City of Columbia v. Omni Outdoor Advertising
499 U.S. 365 (1991)

Annotate this Case

U.S. Supreme Court

City of Columbia v. Omni Outdoor Advertising, 499 U.S. 365 (1991)

City of Columbia v. Omni Outdoor Advertising, Inc.

No. 89-1671

Argued Nov. 28, 1990

Decided April 1, 1991

499 U.S. 365

CERTIORARI TO THE UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

Syllabus

After respondent Omni Outdoor Advertising, Inc., entered the billboard market in petitioner Columbia, South Carolina, petitioner Columbia Outdoor Advertising, Inc. (COA), which controlled more than 95% of the market and enjoyed close relations with city officials, lobbied these officials to enact zoning ordinances restricting billboard construction. After such ordinances were passed, Omni filed suit against petitioners under §§ 1 and 2 of the Sherman Act and the State's Unfair Trade Practices Act, alleging, inter alia, that the ordinances were the result of an anticompetitive conspiracy that stripped petitioners of any immunity to which they might otherwise be entitled. After Omni obtained a jury verdict on all counts, the District Court granted petitioners' motions for judgment notwithstanding the verdict on the ground that their activities were outside the scope of the federal antitrust laws. The Court of Appeals reversed and reinstated the verdict.

Held:

1. The city's restriction of billboard construction is immune from federal antitrust liability under Parker v. Brown,317 U. S. 341, 317 U. S. 352 -- which held that principles of federalism and state sovereignty render the Sherman Act inapplicable to anticompetitive restraints imposed by the States "as an act of government" -- and subsequent decisions according Parker immunity to municipal restriction of competition in implementation of state policy, see, e.g., Hallie v. Eau Claire,471 U. S. 34, 471 U. S. 38. Pp. 499 U. S. 370-379.

(a) The Court of Appeals correctly concluded that the city was prima facie entitled to Parker immunity for its billboard restrictions. Although Parker immunity does not apply directly to municipalities or other political subdivisions of the States, it does apply where a municipality's restriction of competition is an authorized implementation of state policy. South Carolina's zoning statutes unquestionably authorized the city to regulate the size, location, and spacing of billboards. The additional Parker requirement that the city possess clear delegated authority to suppress competition, see, e.g., Hallie, supra, 471 U.S. at 471 U. S. 40-42, is also met here, since suppression of competition is, at the very least, a foreseeable result of zoning regulations. Pp. 499 U. S. 370-373.

Page 499 U. S. 366

(b) The Court of Appeals erred, however, in applying a "conspiracy" exception to Parker, which is not supported by the language of that case. Such an exception would swallow up the Parker rule if "conspiracy" means nothing more than agreement to impose the regulation in question, since it is both inevitable and desirable that public officials agree to do what one or another group of private citizens urges upon them. It would be similarly impractical to limit "conspiracy" to instances of governmental "corruption," or governmental acts "not in the public interest"; virtually all anticompetitive regulation is open to such charges, and the risk of unfavorable ex post facto judicial assessment would impair the States' ability to regulate their domestic commerce. Nor is it appropriate to limit "conspiracy" to instances in which bribery or some other violation of state or federal law has been established, since the exception would then be unrelated to the purposes of the Sherman Act, which condemns trade restraints, not political activity. With the possible exception of the situation in which the State is acting as a market participant, any action that qualifies as state action is ipso facto exempt from the operation of the antitrust laws. Pp. 499 U. S. 374-379.

2. COA is immune from liability for its activities relating to enactment of the ordinances under Eastern Railroad Presidents Conference v. Noerr Motor Freight, Inc.,365 U. S. 127, 365 U. S. 141, which states a corollary to Parker: the federal antitrust laws do not regulate the conduct of private individuals in seeking anticompetitive action from the government. The Court of Appeals erred in applying the "sham" exception to the Noerr doctrine. This exception encompasses situations in which persons use the governmental process itself -- as opposed to the outcome of that process -- as an anticompetitive weapon. That is not the situation here. California Motor Transport Co. v. Trucking Unlimited,404 U. S. 508, 404 U. S. 512, distinguished. Omni's suggestion that this Court adopt a "conspiracy" exception to Noerr immunity is rejected for largely the same reasons that prompt the Court to reject such an exception to Parker. Pp. 499 U. S. 379-384.

3. The Court of Appeals on remand must determine (if the theory has been properly preserved) whether the evidence was sufficient to sustain a verdict for Omni based solely on its assertions that COA engaged in private anticompetitive actions, and whether COA can be held liable to Omni on its state law claim. P. 499 U. S. 384.

891 F.2d 1127 (CA4 1989), reversed and remanded.

SCALIA, J., delivered the opinion of the Court, in which REHNQUIST, C.J., and BLACKMUN, O'CONNOR, KENNEDY, and SOUTER, JJ., joined. STEVENS, J., filed a dissenting opinion, in which WHITE and MARSHALL, JJ., joined, post, p. 499 U. S. 385.

Page 499 U. S. 367

JUSTICE SCALIA delivered the opinion of the Court.

This case requires us to clarify the application of the Sherman Act to municipal governments and to the citizens who seek action from them.

Petitioner Columbia Outdoor Advertising, Inc. (COA), a South Carolina corporation, entered the billboard business in the city of Columbia, South Carolina (also a petitioner here), in the 1940's. By 1981, it controlled more than 95% of what has been conceded to be the relevant market. COA was a local business owned by a family with deep roots in the community, and enjoyed close relations with the city's political leaders. The mayor and other members of the city council were personal friends of COA's majority owner, and the company and its officers occasionally contributed funds and free billboard space to their campaigns. According to respondent, these beneficences were part of a "longstanding" "secret anticompetitive agreement" whereby "the City and COA would each use their [sic] respective power and resources to protect . . . COA's monopoly position," in return for which "City Council members received advantages made possible by COA's monopoly." Brief for Respondent 12, 16.

Page 499 U. S. 368

In 1981, respondent Omni Outdoor Advertising, Inc., a Georgia corporation, began erecting billboards in and around the city. COA responded to this competition in several ways. First, it redoubled its own billboard construction efforts and modernized its existing stock. Second -- according to Omni -- it took a number of anticompetitive private actions, such as offering artificially low rates, spreading untrue and malicious rumors about Omni, and attempting to induce Omni's customers to break their contracts. Finally (and this is what gives rise to the issue we address today), COA executives met with city officials to seek the enactment of zoning ordinances that would restrict billboard construction. COA was not alone in urging this course; a number of citizens concerned about the city's recent explosion of billboards advocated restrictions, including writers of articles and editorials in local newspapers.

In the spring of 1982, the city council passed an ordinance requiring the council's approval for every billboard constructed in downtown Columbia. This was later amended to impose a 180-day moratorium on the construction of billboards throughout the city, except as specifically authorized by the council. A state court invalidated this ordinance on the ground that its conferral of unconstrained discretion upon the city council violated both the South Carolina and Federal Constitutions. The city then requested the State's regional planning authority to conduct a comprehensive analysis of the local billboard situation as a basis for developing a final, constitutionally valid, ordinance. In September, 1982, after a series of public hearings and numerous meetings involving city officials, Omni, and COA (in all of which, according to Omni, positions contrary to COA's were not genuinely considered), the city council passed a new ordinance restricting the size, location, and spacing of billboards. These restrictions, particularly those on spacing, obviously benefited COA, which already had its billboards in place; they severely hindered Omni's ability to compete.

Page 499 U. S. 369

In November, 1982, Omni filed suit against COA and the city in Federal District Court, charging that they had violated §§ 1 and 2 of the Sherman Act, 26 Stat. 209, as amended, 15 U.S.C. §§ 1, 2, [Footnote 1] as well as South Carolina's Unfair Trade Practices Act, S.C.Code § 39-5-140 (1976). Omni contended, in particular, that the city's billboard ordinances were the result of an anticompetitive conspiracy between city officials and COA that stripped both parties of any immunity they might otherwise enjoy from the federal antitrust laws. In January, 1986, after more than two weeks of trial, a jury returned general verdicts against the city and COA on both the federal and state claims. It awarded damages, before trebling, of $600,000 on the § 1 Sherman Act claim, and $400,000 on the § 2 claim. [Footnote 2] The jury also answered two special interrogatories, finding specifically that the city and COA had conspired both to restrain trade and to monopolize the market. Petitioners moved for judgment notwithstanding the verdict, contending among other

Page 499 U. S. 370

things that their activities were outside the scope of the federal antitrust laws. In November, 1988, the District Court granted the motion.

A divided panel of the United States Court of Appeals for the Fourth Circuit reversed the judgment of the District Court and reinstated the jury verdict on all counts. 891 F.2d 1127 (1989). We granted certiorari, 496 U.S. 935 (1990).

II

In the landmark case of Parker v. Brown,317 U. S. 341 (1943), we rejected the contention that a program restricting the marketing of privately produced raisins, adopted pursuant to California's Agricultural Prorate Act, violated the Sherman Act. Relying on principles of federalism and state sovereignty, we held that the Sherman Act did not apply to anticompetitive restraints imposed by the States "as an act of government." 317 U.S. at 317 U. S. 352.

Since Parker emphasized the role of sovereign States in a federal system, it was initially unclear whether the governmental actions of political subdivisions enjoyed similar protection. In recent years, we have held that Parker immunity does not apply directly to local governments, see Hallie v. Eau Claire,471 U. S. 34, 471 U. S. 38 (1985); Community Communications Co. v. Boulder,455 U. S. 40, 455 U. S. 50-51 (1982); Lafayette v. Louisiana Power & Light Co.,435 U. S. 389, 435 U. S. 412-413 (1978) (plurality opinion). We have recognized, however, that a municipality's restriction of competition may sometimes be an authorized implementation of state policy, and have accorded Parker immunity where that is the case.

The South Carolina statutes under which the city acted in the present case authorize municipalities to regulate the use of land and the construction of buildings and other structures within their boundaries. [Footnote 3] It is undisputed that, as a matter

Page 499 U. S. 371

of state law, these statutes authorize the city to regulate the size, location, and spacing of billboards. It could be argued, however, that a municipality acts beyond its delegated authority, for Parker purposes, whenever the nature of its regulation is substantively or even procedurally defective. On such an analysis, it could be contended, for example, that the city's regulation in the present case was not "authorized" by S.C.Code § 5-23-10 (1976), seen 3, supra, if it was not, as that statute requires, adopted "for the purpose of promoting health, safety, morals or the general welfare of the community." As scholarly commentary has noted, such an expansive interpretation of the Parker defense authorization requirement would have unacceptable consequences.

"To be sure, state law 'authorizes' only agency decisions that are substantively and procedurally correct. Errors of fact, law, or judgment by the agency are not 'authorized.' Erroneous acts or decisions are subject to

Page 499 U. S. 372

reversal by superior tribunals because unauthorized. If the antitrust court demands unqualified 'authority' in this sense, it inevitably becomes the standard reviewer not only of federal agency activity, but also of state and local activity whenever it is alleged that the governmental body, though possessing the power to engage in the challenged conduct, has actually exercised its power in a manner not authorized by state law. We should not lightly assume that Lafayette's authorization requirement dictates transformation of state administrative review into a federal antitrust job. Yet that would be the consequence of making antitrust liability depend on an undiscriminating and mechanical demand for 'authority' in the full administrative law sense."

P. Areeda & H. Hovenkamp, Antitrust Law

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