CANTOR, DBA SELDEN DRUGS CO. v. DETROIT EDISON CO.
No. 75-122
Supreme Court of the United States
Argued January 14, 1976—Decided July 6, 1976
428 U.S. 579
George D. Reycraft argued the cause for respondent. With him on the brief were Donald I. Baker, Leon S. Cohan, and Dean J. Landau.
Solicitor General Bork argued the cause for the United States as amicus curiae urging reversal. With him on the brief were Assistant Attorney General Kauper, Barry Grossman, and Carl D. Lawson.
Howard J. Trienens argued the cause for Michigan Bell Telephone Co. et al. as amici curiae urging affirmance. With him on the brief were Theodore N. Miller and C. John Buresh.*
*Sumner J. Katz filed a brief for the National Association of Regulatory Utility Commissioners as amicus curiae urging affirmance.
In Parker v. Brown, 317 U. S. 341, the Court held that the Sherman Act was not violated by state action displacing competition in the marketing of raisins. In this case we must decide whether the Parker rationale immunizes private action which has been approved by a State and which must be continued while the state approval remains effective.
The Michigan Public Service Commission pervasively regulates the distribution of electricity within the State and also has given its approval to a marketing practice which has a substantial impact on the otherwise unregulated business of distributing electric light bulbs. Assuming, arguendo, that the approved practice has unreasonably restrained trade in the light-bulb market, the District Court1 and the Court of Appeals2 held, on the authority of Parker, that the Commission‘s approval exempted the practice from the federal antitrust laws. Because we questioned the applicability of Parker to this situation, we granted certiorari, 423 U. S. 821. We now reverse.
Petitioner, a retail druggist selling light bulbs, claims that respondent is using its monopoly power in the distribution of electricity to restrain competition in the sale of bulbs in violation of the Sherman Act.3 Discovery
and argument in connection with defendant‘s motion for summary judgment were limited by stipulation to the issue raised by the Commission‘s approval of respondent‘s light-bulb-exchange program. We state only the facts pertinent to that issue and assume, without opining, that without such approval an antitrust violation would exist. To the extent that the facts are disputed, we must resolve doubts in favor of the petitioner since summary judgment was entered against him. We first describe respondent‘s “lamp exchange program,” we next discuss the holding in Parker v. Brown, and then we consider whether that holding should be extended to cover this case. Finally, we comment briefly on additional authorities on which respondent relies.
I
Respondent, the Detroit Edison Co., distributes electricity and electric light bulbs to about five million people in southeastern Michigan. In this marketing area, respondent is the sole supplier of electricity, and supplies consumers with almost 50% of the standard-size light bulbs they use most frequently.4 Customers are billed for the electricity they consume, but pay no separate charge for light bulbs. Respondent‘s rates, including the omission of any separate charge for bulbs, have been approved by the Michigan Public Service Commission, and may not be changed without the Commission‘s approval. Respondent must, therefore, con
Respondent, or a predecessor, has been following the practice of providing limited amounts of light bulbs to its customers without additional charge since 1886.5 In 1909 the State of Michigan began regulation of electric utilities.6 In 1916 the Michigan Public Service Commission first approved a tariff filed by respondent setting forth the lamp-supply program. Thereafter, the Commission‘s approval of respondent‘s tariffs has included implicit approval of the lamp-exchange program. In 1964 the Commission also approved respondent‘s decision to eliminate the program for large commercial customers.7 The elimination of the service for such customers became effective as part of a general rate reduction for those customers.
In 1972 respondent provided its residential customers with 18,564,381 bulbs at a cost of $2,835,000.8 In its accounting to the Michigan Public Service Commission, respondent included this amount as a portion of its cost of providing service to its customers. Respondent‘s accounting records reflect no direct profit as a result of the
The distribution of electricity in Michigan is pervasively regulated by the Michigan Public Service Commission. A Michigan statute10 vests the Commission with “complete power and jurisdiction to regulate all public utilities in the state . . . .” The statute confers express power on the Commission “to regulate all rates, fares, fees, charges, services, rules, conditions of service, and all other matters pertaining to the formation, operation, or direction of such public utilities.” Respondent advises us that the heart of the Commission‘s function is to regulate the “‘furnishing . . . [of] electricity for the production of light, heat or power . . . .‘”11
The distribution of electric light bulbs in Michigan is unregulated. The statute creating the Commission contains no direct reference to light bulbs. Nor, as far as we have been advised, does any other Michigan statute authorize the regulation of that business. Neither the Michigan Legislature, nor the Commission, has ever made any specific investigation of the desirability of a lamp-exchange program or of its possible effect on competition in the light-bulb market. Other utilities regulated by the Michigan Public Service Commission do not follow the practice of providing bulbs to their customers at no
Although there is no statute, Commission rule, or policy which would prevent respondent from abandoning the program merely by filing a new tariff providing for a proper adjustment in its rates, it is nevertheless apparent that while the existing tariff remains in effect, respondent may not abandon the program without violating a Commission order, and therefore without violating state law. It has, therefore, been permitted by the Commission to carry out the program, and also is required to continue to do so until an appropriate filing has been made and has received the approval of the Commission.
Petitioner has not named any public official as a party to this litigation and has made no claim that any representative of the State of Michigan has acted unlawfully.
II
In Parker v. Brown the Court considered whether the Sherman Act applied to state action. The way the Sherman Act question was presented and argued in that case sheds significant light on the character of the state-action concept embraced by the Parker holding.
The plaintiff, Brown, was a producer and packer of raisins; the defendants were the California Director of Agriculture and other public officials charged by California statute with responsibility for administering a program for the marketing of the 1940 crop of raisins. The express purpose of the program was to restrict competition among the growers and maintain prices in the dis
The defendant state officials took a direct appeal to this Court. Probable jurisdiction was noted on April 6, 1942, and the Court heard oral argument on the Com-
Presumably because the Court was then concerned with the relationship between the sovereign States and the antitrust laws, it immediately set Parker v. Brown for reargument15 and, on its own motion, requested the Solicitor General of the United States to file a brief as amicus curiae and directed the parties to discuss the question whether the California statute was rendered invalid by the Sherman Act.16
In his supplemental brief the Attorney General of
In his brief for the United States as amicus curiae, the Solicitor General did not take issue with the appellants’ first argument. He contended that the California program was inconsistent with the policy of the Sherman Act, but expressly disclaimed any argument that the State of California or its officials had violated federal law.19 Later in his brief the Solicitor General drew an
Notes
“The contention that because the commissioned pilots have a monopoly of the business, and by combination among themselves exclude all others from rendering pilotage services, is also but a denial of the authority of the State to regulate, since if the State has the power to regulate, and in so doing to appoint and commission, those who are to perform pilotage services, it must follow that no monopoly or combination in a legal sense can arise from the fact that the duly authorized agents of the State are alone allowed to perform the duties devolving upon them by law. When the propositions just referred to are considered in their ultimate aspect they amount simply to the contention, not that the Texas laws are void for want of power, but that they are unwise. If an analysis of those laws justified such conclusion—which we do not at all imply is the case—the remedy is in Congress, in whom the ultimate authority on the subject is vested, and cannot be judicially afforded by denying the power of the State to exercise its authority over a subject concerning which it has plenary power until Congress has seen fit to act in the premises.” Id., at 344-345.
”Parker v. Brown dealt with a State commission authorized by State statute to enforce a program in conformity with, if not supplementary to, a Federal statute. Obviously, all State regulation concerning insurance does not and would not fall in such a category.” S. Rep. No. 1112, 78th Cong., 2d Sess., 5 (1944).
See also S. Rep. No. 20, 79th Cong., 1st Sess., 1-3 (1945); H. R. Rep. No. 873, 78th Cong., 1st Sess., 7 (1943); H. R. Rep. No. 143, 79th Cong., 1st Sess., 4 (1945). If Parker v. Brown, supra, could be circumvented by the simple expedient of suing the private party against whom the State‘s “anticompetitive” command runs, then that holding would become anNeither can I agree with the dissent, however, that Parker must be taken to stand for the broad proposition that a State can
I am puzzled by MR. JUSTICE BLACKMUN‘S willingness to emasculate Parker, which the Court indicated to have continued vitality just this Term. See Virginia Pharmacy Bd. v. Virginia Consumer Council, 425 U. S. 748, 770. It seems to me that such a step is inconsistent not only with the legislative history of the Sherman Act but also with well-settled principles of stare decisis applicable to this Court‘s construction of federal statutes. See Edelman v. Jordan, 415 U. S. 651, 671 n. 14. If those principles preclude the reconsideration of an antitrust exemption which is in every sense an “aberration” and an “anomaly,” Flood v. Kuhn, 407 U. S. 258, 282, then a fortiori they preclude the re-examination of an exemption that coincides with a clear expression of congressional intent.
A different approach is, of course, called for in interpreting this Court‘s summary dispositions of appeals. See generally Hicks v. Miranda, 422 U. S. 332, 345 n. 14; Protective Comm. v. Port of New York Authority, 387 F. 2d 259, 262 (CA2).
First, I take it that a defense based on fairness would be a defense to a damages recovery but not injunctive relief. The latter, of course, presents no danger of unfairness. Moreover, as MR. JUSTICE STEVENS implies by his emphasis on not unfairly holding a
Second, I would hope that consideration will be given on remand to allowing a defense against damages wherever the conduct on which such damages would be based was required by state law. Such a rule would comport with the theory that a defendant should not be held “responsible” in damages for conduct as to which he had no choice, by which I do not mean to rule out other possible grounds for such a rule. See Posner, The Proper Relationship Between State Regulation and the Federal Antitrust Laws, 49 N. Y. U. L. Rev. 693, 728-732 (1974). It would also eliminate what seems to me the extremely unfair possibility that during a particular period—and it could be a regulatory lag during which the regulatee was attempting to change the state mandate—the regulatee could be required by state law to conform to a course of conduct for which he was all the while accumulating treble-damages liability under federal law.
California‘s argument began with a statement of the principle that the Federal Government and the States—“sister sovereignties,” Supplemental Brief for Appellants 35 in Parker v. Brown, O. T. 1942, No. 46—are each “supreme” when legislating “within their respective spheres.” “The subject of Federal power is still ‘commerce,‘—not all commerce, but commerce with foreign nations and among the several states.” Id., at 35-37. Incorporating by explicit reference its preceding argument with respect to whether the“A state statute permitting, or requiring, dealers in a commodity to combine so as to limit the supply or raise the price of a subject of interstate commerce would clearly be void. The question here is whether a state may itself undertake to control the supply and price of a commodity shipped in interstate commerce or otherwise restrain interstate competition through a mandatory regulation.” Brief for United States as Amicus Curiae 63 in Parker v. Brown, O. T. 1942, No. 46.
He then acknowledged that “[i]t seems clear that Congress, when it enacted the statute, did not intend to deprive the states of their normal ‘police’ powers over business and industry. . . . For example, in the field of public utilities, a state can undoubtedly regulate rates without running afoul of the
This constitutional holding has no bearing on whether a utility‘s action in compliance with a tariff which it proposed is exempt from
“The declared objective of the California Act is to prevent excessive supplies of agricultural commodities from ‘adversely affecting’ the market, and although the statute speaks in terms of ‘economic stability’ and ‘agricultural waste’ rather than of price, the evident purpose and effect of the regulation is to ‘conserve agricultural wealth of the state’ by raising and maintaining prices, but ‘without permitting unreasonable profits to producers.’ § 10.” Id., at 355.
As the Court noted in Noerr, the scheme at issue in Parker required popular initiative. 365 U. S., at 137-138, n. 17. And as it further noted, Parker itself expressly rejected the argument that the necessity for private initiative affected the “program‘s validity under theThis rationale will not bear its own weight. If compliance with a state program aimed at suppressing competition in nonmonopoly industries—i. e., raisin production—cannot give rise to
“No. 1040. W. B. Parker, Director of Agriculture, et al., appellants, v. Porter L. Brown. This cause is restored to the docket for reargument on October 12 next. In their briefs and on the oral argument counsel for the parties are requested to discuss the questions whether the state statute involved is rendered invalid by the action of Congress in passing the Sherman Act, the Agricultural Adjustment Act as amended, or any other Act of Congress. The Solicitor General is requested to file a brief as amicus curiae and, if he so desires, to participate in the oral argument.” Journal, O. T. 1941, p. 252.
H. R. Rep. No. 1707, 51st Cong., 1st Sess., 1 (1890) (emphasis added).“The Sherman Anti-Trust law and the California raisin program 35
“1. Is a state subject to the Sherman Act? 35
“2. Does the state seasonal program for raisins violate the provisions of the Sherman Act? 48
“(a) The Sherman Act is circumscribed by the rule of reason 53
“(b) Federal legislation as exempting state program from anti-trust laws 60
“3. May the California raisin program be enjoined in the present action? 64”
21 Cong. Rec. 2456 (1890) (emphasis added).“The Sherman Act does not in terms define its scope in so far as it applies to the activities of state governments. But nothing
important distinction between economic action taken by the State itself and private action taken pursuant to a state statute permitting or requiring individuals to engage in conduct prohibited by the Sherman Act. The Solicitor General contended that the private conduct would clearly be illegal but recognized that a different problem existed with respect to the State itself.20 It was the latter problem that was presented in the Parker case.
This Court set aside the injunction entered by the District Court. In the portion of his opinion for the Court discussing the Sherman Act issue, Mr. Chief Justice Stone addressed only the first of the three arguments advanced by the California Attorney General. The Court held that even though comparable programs organized by private persons would be illegal, the action taken by state officials pursuant to express legislative command did not violate the Sherman Act.21
Unquestionably the term “state action” may be used broadly to encompass individual action supported to some extent by state law or custom. Such a broad use of the term, which is familiar in civil rights litigation,23 is not,
In this case, unlike Parker, the only defendant is a private utility. No public officials or agencies are named as parties and there is no claim that any state action violated the antitrust laws. Conversely, in Parker there was no claim that any private citizen or company had violated the law. The only Sherman Act issue decided was whether the sovereign State itself, which had been held to be a person within the meaning of § 7 of the statute, was also subject to its prohibitions. Since the case now before us does not call into question the legality of any
III
In this case we are asked to hold that private conduct required by state law is exempt from the Sherman Act. Two quite different reasons might support such a rule. First, if a private citizen has done nothing more than obey the command of his state sovereign, it would be unjust to conclude that he has thereby offended federal law. Second, if the State is already regulating an area of the economy, it is arguable that Congress did not intend to superimpose the antitrust laws as an additional, and perhaps conflicting, regulatory mechanism. We consider these two reasons separately.
We may assume, arguendo, that it would be unacceptable ever to impose statutory liability on a party who had done nothing more than obey a state command. Such an assumption would not decide this case, if, indeed, it would decide any actual case. For typically cases of this kind involve a blend of private and public decisionmaking.25 The Court has already decided that state authorization,26 approval,27 encouragement,28 or
In each of these cases the initiation and enforcement of the program under attack involved a mixture of private and public decisionmaking. In each case, notwithstanding the state participation in the decision, the private party exercised sufficient freedom of choice to enable the Court to conclude that he should be held responsible for the consequences of his decision.
The case before us also discloses a program which is the product of a decision in which both the respondent and the
Apart from the question of fairness to the individual who must conform not only to state regulation but to the federal antitrust laws as well, we must consider whether Congress intended to superimpose antitrust standards on conduct already being regulated under a different standard. Amici curiae forcefully contend that the competitive standard imposed by antitrust legislation is fundamentally inconsistent with the “public interest” standard widely enforced by regulatory agencies, and that the essential teaching of Parker v. Brown is that the federal antitrust laws should not be applied in areas of the economy pervasively regulated by state agencies.
There are at least three reasons why this argument is unacceptable. First, merely because certain conduct may be subject both to state regulation and to the federal antitrust laws does not necessarily mean that it must satisfy inconsistent standards; second, even assuming inconsistency, we could not accept the view that the federal interest must inevitably be subordinated to the State‘s; and finally, even if we were to assume that Congress did not intend the antitrust laws to apply to areas of the economy primarily regulated by a State, that assumption would not foreclose the enforcement of the antitrust laws in an essentially unregulated area such as the market for electric light bulbs.
Unquestionably there are examples of economic regulation in which the very purpose of the government control is to avoid the consequences of unrestrained competition. Agricultural marketing programs, such as that involved in Parker, were of that character. But all economic regulation does not necessarily suppress competition. On the contrary, public utility regulation typically
The mere possibility of conflict between state regulatory policy and federal antitrust policy is an insufficient basis for implying an exemption from the federal antitrust laws. Congress could hardly have intended state regulatory agencies to have broader power than federal agencies to exempt private conduct from the antitrust laws.36 Therefore, assuming that there are situations in
The Court has consistently refused to find that regulation gave rise to an implied exemption without first determining that exemption was necessary in order to make the regulatory Act work, “and even then only to the minimum extent necessary.”37
We conclude that neither Michigan‘s approval of the tariff filed by respondent, nor the fact that the lamp-exchange program may not be terminated until a new tariff is filed, is a sufficient basis for implying an exemption from the federal antitrust laws for that program.38
IV
The dissenting opinion voices the legitimate concern that violation of the antitrust laws by regulated companies may give rise to “massive treble damage liabilities.” This is an oft-repeated criticism of the inevitably
The concern about treble-damage liability has arguable relevance to this case in two ways. If the hazard of violating the antitrust laws were enhanced by the fact of regulation, or if a regulated company had engaged in anticompetitive conduct in reliance on a justified understanding that such conduct was immune from the antitrust laws, a concern with the punitive aspects of the treble-damage remedy would be appropriate. But neither of those circumstances is present in this case.
When regulation merely takes the form of approval of a tariff proposed by the company, it surely has not increased the company‘s risk of violating the law. The
Nor can the utility fairly claim that it was led to believe that its conduct was exempt from the federal antitrust laws. A claim of immunity or exemption is in the nature of an affirmative defense to conduct which is otherwise assumed to be unlawful. This Court has never sustained a claim that otherwise unlawful private conduct is exempt from the antitrust laws because it was permitted or required by state law.
In the Court‘s most recent consideration of this subject, it described the defendant‘s claim with pointed precision as “this so-called state-action exemption.” Goldfarb v. Virginia State Bar, 421 U. S. 773, 788. The Court then explained that the question whether the anticompetitive activity had been required by the State acting as sovereign was the “threshold inquiry” in determining whether it was state action of the type the Sherman Act was not meant to proscribe.41 Certainly that careful use of language could not have been read as a guarantee that compliance with any state requirement would automatically confer federal antitrust immunity.
The dissenting opinion in this case makes much of the obvious fact that Parker v. Brown implicitly held that California‘s raisin-marketing program was not a violation of the Sherman Act. That is, of course, perfectly
Nor could respondent justifiably rely on either the holding in Eastern R. Conf. v. Noerr Motors, 365 U. S. 127, or the reference in that opinion to Parker.43 The holding in Noerr was that the concerted activities of the railroad defendants in opposing legislation favorable to the plaintiff motor carriers was not prohibited by the Sherman Act. The case did not involve any question of either liability or exemption for private action taken in compliance with state law.
Moreover, nothing in the Noerr opinion implies that
Since the District Court has not yet addressed the question whether the complaint alleged a violation of the antitrust laws, the case is remanded for a determination of that question and for such other proceedings as may be appropriate.
Reversed and remanded.
MR. CHIEF JUSTICE BURGER, concurring in the judgment and in all except Parts II and IV of the Court‘s opinion.
I concur in the judgment and in all except Parts II and IV of the Court‘s opinion. I do not agree, however, that Parker v. Brown, 317 U. S. 341 (1943), can logically be
“The 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.” Goldfarb v. Virginia State Bar, 421 U. S. 773, 790 (1975) (emphasis added).
If Parker‘s holding were limited simply to the nonliability of state officials, then the Court‘s inquiry in Goldfarb as to the County Bar Association‘s claimed exemption could have ended upon our recognition that the organization was “a voluntary association and not a state agency . . . .” 421 U. S., at 790. Yet, before determining that there was no exemption from the antitrust laws, the Court proceeded to treat the Association‘s contention that its action, having been “prompted” by the State Bar, was “state action for Sherman Act purposes.” Ibid.
The reading of Parker in Part II is unnecessary to the result in this case; that decision simply does not address the precise issue raised by the present case. There was no need in Parker to focus upon the situation where the State, in addition to requiring a public utility “to meet regulatory criteria insofar as it is exercising its natural monopoly powers,” ante, at 596, also purports, without any independent regulatory purpose, to control the utility‘s activities in separate, competitive markets. Today the Court correctly concludes:
“The Commission‘s approval of respondent‘s decision to maintain such a program does not . . . implement any statewide policy relating to light bulbs. We infer that the State‘s policy is neutral on the ques-
tion whether a utility should, or should not, have such a program.” Ante, at 585 (emphasis added).
To find a “state action” exemption on the basis of Michigan‘s undifferentiated sanction of this ancillary practice could serve no federal or state policy.
MR. JUSTICE BLACKMUN, concurring in the judgment.
I agree with the Court insofar as it holds that the fact that anticompetitive conduct is sanctioned, or even required, by state law does not of itself put that conduct beyond the reach of the Sherman Act. Since the opposite proposition is the ground on which the Court of Appeals affirmed the dismissal of this suit, I also agree that its judgment must be reversed. My approach, however, is somewhat different from that of the Court.
I
As to the principal question in the case, that of the Sherman Act‘s pre-emptive effect upon inconsistent state laws, it is, as the dissent points out, one of congressional intent. No one denies that Congress could, if it wished, override those state laws whose operation would subvert the federal policy of free competition in interstate commerce. In discerning that intent, however, I find somewhat less assistance in the legislative history than does the dissent. It is true that the framers of the Sherman Act expressed the view that certain areas of economic activity were left entirely to state regulation. The dissent quotes several of these expressions. Post, at 632-634. A careful reading of those statements reveals, however, that they little more than reflect the then-prevailing view that Congress lacked the power, under the Commerce Clause, to regulate economic activity that was within the domain of the States. The Court since then has recognized a greatly expanded Commerce Clause
Our question in this case is one that the Sherman Act‘s framers did not directly confront or explicitly address: What was to be the result if the expanding ambit of the Sherman Act should bring it into conflict with inconsistent state law? But it seems to me that this bridge also has been crossed. In Schwegmann Bros. v. Calvert Distillers Corp., 341 U. S. 384 (1951), the issue was whether the Sherman Act permitted enforcement of a Louisiana statute requiring compliance by liquor retailers with resale price agreements to which they were not parties, but which had been entered into by other retailers with their wholesale suppliers. The Court held the Louisiana statute unenforceable; there is no plausible reading of that decision other than that the statute was pre-empted by the Sherman Act.1 Northern Securities Co. v. United States, 193 U. S. 197 (1904), is to the same effect. The defenders of the railroad holding company attacked in that case argued that it was beyond the Sherman Act‘s reach because it was lawful under the cor-
Congress itself has given support to the view that inconsistent state laws are pre-empted by the Sherman Act. Were it the case that state statutes held complete sway, Congress would not have found it necessary in 1937 to pass the
II
I also agree with MR. JUSTICE STEVENS that the particular anticompetitive scheme attacked in this case must fall despite the imprimatur it claims to have received from the State of Michigan. To say, as I have, that the Sherman Act generally pre-empts inconsistent state laws is not to answer the much more difficult question as to which such laws are pre-empted and to what extent. I fear there are no easy solutions, though several suggest themselves.
It cannot be decisive, for example, simply that a state law goes so far as to require, rather than simply to authorize, the anticompetitive conduct in question. The Court accepted this as a prerequisite to antitrust immunity in Goldfarb v. Virginia State Bar, 421 U. S. 773, 790 (1975), but it cannot alone be sufficient. The whole issue in Schwegmann was whether the State could require obedience to a fixed resale price arrangement. Similarly, compliance with an anticompetitive contract, or adherence to an illegal corporate combination, might well be “required” by a State‘s general contract and corporation law.
Neither can it be decisive that a particular state-sanctioned scheme was initiated by the private actors rather than by the State. I see no difference in the degree of private initiation as between the marketing arrangement approved in Parker v. Brown, 317 U. S. 341 (1943) (and properly approved, I think, for reasons set forth below), and the resale price maintenance scheme disapproved in Schwegmann. In each case the particular scheme was initiated by the private actors at the invitation of a general statute, with which they may or may
A final, ostensibly simple, solution that I find wanting would be to insist only on some degree of affirmative articulation by the State of its conscientious intent to sanction the challenged scheme, and its reasons therefor. This also is a tempting solution, particularly in this case, where there is little to suggest (at least in recent years) that the Michigan Public Service Commission has even actively considered the light-bulb tie-in, much less articulated a justification for it. Yet such a solution would also lead to perverse results. A regulation whose justification was too plain to require explication would be vulnerable; a questionable one could be immunized if its proponents had the skill or influence to generate the proper legislative history. And, of course, deciding how much “affirmative articulation” of state policy is enough is not a simple matter.
I would apply, at least for now, a rule of reason, taking it as a general proposition that state-sanctioned anticompetitive activity must fall like any other if its potential harms outweigh its benefits. This does not mean
No doubt such a rule of reason will crystallize, as it is applied, into various per se rules relating to certain kinds of state enactments, such as the regulation of the classic natural monopoly, the public utility. We should not shrink in our general approach, however, from what seems to me our constitutionally mandated task, one often set for us by conflicting federal and state laws, and that is the balancing of implicated federal and state interests with a view to assuring that when these are truly in conflict, the former prevail.
III
By these standards the present case does not seem a difficult one. The light-bulb tie-in presents the usual dangers of such a scheme, principally that respondent will extend its monopoly from the sale of electric power into that of light bulbs, not because it sells better light bulbs, but because its light bulbs are the ones customers must pay for if they are to have light at all. See P. Areeda, Antitrust Analysis 569-570 (2d ed. 1974). On the record before us the scheme appears to be unjustified. No doubt it originated as a means to promote electric power use, but it is difficult to see why a tie-in (rather than an optional, promotional light-bulb sale) was nec-
This is what I take it the Court means when it says the electric light-bulb market is “essentially unregulated,” and on that understanding I agree with its conclusion. It is conceivable that respondent may show, upon further evidence, a sufficient justification for the scheme, but it certainly has not done so as yet.6
MR. JUSTICE STEWART, with whom MR. JUSTICE POWELL and MR. JUSTICE REHNQUIST join, dissenting.
The Court today holds that a public utility company, pervasively regulated by a state utility commission, may be held liable for treble damages under the Sherman Act for engaging in conduct which, under the requirements of its tariff, it is obligated to perform. I respectfully dissent from this unprecedented application of the federal antitrust laws, which will surely result in disruption of the operation of every state-regulated public utility company in the Nation and in the creation of “the prospect of massive treble damage liabilities”1 payable ultimately by the companies’ customers.
The starting point in analyzing this case is Parker v. Brown, 317 U. S. 341. While Parker did not create the “so-called state-action exemption”2 from the federal antitrust laws,3 it is the case that is most frequently
this Court that have interpreted or applied Parker‘s “state action” doctrine, and is unsupported by the sources on which the plurality relies.
As to those sources, I would have thought that except in rare instances an analysis of the positions taken by the parties in briefs submitted to this Court should play no role in interpreting its written opinions.5 A
But assuming, arguendo, that it is appropriate to look behind the language of Parker v. Brown, supra, I think it is apparent that the plurality has distorted the positions taken by the State of California and the United States as amici curiae. The question presented on reargument in Parker was “whether the state statute involved is rendered invalid by the action of Congress in passing the Sherman Act. . . .” Ante, at 587 n. 16. This phrasing indicates that the precise issue on which the Court sought reargument was whether the California statute was pre-empted by the Sherman Act, not whether sovereign States were immune from suit under the Sherman Act.
The State of California and the Solicitor General certainly understood this to be the principal issue. As the plurality opinion correctly notes, the supplemental brief filed by the State of California in response to the question posed by this Court advanced three basic arguments. And as it further notes, this Court‘s decision in Parker rested on the first of those arguments. But what the plurality fails to acknowledge is that California‘s first argument was in principal part a straightforward conten-
tion that the
With respect to the amicus brief of the United States, the plurality‘s position today seems to be that because the State of California placed particular emphasis on the fact that the proscriptions of the
“To hold the State within the prohibition of the
Sherman Act in the present instance would result in prohibiting it from exercising its otherwise valid police powers. This Court has repeatedly and emphatically stated that it should never be held that Congress intends to supersede or by its legislation suspend the exercise of the police powers of the State, even when it may do so, unless its purpose to effect that result is clearly manifested.” Supplemental Brief for Appellants 47-48 in Parker v. Brown, O. T. 1942, No. 46 (footnote omitted).
This distinction was properly drawn, as is apparent from decisions in the labor law context. A State or political subdivision thereof is not normally subject to the prohibitions of the
“‘[T]he question we face here is not whether California or its officials have violated the
Sherman Act , but whether the state program interferes with the accomplishment of the objectives of the federal statute.‘” Ante, at 589 n. 19.
This statement by the Solicitor General was indeed correct, because the question on which the Court had requested supplemental briefing was “whether the state statute involved is rendered invalid by the action of Congress in passing the
Thus, it is clear that the plurality has misread the positions taken by the State of California and the Solicitor General in Parker v. Brown. The question presented to the Court in Parker was whether the restraint on trade effected by the California statute was exempt
The notion that Parker decided only that “action taken by state officials pursuant to express legislative command did not violate the
In Eastern R. Conf. v. Noerr Motors, 365 U. S. 127, for instance, the Court held that no violation of the
Litigation testing the limits of the state-action exemption has focused on whether alleged anticompetitive conduct by private parties is indeed “the result of” state action. Thus, in Goldfarb v. Virginia State Bar, 421 U. S. 773, the question was whether price fixing practiced by the respondents was “required by the State acting as sovereign. Parker v. Brown, 317 U. S., at 350-352. . . .” Id., at 790. The Court held that the “so-called state-action exemption,” id., at 788, did not protect the respondents because it “cannot fairly be said that the State of Virginia through its Supreme Court Rules required the anticompetitive activities of either respondent. . . . Respondents’ arguments, at most, constitute the contention that their activities complemented the ob
Parker, Noerr, and Goldfarb point unerringly to the proper disposition of this case. The regulatory process at issue has three principal stages. First, the utility company proposes a tariff. Second, the Michigan Public Service Commission investigates the proposed tariff and either approves it or rejects it. Third, if the tariff is approved, the utility company must, under command of state law, provide service in accord with its requirements until or unless the Commission approves a modification. The utility company thus engages in two distinct activities: It proposes a tariff and, if the tariff is approved, it obeys its terms. The first action cannot give rise to antitrust liability under Noerr and the second—compliance with the terms of the tariff under the command of state law—is immune from antitrust liability under Parker and Goldfarb.10
With scarcely a backward glance at the Noerr case, the Court concludes that because the utility company‘s “participation” in the decision to incorporate the lamp-exchange program into the tariff was “sufficiently significant,” there is nothing “unjust” in concluding that the company is required to conform its conduct to federal antitrust law “like comparable conduct by unregulated businesses. . . .” Ante, at 594. This attempt to distinguish between the exemptive force of mandatory state rules adopted at the behest of private parties and those adopted pursuant to the State‘s unilateral decision is flatly inconsistent with the rationale of Noerr. There the Court pointedly rejected “[a] construction of the
The second arm of the Court‘s new immunity test, which apparently comes into play only if the utility‘s own activity does not exceed a vaguely defined threshold of “sufficient freedom of choice,” purports to be aimed at answering the basic question of whether “Congress intended to superimpose antitrust standards on conduct already being regulated” by state utility regulation laws. Ante, at 595. Yet analysis of the Court‘s opinion reveals that the three factors to which the Court pays heed have little or nothing to do with discerning congressional intent. Rather, the second arm of the new test simply creates a vehicle for ad hoc judicial determinations of the substantive validity of state regulatory goals, which closely resembles the discarded doctrine of substantive due process. See Ferguson v. Skrupa, 372 U. S. 726.
The Court‘s delineation of the second arm of the new test proceeds as follows. Apart from the “fairness” question, the Court states, there are “at least three reasons” why the light-bulb program should not enjoy
“The mere possibility of conflict between state regulatory policy and federal antitrust policy is an insufficient basis for implying an exemption from the federal antitrust laws. Congress could hardly have intended state regulatory agencies to have broader power than federal agencies to exempt private conduct from the antitrust laws. Therefore,
assuming that there are situations in which the existence of state regulation should give rise to an implied exemption, the standards for ascertaining the existence and scope of such an exemption surely must be at least as severe as those applied to federal regulatory legislation. “The Court has consistently refused to find that regulation gave rise to an implied exemption without first determining that exemption was necessary in order to make the regulatory act work, ‘and even then only to the minimum extent necessary.’
“The application of that standard to this case inexorably requires rejection of respondent‘s claim.” Ante, at 596-598 (footnotes omitted).
The Court‘s analysis rests on a mistake premise. The “implied immunity” doctrine employed by this Court to reconcile the federal antitrust laws and federal regulatory statutes cannot, rationally, be put to the use for which the Court would employ it. That doctrine, a species of the basic rule that repeals by implication are disfavored, comes into play only when two arguably inconsistent federal statutes are involved. “‘Implied repeal‘” of federal antitrust laws by inconsistent state regulatory statutes is not only “‘not favored,‘” ante, at 597-598, n. 37, it is impossible. See
A closer scrutiny of the Court‘s holding reveals that its reference to the inapposite “implied repeal” doctrine is simply window dressing for a type of judicial review radically different from that engaged in by this Court in Gordon v. New York Stock Exchange, 422 U. S. 659, and United States v. Philadelphia National Bank, 374 U. S. 321. Those cases turned exclusively on issues of statutory construction and involved no judicial scrutiny of the abstract “necessity” or “centrality” of par
The Court‘s approach here is qualitatively different. The State of Michigan, through its Public Service Commission, has decided that requiring Detroit Edison to provide “free” light bulbs as a term and condition of service is in the public interest. Yet the Court is prepared to set aside that policy determination: “The lamp-supply program is by no means . . . imperative in the continued effective functioning of Michigan‘s regulation of the utilities industry.” Ante, at 597 n. 36 (emphasis added). Even “if the federal antitrust laws should be construed to outlaw respondent‘s light-bulb-exchange program, there is no reason to believe that Michigan‘s regulation of its electric utilities will no longer be able to function effectively. Regardless of the outcome of this case, Michigan‘s interest in regulating its utilities’ distribution of electricity will be almost entirely unimpaired.” Ante, at 598 (emphasis added).
The emphasized language in these passages shows that the Court is adopting an interpretation of the
The Court‘s rationale appears to be that the draftsmen of the
But the legislative history of the
The legislative history reveals very clearly that Congress’ perception of the limitations of its power under the Commerce Clause was coupled with an intent not to intrude upon the authority of the several States to regulate “domestic” commerce. As the House Report stated:
“It will be observed that the provisions of the bill are carefully confined to such subjects of legislation as are clearly within the legislative authority of Congress.
“No attempt is made to invade the legislative au
thority of the several States or even to occupy doubtful grounds. No system of laws can be devised by Congress alone which would effectually protect the people of the United States against the evils and oppression of trusts and monopolies. Congress has no authority to deal, generally, with the subject within the States, and the States have no authority to legislate in respect of commerce between the several States or with foreign nations. “It follows, therefore, that the legislative authority of Congress and that of the several States must be exerted to secure the suppression of restraints upon trade and monopolies. Whatever legislation Congress may enact on this subject, within the limits of its authority, will prove of little value unless the States shall supplement it by such auxiliary and proper legislation as may be within their legislative authority.”16
Similarly, the floor debates on the proposed legislation reveal an intent to “g[o] as far as the Constitution permits Congress to go,”17 in the words of Senator Sherman, conjoined with an intent not to “interfere with” state-law efforts to “prevent and control combinations within the limit of the State.”18 Far from demonstrating an intent to pre-empt state laws aimed at preventing or controlling combinations or monopolies, the legislative debates show that Congress’ goal was to supplement such state efforts, themselves restricted to the geographic boundaries of the several States. As Senator Sherman stated: “Each State can deal with a combination within the State, but only the General Government can deal
It is noteworthy that the body of state jurisprudence which formed the model for the
As previously noted, the intent of the draftsmen of the
It was this retroactive expansion of the jurisdictional reach of the
But the law did not remain static. As one commentator has put it: “By 1942, when Parker v. Brown was decided, the interpretation and scope of the commerce clause had changed substantially. With the development of the ‘affection doctrine’ purely intrastate events“—like state-mandated anticompetitive arrangements with respect to in-state agricultural production or in-state provision of utility services—“could be regulated
The “state action” doctrine of Parker v. Brown, as clarified by Goldfarb, represents the best possible accommodation of this limiting intent and the post-1890 judicial expansion of the jurisdictional reach of the
Beyond this the Court cannot go without disregarding the purpose of the
The Court‘s opinion simply ignores the clear evidence of congressional intent and substitutes its own policy judgment about the desirability of disregarding any facet of state economic regulation that it thinks unwise or of no great importance. In adopting this freewheeling approach to the language of the
Henceforth, a state-regulated public utility company must at its peril successfully divine which of its countless and interrelated tariff provisions a federal court will ultimately consider “central” or “imperative.” If it guesses wrong, it may be subjected to treble damages as a penalty for its compliance with state law.
Id., at 2460.“A state statute permitting, or requiring, dealers in a commodity to combine so as to limit the supply or raise the price of a subject of interstate commerce would clearly be void. The question here is whether a state may itself undertake to control the supply and price of a commodity shipped in interstate commerce or otherwise restrain interstate competition through a mandatory regulation.”
Id., at 2456.The cumulative effect of these carefully drafted references unequivocally differentiates between official action, on the one hand, and individual action (even when commanded by the State), on the other hand.
Slater, supra, n. 14, at 85.This suggestion overlooks the fact that Michigan‘s policy, far from being “neutral,” is, as announced in
If a state legislature can ensure antitrust exemption only by eschewing such broad delegation of regulatory authority and incorporating regulatory details into statutory law, then there is a very great risk that the State will be prevented from regulating effectively. For as this Court has repeatedly observed in another context, “[d]elegation . . . has long been recognized as necessary in order that the exertion of legislative power does not become a futility. . . . [T]he effectiveness of both the legislative and administrative processes would become endangered if [the legislature] were under the compulsion of filling in the details beyond the liberal prescription [of requiring the making of ‘just and reasonable’ rates and regulating in the ‘public interest‘] here. Then the burdens of minutiae would be apt to clog the administration of the law and deprive the agency of that flexibility and dispatch which are its salient virtues.” Sunshine Anthracite Coal Co. v. Adkins, 310 U. S. 381, 398.
“The nature of governmental regulation of private utilities is such that a utility may frequently be required by the state regulatory scheme to obtain approval for practices a business regulated in less detail would be free to institute without any approval from a regulatory body. Approval by a state utility commission of such a request from a regulated utility, where the Commission has not put its own weight on the side of the proposed practice by ordering it, does not transmute a practice initiated by the utility and approved by the Commission into ‘state action.’ At most, the Commission‘s failure to overturn this practice amounted to no more than a determination that a Pennsylvania utility was authorized to employ such a practice if it so desired. Respondent‘s exercise of the choice allowed by state law where the initiative comes from it and not from the State, does not make its action in doing so ‘state action’ for purposes of the Fourteenth Amendment.” Id., at 357. (Footnote omitted.)
“But the question we face here is not whether California or its officials have violated the Sherman Act, but whether the state program interferes with the accomplishment of the objectives of the federal statute.”
effective without that command. We find 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. In a dual system of government in which, under the Constitution, the states are sovereign, save only as Congress may constitutionally subtract from their authority, an unexpressed purpose to nullify a state‘s control over its officers and agents is not lightly to be attributed to Congress.“The Sherman Act makes no mention of the state as such, and gives no hint that it was intended to restrain state action or official action directed by a state.
“There is no suggestion of a purpose to restrain state action in the Act‘s legislative history. The sponsor of the bill which was ultimately enacted as the Sherman Act declared that it prevented only ‘business combinations.’ 21 Cong. Rec. 2562, 2457; see also [id.,] at 2459, 2461. That its purpose was to suppress combinations to restrain competition and attempts to monopolize by individuals and corporations, abundantly appears from its législative history.
“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. Olsen v. Smith, 195 U. S. 332, 344-345; cf. Lowenstein v. Evans, 69 F. 908, 910.” 317 U. S., at 350-352.
& Co., 398 U. S. 144, 188-234 (BRENNAN, J., concurring in part and dissenting in part). that their activities complemented the objective of the ethical codes. In our view that is not state action for Sherman Act purposes. It is not enough that, as the County Bar puts it, anticompetitive conduct is ‘prompted’ by state action; rather, anticompetitive activities must be compelled by direction of the State acting as a sovereign,” Goldfarb v. Virginia State Bar, 421 U. S. 773, 791 (1975). stronger justification for an implied exemption than federal regulation. On the contrary, respondent relies heavily on Gordon v. New York Stock Exchange, 422 U. S. 659 (1975), in which the Court upheld the fixed commissions of the stock exchange as an integral part of the effective operation of the Securities Exchange Act of 1934. The inapplicability of that case is manifest from MR. JUSTICE STEWART‘S brief concurring opinion in which he stated:“The Court has never held, and does not hold today, that the antitrust laws are inapplicable to anticompetitive conduct simply because a federal agency has jurisdiction over the activities of one or more of the defendants. An implied repeal of the antitrust laws may be found only if there exists a ‘plain repugnancy between the antitrust and regulatory provisions.’ United States v. Philadelphia Nat. Bank, 374 U. S. 321, 351.
“The mere existence of the Commission‘s reserve power of oversight with respect to rules initially adopted by the exchanges, therefore, does not necessarily immunize those rules from antitrust attack. . . . The question presented by the present case, therefore, is whether exchange rules fixing minimum commission rates are ‘necessary to make the Securities Exchange Act work.‘” Id., at 692-693.
The lamp-supply program is by no means comparably imperative in the continued effective functioning of Michigan‘s regulation of the utilities industry.
scheme] work.‘” Robinson, Recent Antitrust Developments: 1975, 31 Record of N. Y. C. B. A. 38, 57-58 (1976).In United States v. National Assn. of Securities Dealers, 422 U. S. 694, 719-720 (1975), the Court pointed out:
“Implied antitrust immunity is not favored, and can be justified only by a convincing showing of clear repugnancy between the antitrust laws and the regulatory system. See, e. g., United States v. Philadelphia Nat. Bank, 374 U. S., at 348; United States v. Borden Co., 308 U. S. 188, 197-206 (1939).”
These cases are, of course, consistent with the “cardinal rule,” applicable to legislation generally, that repeals by implication are not favored. Posadas v. National City Bank, 296 U. S. 497, 503 (1936).