COMMUNITY COMMUNICATIONS CO., INC. v. CITY OF BOULDER, COLORADO, ET AL.
No. 80-1350
Supreme Court of the United States
Argued October 13, 1981—Decided January 13, 1982
455 U.S. 40
Harold R. Farrow argued the cause for petitioner. With him on the briefs were Thomas A. Seaton and Robert E. Youle.
Jeffrey H. Howard argued the cause for respondents. With him on the brief were Kathleen A. McGinn, Dale R. Harris, Bruce T. Reese, Joseph N. de Raismes, and Alan E. Boles, Jr.
Thomas P. McMahon, Assistant Attorney General of Colorado, argued the cause for the State of Colorado et al. as amici curiae urging reversal. With him on the brief were J. D. MacFarlane, Attorney General of Colorado, Mary J. Mullarkey, Solicitor General, and B. Lawrence Theis, First Assistant Attorney General; Wilson L. Condon, Attorney
JUSTICE BRENNAN delivered the opinion of the Court.
The question presented in this case, in which the District Court for the District of Colorado granted preliminary injunctive relief, is whether a “home rule” municipality, granted by the state constitution extensive powers of self-government in local and municipal matters, enjoys the “state action” exemption from Sherman Act liability announced in Parker v. Brown, 317 U. S. 341 (1943).
I
Respondent city of Boulder is organized as a “home rule” municipality under the Constitution of the State of Colorado.1 The city is thus entitled to exercise “the full right of self-government in both local and municipal matters,” and with respect to such matters the City Charter and ordinances
From 1966 until February 1980, due to the limited service that could be provided with the technology then available, petitioner‘s service consisted essentially of retransmissions of programming broadcast from Denver and Cheyenne, Wyo. Petitioner‘s market was therefore confined to the University Hill area. However, markedly improved technology became available in the late 1970‘s, enabling petitioner to offer many more channels of entertainment than could be provided by local broadcast television.3 Thus presented with an oppor-
The City Council‘s response, after reviewing its cable television policy,6 was the enactment of an “emergency” ordi-
Petitioner filed this suit in the United States District Court for the District of Colorado, and sought, inter alia, a preliminary injunction to prevent the city from restricting petition-
On appeal, a divided panel of the United States Court of Appeals for the Tenth Circuit reversed. 630 F. 2d 704 (1980). The majority, after examining Colorado law, rejected the District Court‘s conclusion that regulation of the cable television business was beyond the home rule authority
II
A
Parker v. Brown, 317 U. S. 341 (1943), addressed the question whether the federal antitrust laws prohibited a State, in the exercise of its sovereign powers, from imposing certain anticompetitive restraints. These took the form of a “marketing program” adopted by the State of California for the 1940 raisin crop; that program prevented appellee from freely marketing his crop in interstate commerce. Parker noted that California‘s program “derived its authority . . .
“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.” Id., at 350-351.
The availability of this exemption to a State‘s municipalities was the question presented in City of Lafayette, supra. In that case, petitioners were Louisiana cities empowered to own and operate electric utility systems both within and beyond their municipal limits. Respondent brought suit against petitioners under the Sherman Act, alleging that they had committed various antitrust offenses in the conduct of their utility systems, to the injury of respondent. Petitioners invoked the Parker doctrine as entitling them to dismissal of the suit. The District Court accepted this argument and dismissed. But the Court of Appeals for the Fifth Circuit reversed, holding that a “subordinate state governmental body is not ipso facto exempt from the operation of the antitrust laws,” City of Lafayette v. Louisiana Power & Light Co., 532 F. 2d 431, 434 (1976) (footnote omitted), and directing the District Court on remand to examine “whether the state legislature contemplated a certain type of anticompetitive restraint,” ibid..12
“Cities are not themselves sovereign; they do not receive all the federal deference of the States that create them. Parker‘s limitation of the exemption to ‘official action directed by a state,’ is consistent with the fact that the States’ subdivisions generally have not been treated as
equivalents of the States themselves. In light of the serious economic dislocation which could result if cities were free to place their own parochial interests above the Nation‘s economic goals reflected in the antitrust laws, we are especially unwilling to presume that Congress intended to exclude anticompetitive municipal action from their reach.” 435 U. S., at 412-413 (footnote and citations omitted).
The opinion emphasized, however, that the State as sovereign might sanction anticompetitive municipal activities and thereby immunize municipalities from antitrust liability. Under the plurality‘s standard, the Parker doctrine would shield from antitrust liability municipal conduct engaged in “pursuant to state policy to displace competition with regulation or monopoly public service.” 435 U. S., at 413. This was simply a recognition that a State may frequently choose to effect its policies through the instrumentality of its cities and towns. It was stressed, however, that the “state policy” relied upon would have to be “clearly articulated and affirmatively expressed.” Id., at 410. This standard has since been adopted by a majority of the Court. New Motor Vehicle Board of California v. Orrin W. Fox Co., 439 U. S. 96, 109 (1978); California Retail Liquor Dealers Assn. v. Midcal Aluminum, Inc., 445 U. S. 97, 105 (1980).14
Our precedents thus reveal that Boulder‘s moratorium ordinance cannot be exempt from antitrust scrutiny unless it constitutes the action of the State of Colorado itself in its sovereign capacity, see Parker, or unless it constitutes municipal action in furtherance or implementation of clearly articulated and affirmatively expressed state policy, see City of Lafayette, Orrin W. Fox Co., and Midcal. Boulder argues that these criteria are met by the direct delegation of powers to municipalities through the Home Rule Amendment to the Colorado Constitution. It contends that this delegation satisfies both the Parker and the City of Lafayette standards. We take up these arguments in turn.
(1)
Respondent city‘s Parker argument emphasizes that through the Home Rule Amendment the people of the State of Colorado have vested in the city of Boulder “‘every power theretofore possessed by the legislature . . . in local and municipal affairs.‘”15 The power thus possessed by Boul-
We reject this argument: it both misstates the letter of the law and misunderstands its spirit. The Parker state-action exemption reflects Congress’ intention to embody in the Sherman Act the federalism principle that the States possess a significant measure of sovereignty under our Constitution. But this principle contains its own limitation: Ours is a “dual system of government,” Parker, 317 U. S., at 351 (emphasis added), which has no place for sovereign cities. As this Court stated long ago, all sovereign authority “within the geographical limits of the United States” resides either with
“the Government of the United States, or [with] the States of the Union. There exist within the broad domain of sovereignty but these two. There may be cities, counties, and other organized bodies with limited legisla-
tive functions, but they are all derived from, or exist in, subordination to one or the other of these.” United States v. Kagama, 118 U. S. 375, 379 (1886) (emphasis added).
The dissent in the Court of Appeals correctly discerned this limitation upon the federalism principle: “We are a nation not of ‘city-states’ but of States.” 630 F. 2d, at 717. Parker itself took this view. When Parker examined Congress’ intentions in enacting the antitrust laws, the opinion, as previously indicated, noted: “[N]othing in the language of the Sherman Act or in its history . . . suggests that its purpose was to restrain a state or its officers or agents from activities directed by its legislature. . . . [And] an unexpressed purpose to nullify a state‘s control over its officers and agents is not lightly to be attributed to Congress.” 317 U. S., at 350-351 (emphasis added). Thus Parker recognized Congress’ intention to limit the state-action exemption based upon the federalism principle of limited state sovereignty. City of Lafayette, Orrin W. Fox Co., and Midcal reaffirmed both the vitality and the intrinsic limits of the Parker state-action doctrine. It was expressly recognized by the plurality opinion in City of Lafayette that municipalities “are not themselves sovereign,” 435 U. S., at 412, and that accordingly they could partake of the Parker exemption only to the extent that they acted pursuant to a clearly articulated and affirmatively expressed state policy, 435 U. S., at 413. The Court adopted this view in Orrin W. Fox Co., 439 U. S., at 109, and Midcal, 445 U. S., at 105. We turn then to Boulder‘s contention that its actions were undertaken pursuant to a clearly articulated and affirmatively expressed state policy.
(2)
Boulder first argues that the requirement of “clear articulation and affirmative expression” is fulfilled by the Colorado Home Rule Amendment‘s “guarantee of local autonomy.” It contends, quoting from City of Lafayette, 435 U. S., at 394,
But plainly the requirement of “clear articulation and affirmative expression” is not satisfied when the State‘s position is one of mere neutrality respecting the municipal actions challenged as anticompetitive. A State that allows its municipalities to do as they please can hardly be said to have “contemplated” the specific anticompetitive actions for which municipal liability is sought. Nor can those actions be truly described as “comprehended within the powers granted,” since the term, “granted,” necessarily implies an affirmative addressing of the subject by the State. The State did not do so here: The relationship of the State of Colorado to Boulder‘s moratorium ordinance is one of precise neutrality. As the majority in the Court of Appeals below acknowledged: “[W]e are here concerned with City action in the absence of any regulation whatever by the State of Colorado. Under these circumstances there is no interaction of state and local regulation. We have only the action or exercise of authority by the City.” 630 F. 2d, at 707. Indeed, Boulder argues that
Respondents argue that denial of the Parker exemption in the present case will have serious adverse consequences for cities, and will unduly burden the federal courts. But this argument is simply an attack upon the wisdom of the longstanding congressional commitment to the policy of free markets and open competition embodied in the antitrust laws.19 Those laws, like other federal laws imposing civil or criminal sanctions upon “persons,” of course apply to municipalities as well as to other corporate entities.20 Moreover, judicial en-
“Today‘s decision does not threaten the legitimate exercise of governmental power, nor does it preclude municipal government from providing services on a monopoly basis. Parker and its progeny make clear that a State properly may . . . direct or authorize its instrumentalities to act in a way which, if it did not reflect state policy, would be inconsistent with the antitrust laws. . . . [A]ssuming that the municipality is authorized to provide a service on a monopoly basis, these limitations on municipal action will not hobble the execution of legitimate governmental programs.” Id., at 416-417 (footnote omitted).
The judgment of the Court of Appeals is reversed, and the action is remanded for further proceedings consistent with this opinion.
It is so ordered.
JUSTICE WHITE took no part in the consideration or decision of this case.
The Court‘s opinion, which I have joined, explains why the city of Boulder is not entitled to an exemption from the antitrust laws. The dissenting opinion seems to assume that the Court‘s analysis of the exemption issue is tantamount to a holding that the antitrust laws have been violated. The assumption is not valid. The dissent‘s dire predictions about the consequences of the Court‘s holding should therefore be viewed with skepticism.1
In City of Lafayette v. Louisiana Power & Light Co., 435 U. S. 389 (1978), we held that municipalities’ activities as providers of services are not exempt from the Sherman Act. The reasons for denying an exemption to the city of Lafayette are equally applicable to the city of Boulder, even though Colorado is a home-rule State. We did not hold in City of Lafayette that the city had violated the antitrust laws. Moreover, that question is quite different from the question whether the city of Boulder violated the Sherman Act because the character of their respective activities differs. In both cases, the violation issue is separate and distinct from the exemption issue.
A brief reference to our decision in Cantor v. Detroit Edison Co., 428 U. S. 579, will identify the invalidity of the dissent‘s assumption. In that case, the Michigan Public Utility Commission had approved a tariff that required the Detroit Edison Co. to provide its customers free light bulbs. The company contended that its light bulb distribution program was therefore exempt from the antitrust laws on the authority of Parker v. Brown, 317 U. S. 341. See 428 U. S., at
It would be premature at this stage of the litigation to comment on the question whether petitioner will be able to establish that respondents have violated the antitrust laws. The
JUSTICE REHNQUIST, with whom THE CHIEF JUSTICE and JUSTICE O‘CONNOR join, dissenting.
The Court‘s decision in this case is flawed in two serious respects, and will thereby impede, if not paralyze, local governments’ efforts to enact ordinances and regulations aimed at protecting public health, safety, and welfare, for fear of subjecting the local government to liability under the
Pre-emption and exemption are fundamentally distinct concepts. Pre-emption, because it involves the
In contrast, exemption involves the interplay between the enactments of a single sovereign—whether one enactment was intended by Congress to relieve a party from the necessity of complying with a prior enactment. See, e. g., National Broiler Marketing Assn. v. United States, 436 U. S. 816 (1978) (Sherman Act and Capper-Volstead Act); United States v. Philadelphia National Bank, 374 U. S. 321, 350-355 (1963) (Clayton Act and Bank Merger Act of 1960); Silver v. New York Stock Exchange, 373 U. S. 341, 357-361 (1963) (Sherman Act and Securities Exchange Act). Since the enactments of only one sovereign are involved, no problems of federalism are present. The court interpreting the
With this distinction in mind, I think it quite clear that questions involving the so-called “state action” doctrine are more properly framed as being ones of pre-emption rather than exemption. Issues under the doctrine inevitably involve state and local regulation which, it is contended, are in conflict with the Sherman Act.
Our decision in Parker v. Brown, supra, was the genesis of the “state action” doctrine. That case involved a challenge to a program established pursuant to the California Agricultural Prorate Act, which sought to restrict competition in the State‘s raisin industry by limiting the producer‘s ability to distribute raisins through private channels. The program thus sought to maintain prices at a level higher than those maintained in an unregulated market. This Court assumed that the program would violate the Sherman Act were it “organized and made effective solely by virtue of a contract, combination or conspiracy of private persons, individual or corporate,” and that “Congress could, in the exercise of its commerce power, prohibit a state from maintaining a stabilization program like the present because of its effect on interstate commerce.” 317 U. S., at 350. In this regard, we noted that “[o]ccupation of a legislative field by Congress in the exercise of a granted power is a familiar example of its constitutional power to suspend state laws.” Ibid. We then held, however, that “[w]e 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
This is clearly the language of federal pre-emption under the
Our two most recent Parker doctrine cases reveal most clearly that the “state action” doctrine is not an exemption at all, but instead a matter of federal pre-emption.
In New Motor Vehicle Bd. of California v. Orrin W. Fox Co., 439 U. S. 96 (1978), we examined the contention that the California Automobile Franchise Act conflicted with the Sherman Act. That Act required a motor vehicle manufacturer to secure the approval of the California New Motor Vehicle Board before it could open a dealership within an existing franchisee‘s market area, if the competing franchisee objected. By so delaying the opening of a new dealership whenever a competing dealership protested, the Act arguably gave effect to privately initiated restraints of trade, and thus was invalid under Schwegmann Bros. v. Calvert Distillers Corp., 341 U. S. 384 (1951). We held that the Act was outside the purview of the Sherman Act because it con-
In California Retail Liquor Dealers Assn. v. Midcal Aluminum, Inc., 445 U. S. 97 (1980), we invalidated California‘s wine-pricing system in the face of a challenge under the Sherman Act. We first held that the price-setting program constituted resale price maintenance, which this Court has consistently held to be a “per se” violation of the Sherman Act. Id., at 102-103. We then concluded that the program could not fit within the Parker doctrine. Although the restraint was imposed pursuant to a clearly articulated and affirmatively expressed state policy, the program was not actively supervised by the State itself. The State merely authorized and enforced price fixing established by private parties, instead of establishing the prices itself or reviewing their reasonableness. In the absence of sufficient state supervision, we held that the pricing system was invalid under the Sherman Act. 445 U. S., at 105-106.
Unlike the instant case, Parker, Midcal, and New Motor Vehicle Bd. involved challenges to a state statute. There was no suggestion that a State violates the Sherman Act when it enacts legislation not saved by the Parker doctrine from invalidation under the Sherman Act. Instead, the statute is simply unenforceable because it has been pre-empted by the Sherman Act. By contrast, the gist of the Court‘s
Viewing the Parker doctrine in this manner will have troubling consequences for this Court and the lower courts who must now adapt antitrust principles to adjudicate Sherman Act challenges to local regulation of the economy. The majority suggests as much in footnote 20. Among the many problems to be encountered will be whether the “per se” rules of illegality apply to municipal defendants in the same manner as they are applied to private defendants. Another is the question of remedies. The Court understandably leaves open the question whether municipalities may be liable for treble damages for enacting anticompetitive ordinances which are not protected by the Parker doctrine.2
Most troubling, however, will be questions regarding the factors which may be examined by the Court pursuant to the Rule of Reason. In National Society of Professional Engi-neers v. United States, 435 U. S. 679, 695 (1978), we held that an anticompetitive restraint could not be defended on the basis of a private party‘s conclusion that competition posed a potential threat to public safety and the ethics of a particular profession. “[T]he Rule of Reason does not support a defense based on the assumption that competition itself is unreasonable.” Id., at 696. Professional Engineers holds that the decision to replace competition with regulation is not within the competence of private entities. Instead, private entities may defend restraints only on the basis that the restraint is not unreasonable in its effect on competition or because its procompetitive effects outweigh its anticompetitive effects. See Continental T. V., Inc. v. GTE Sylvania Inc., 433 U. S. 36 (1977).
Applying Professional Engineers to municipalities would mean that an ordinance could not be defended on the basis that its benefits to the community, in terms of traditional health, safety, and public welfare concerns, outweigh its anticompetitive effects. A local government would be disabled from displacing competition with regulation. Thus, a municipality would violate the Sherman Act by enacting restrictive zoning ordinances, by requiring business and occupational licenses, and by granting exclusive franchises to utility services, even if the city determined that it would be in the best interests of its inhabitants to displace competition with regulation. Competition simply does not and cannot further the interests that lie behind most social welfare legislation. Although state or local enactments are not invalidated by the Sherman Act merely because they may have anticompetitive effects, Exxon Corp. v. Governor of Maryland, supra, at 133, this Court has not hesitated to invalidate such statutes on the basis that such a program would violate the antitrust laws if engaged in by private parties. See California Retail Liquor Dealers Assn. v. Midcal Aluminum, Inc., supra, at 102-103 (resale price maintenance); Schwegmann Bros. v. Calvert Distillers Corp., 341 U. S. 384 (1951) (same). Cf. Parker v. Brown, 317 U. S., at 350
On the other hand, rejecting the rationale of Professional Engineers to accommodate the municipal defendant opens up a different sort of Pandora‘s Box. If the Rule of Reason were “modified” to permit a municipality to defend its regulation on the basis that its benefits to the community outweigh its anticompetitive effects, the courts will be called upon to review social legislation in a manner reminiscent of the Lochner (Lochner v. New York, 198 U. S. 45 (1905)) era. Once again, the federal courts will be called upon to engage in the same wide-ranging, essentially standardless inquiry into the reasonableness of local regulation that this Court has properly rejected. Instead of “liberty of contract” and “substantive due process,” the procompetitive principles of the Sherman Act will be the governing standard by which the reasonableness of all local regulation will be determined.3 Neither the
Before this Court leaps into the abyss and holds that municipalities may violate the Sherman Act by enacting economic and social legislation, it ought to think about the consequences of such a decision in terms of its effect both upon the very antitrust principles the Court desires to apply to local governments and upon the role of the federal courts in examining the validity of local regulation of the economy.
Analyzing this problem as one of federal pre-emption rather than exemption will avoid these problems. We will not be confronted with the anomaly of holding a municipality liable for enacting anticompetitive ordinances.4 The federal courts will not be required to engage in a standardless review of the reasonableness of local legislation. Rather, the question simply will be whether the ordinance enacted is preempted by the Sherman Act. I see no reason why a different rule of pre-emption should be applied to testing the validity of municipal ordinances than the standard we presently apply in assessing state statutes. I see no reason why a municipal ordinance should not be upheld if it satisfies the
Apart from misconstruing the Parker doctrine as a matter of “exemption” rather than pre-emption, the majority comes to the startling conclusion that our federalism is in no way implicated when a municipal ordinance is invalidated by the Sherman Act. I see no principled basis to conclude, as does the Court, that municipal ordinances are more susceptible to invalidation under the Sherman Act than are state statutes. The majority concludes that since municipalities are not States, and hence are not “sovereigns,” our notions of federalism are not implicated when federal law is applied to invalidate otherwise constitutionally valid municipal legislation. I find this reasoning remarkable indeed. Our notions of federalism are implicated when it is contended that a municipal ordinance is pre-empted by a federal statute. This Court has made no distinction between States and their subdivisions with regard to the pre-emptive effects of federal law.
As with the States, the Parker doctrine should be employed to determine whether local legislation has been pre-empted by the Sherman Act. Like the State, a municipality should not be haled into federal court in order to justify its decision that competition should be replaced with regulation. The Parker doctrine correctly holds that the federal interest in protecting and fostering competition is not infringed so long as the state or local regulation is so structured to ensure that it is truly the government, and not the regulated private entities, which is replacing competition with regulation.
II
By treating the municipal defendant as no different from the private litigant attempting to invoke the Parker doctrine, the Court‘s decision today will radically alter the relationship between the States and their political subdivisions. Municipalities will no longer be able to regulate the local economy without the imprimatur of a clearly expressed state policy