA are private associations composed of motor common carriers operating in North Carolina, Georgia, Mississippi, and Tennessee. [Footnote 7] Both organizations have committees that consider possible rate changes. [Footnote 8] If a rate committee concludes that an intrastate rate should be changed, a collective proposal for the changed rate is submitted to the State Public Service Commission. Members of the bureau, however, are not bound by the joint proposal. Any disapproving member may submit an independent rate proposal to the state regulatory Commission. [Footnote 9]
On November 17, 1976, the United States instituted this action against SMCRC and NCMCA in the United States District Court for the Northern District of Georgia. [Footnote 10] The
United States charged that the two rate bureaus had violated § 1 of the Sherman Act by conspiring with their members to fix rates for the intrastate transportation of general commodities. The rate bureaus responded that their conduct was exempt from the federal antitrust laws by virtue of the state action doctrine. See Parker v. Brown,317 U. S. 341 (1943). [Footnote 11] They further asserted that their collective ratemaking activities did not violate the Sherman Act, because the rates ultimately were determined by the appropriate state agencies. The District Court found the rate bureaus' arguments meritless, and entered a summary judgment in favor of the Government. 467 F.Supp. 471 (1979). The defendants were enjoined from engaging in collective ratemaking activities with their members.
The Court of Appeals for the Fifth Circuit (Unit B, now the Eleventh Circuit), sitting en banc, affirmed the judgment of the District Court. 702 F.2d 532 (1983). [Footnote 12] Relying primarily on Goldfarb v. Virginia State Bar,421 U. S. 773 (1975), the court held that the rate bureaus' challenged conduct, because it was not compelled by the State, was not entitled to Parker immunity. The two-pronged test set forth in California Retail Liquor Dealers Assn. v. Midcal Aluminum, Inc.,445 U. S. 97 (1980), was irrelevant, the court reasoned, for in that case a public official was the
named defendant. [Footnote 13] 702 F.2d at 539. The Court of Appeals further held that, even if Midcal were applicable to a private party's claim of state action immunity, the rate bureaus were not shielded from liability under the Sherman Act. The court concluded that only if the anticompetitive acts of a private party are compelled can a State's policy be held "clearly articulated and affirmatively expressed" within the meaning of Midcal. 702 F.2d at 539.
After finding the rate bureaus not entitled to Parker immunity, the Court of Appeals held that their collective ratemaking activities violated the Sherman Act. 672 F.2d 469, 481 (1982). [Footnote 14] It rejected the rate bureaus' contention that, because the regulatory agencies had ultimate authority and control over the rates charged, the federal antitrust laws were not violated. The Court of Appeals found that "joint ratesetting . . . reduce[d] the amount of independent rate filing that otherwise would characterize the market process," and thus raised the prices charged for intrastate transportation of general commodities. Id. at 478. This "naked price restraint," the court reasoned, is per se illegal. Ibid.
Four judges strongly dissented. They argued that Midcal was applicable to a private party's claim of state action immunity. The success of an antitrust action should depend upon the activity challenged, rather than the identity of the defendant. 702 F.2d at 543-544. After asserting that Midcal provided the relevant test, the dissenters concluded that the lack of compulsion was not dispositive. Even in the absence of compulsion, a "state can articulate a clear and express policy." Id. at 546. The dissent further concluded that a per se compulsion requirement denies States needed flexibility in the formation of regulatory programs, and thus is
inconsistent with the principles of federalism that Congress intended to embody in the Sherman Act. [Footnote 15]
We granted certiorari, [Footnote 16] 467 U.S. 1240 (1984), to decide whether petitioners' collective ratemaking activities, though not compelled by the States in which they operate, are entitled to Parker immunity. [Footnote 17]
filed an action against the California Director of Agriculture to enjoin the enforcement of the State's Agricultural Prorate Act. Under that statute, a cartel of private raisin producers was created in order to stabilize prices and prevent "economic waste." Id. at 317 U. S. 346. The Court recognized that the State's program was anticompetitive, and it assumed that Congress, "in the exercise of its commerce power, [could] prohibit a state from maintaining [such] a stabilization program. . . ." Id. at 317 U. S. 350. Nevertheless, the Court refused to find in the Sherman Act "an unexpressed purpose to nullify a state's control over its officers and agents. . . ." Id. at 317 U. S. 351.
Although Parker involved an action against a state official, the Court's reasoning extends to suits against private parties. The Parker decision was premised on the assumption that Congress, in enacting the Sherman Act, did not intend to compromise the States' ability to regulate their domestic commerce. [Footnote 19] If Parker immunity were limited to the actions of public officials, this assumed congressional purpose would be frustrated, for a State would be unable to implement programs that restrain competition among private parties. A plaintiff could frustrate any such program merely by filing suit against the regulated private parties, rather than the
state officials who implement the plan. We decline to reduce Parker's holding to a formalism that would stand for little more than the proposition that Porter Brown sued the wrong parties. Cantor v. Detroit Edison Co.,428 U. S. 579, 428 U. S. 616-617, n. 4 (1976) (Stewart, J., dissenting).
The circumstances in which Parker immunity is available to private parties, and to state agencies or officials regulating the conduct of private parties, are defined most specifically by our decision in California Retail Liquor Dealers Assn. v. Midcal Aluminum, Inc., 445 U.S. at 445 U. S. 97. See Hallie v. Eau Claire, ante at 471 U. S. 46, n. 10. In Midcal, we affirmed a state court injunction prohibiting officials from enforcing a statute requiring wine producers to establish resale price schedules. We set forth a two-pronged test for determining whether state regulation of private parties is shielded from the federal antitrust laws. First, the challenged restraint must be "one clearly articulated and affirmatively expressed as state policy.'" 445 U.S. at 445 U. S. 105, quoting Lafayette v. Louisiana Power & Light Co.,435 U. S. 389, 435 U. S. 410 (1978) (opinion of BRENNAN, J.). Second, the State must supervise actively any private anticompetitive conduct. 445 U.S. at 445 U. S. 105. [Footnote 20] This supervision requirement prevents the State from frustrating the national policy in favor of competition by casting a "gauzy cloak of state involvement" over what is essentially private anticompetitive conduct. Id. at 445 U. S. 106. [Footnote 21]
The Midcal test does not expressly provide that the actions of a private party must be compelled by a State in order to be protected from the federal antitrust laws. The Court of Appeals, however, held that compulsion is a threshold requirement to a finding of Parker immunity. It reached this conclusion by finding that: (i) Midcal is inapplicable to suits brought against private parties; (ii) even if Midcal is applicable, private conduct that is not compelled cannot be taken pursuant to a "clearly articulated state policy," within the meaning of Midcal's first prong; and (iii) because Goldfarb was cited with approval in Midcal, the Midcal Court endorsed the continued validity of a "compulsion requirement." We consider these points in order.
The Court of Appeals held that Midcal, that involved a suit against a state agency, is inapplicable where a private party is the named defendant. Midcal, however, should not be given such a narrow reading. In that case, we were concerned, as we are here, with state regulation restraining competition among private parties. Therefore, the two-pronged test set forth in Midcal should be used to determine whether the private rate bureaus' collective ratemaking activities are protected from the federal antitrust laws. The success of an antitrust action should depend upon the nature of the activity challenged, rather than on the identity of the
defendant. See Cantor v. Detroit Edison Co., supra, at 428 U. S. 604 (BURGER, C.J., concurring in part and concurring in judgment); Lafayette v. Louisiana Power & Light Co., supra, at 435 U. S. 420 (BURGER, C.J., concurring in part and concurring in judgment).
The Court of Appeals held that, even if Midcal were applicable here, the rate bureaus would not be immune from federal antitrust liability. According to that court, the actions of a private party cannot be attributed to a clearly articulated state policy, within the meaning of the Midcal test's first prong, "when it is left to the private party to carry out that policy or not as he sees fit." 702 F.2d at 539. In the four States in which petitioners operate, all common carriers are free to submit proposals individually. The court therefore reasoned that the States' policies are neutral with respect to collective ratemaking, and that these policies will not be frustrated if the federal antitrust laws are construed to require individual submissions.
In reaching its conclusion, the Court of Appeals assumed that, if anticompetitive activity is not compelled, the State can have no interest in whether private parties engage in that conduct. This type of analysis ignores the manner in which the States in this case clearly have intended their permissive policies to work. Most common carriers probably will engage in collective ratemaking, as that will allow them to share the cost of preparing rate proposals. If the joint rates are viewed as too high, however, carriers individually may submit lower proposed rates to the Commission in order to obtain a larger share of the market. Thus, through the self-interested actions of private common carriers, the States may achieve the desired balance between the efficiency of collective ratemaking and the competition fostered by individual submissions. Construing the Sherman Act to prohibit collective rate proposals eliminates the free choice necessary to ensure that these policies function in the manner intended
by the States. The federal antitrust laws do not forbid the States to adopt policies that permit, but do not compel, anticompetitive conduct by regulated private parties. As long as the State clearly articulates its intent to adopt a permissive policy, the first prong of the Midcal test is satisfied. [Footnote 22]
In Goldfarb v. Virginia State Bar,421 U. S. 773 (1975), this Court said that
"[t]he threshold inquiry in determining if an anticompetitive activity is state action of the type the Sherman Act was not meant to proscribe is whether the activity is required by the State acting as sovereign."
Id. at 421 U. S. 790. Midcal cited Goldfarb with approval. 445 U.S. at 445 U. S. 104. On the basis of this citation, the Court of Appeals reasoned that Midcal did not eliminate the "compulsion requirement" of Goldfarb.
Goldfarb, however, is not properly read as making compulsion a sine qua non to state action immunity. In that case, the Virginia State Bar, a state agency, compelled Fairfax County lawyers to adhere to a minimum fee schedule. 421 U.S. at 421 U. S. 776-778. The Goldfarb Court therefore was not concerned with the necessity of compulsion -- its presence in the case was not an issue. The focal point of the Goldfarb opinion was the source of the anticompetitive policy, rather than whether the challenged conduct was compelled. The Court held that a State Bar, acting alone, could not immunize its anticompetitive conduct. Instead, the Court held that private parties were entitled to Parker immunity only if the State "acting as sovereign" intended to displace competition. 421 U.S. at 421 U. S. 790; see Lafayette v. Louisiana Power
& Light Co., 435 U.S. at 435 U. S. 410 (opinion of BRENNAN, J.) ("Goldfarb . . . made it clear that, for purposes of the Parker doctrine, not every act of a state agency is that of the State as sovereign").
Although Goldfarb did employ language of compulsion, it is beyond dispute that the Court would have reached the same result had it applied the two-pronged test later set forth in Midcal. As stated above, Virginia, "as sovereign," did not have a "clearly articulated policy" designed to displace price competition among lawyers. In fact, the Supreme Court of Virginia had explicitly directed lawyers not "to be controlled" by minimum fee schedules. Goldfarb, supra, at 421 U. S. 789, n.19. Although we recognize that the language in Goldfarb is not without ambiguity, we do not read that opinion as making compulsion a prerequisite to a finding of state action immunity.
The Parker doctrine represents an attempt to resolve conflicts that may arise between principles of federalism and the goal of the antitrust laws, unfettered competition in the marketplace. A compulsion requirement is inconsistent with both values. It reduces the range of regulatory alternatives available to the State. At the same time, insofar as it encourages States to require, rather than merely permit, anticompetitive conduct, a compulsion requirement may result in greater restraints on trade. We do not believe that Congress intended to resolve conflicts between two competing interests by impairing both more than necessary.
In summary, we hold Midcal's two-pronged test applicable to private parties' claims of state action immunity. Moreover, a state policy that expressly permits, but does not compel, anticompetitive conduct may be "clearly articulated" within the meaning of Midcal. [Footnote 23] Our holding today does not
suggest, however, that compulsion is irrelevant. To the contrary, compulsion often is the best evidence that the State has a clearly articulated and affirmatively expressed policy to displace competition. See Hallie v. Eau Claire, ante at 471 U. S. 45-46; 1 P. Areeda & D. Turner, Antitrust Law
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