Opinion ID: 602387
Heading Depth: 2
Heading Rank: 2

Heading: Anti-Trust Law

Text: 14 The Sherman Anti-Trust Act (the Act) 14 makes unlawful [e]very contract, combination ... or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations.... 15 The act also makes it unlawful to monopolize, or attempt to monopolize, or combine to conspire with any other person or persons to monopolize any part of the trade or commerce among the several States or with foreign nations.... 16 In the seminal case of Parker v. Brown, 17 the Supreme Court, addressing whether a state marketing program violated the Act, held that 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. Therefore, in view of the [Act's] words and history, it must be taken to be a prohibition of individual and not state action. 18 15 Thus, from Parker originated the state action doctrine, which confers anti-trust immunity for state regulatory programs. The Court subsequently made clear in Midcal 19 that private party conduct pursuant to a regulatory program shares this immunity only if the conduct meets both prongs of a two-prong test, thenceforth called the Midcal test. This test requires that: (1) the challenged restraint be clearly articulated and affirmatively expressed as state policy; and (2) the state actively supervise any anticompetitive conduct. 20
16 The district court held, and Bell agrees, that this prong is satisfied by PURA, which provides: 17 This Act is enacted to protect the public interest inherent in the rates and services of public utilities. The legislature finds that public utilities are by definition monopolies in the areas they serve; that therefore the normal forces of competition which operate to regulate prices in the free enterprise society do not operate; and that therefore utility rates, operations and services are regulated by public agencies with the objective that such regulation shall operate as a substitute for such competition. The purpose of this Act is to establish a comprehensive regulatory system which is adequate to the task of regulating public utilities as defined by this Act, to assure rates, operations, and services which are just and reasonable to the consumers and to the utilities. 21 18 Again, we have previously held in Metro I 22 that Bell meets the first prong of the Midcal Test. As neither Ticor nor any other Supreme Court decision or subsequent legislation has changed the legal foundation of that holding, we are bound by the law of the case doctrine to follow our finding in Metro I that the Texas system satisfies the first Midcal prong.
19 The real issue in this appeal, then, is the second prong of the Midcal Test--whether the state of Texas actively supervises the regulatory conduct in question within the contemplation of Ticor. The challenged conduct in Ticor was a horizontal price-fixing scheme within the title insurance industry. In the instant case, the identity of the challenged conduct is the focus of dispute between the parties. On one hand, Metro insists that the challenged conduct is Bell's threat to cut-off Metro's access to Bell's phone lines, thereby forcing Metro out of business. On the other hand, Bell contends that the challenged conduct is the application of the appropriate rate. According to Bell, the rate is set by the PUC and Bell has no discretion in its application. Bell also explains that the threat to cut-off Metro's line access was merely the explained consequences that would follow if--but only if--Metro refused to pay the appropriate line charges. 20 Despite Metro's protestations, the conduct which it challenges is the application of the established rates. Metro's attempt to finesse the language of PURA and to manipulate the facts is mere obfuscation. Although the ultimate effect of Bell's application of the higher rates may well be the death knell of Metro's business, that does not alter the character of Bell's initial conduct. In other words, the possible future consequences of the action are irrelevant to our inquiry. Neither is it of consequence that Bell may have harbored some secret desire to rid itself of a competitor. The state action doctrine  'does not depend on the subjective motivation of the individual actors, but rather on the satisfaction of the objective standards set forth in Parker ... and authorities which interpret it.'  23 The only question for our review is whether the state sufficiently supervises the challenged conduct--here, the ratemaking and rate application process. 21 Having identified the challenged conduct, we now examine the requirements of Midcal's active supervision prong, as newly restated in Ticor. In that case, the Supreme Court held that  'the mere presence of some state involvement or monitoring does not suffice.'  24 Rather, the state supervision must be active; state officials must be vested with the power to review particular anti-competitive acts and to disapprove those actions that do not comply with state policy. 25 [T]he purpose of the active supervision inquiry is not to determine whether the State has met some normative standard, such as efficiency, in its regulatory practices. Its purpose is to determine whether the State has exercised sufficient independent judgment and control so that the details of the rates or prices have been established as a product of deliberate state intervention, not simply by agreement among private parties. 26 22 The Texas regulatory structure under PURA provides for an active role for the PUC. The PUC is authorized to establish rates, which are defined as every compensation ... and any rules, regulations, practices or contracts affecting any such compensation, tariff ... or classification. 27 The PUC's authority, therefore, is not limited to reviewing the fee charged for a particular service, but in fact extends to reviewing rules, regulations, and practices of a utility. In addition, PURA provides a forum for complaints from any affected person or from the PUC whenever the regulatory authority ... finds that the existing rates of any public utility for any service are unreasonable or in any way in violation of any provision of the law. 28 23 Alone, however, this potential for supervision does not satisfy the second prong of the Midcal test. The PUC must actually fulfill the active role granted to it under the statute. 24 A review of the record demonstrates to our comfortable satisfaction that the PUC does in fact actively supervise ratemaking and enforcement as defined by PURA to include the rules, regulations, and practices of utilities. The record reflects numerous references to the PUC's inquiry into the reasonableness of Bell's rates, in Docket 8585 filed January 4, 1989. 29 In addition to this specific inquiry into Bell's rates, published decisions reflect that the PUC has conducted other broad-based ratemaking proceedings. 30 In like manner, the record and published opinions together demonstrate that PURA provides a forum for complaints regarding the application of tariffs. 31 25 Most importantly, Metro and Bell filed a joint pleading recognizing that, while this suit was pending, the PUC was adjudicating the very same issues presented in the instant case. In fact, the very same attorneys participated in these state proceedings in January 1992. It is ludicrous, almost to the point of frivolity, for Metro to contend that the PUC does not actively supervise the conduct in question given the fact that Metro and Bell are awaiting a PUC decision on Bell's actions as we speak. 26 These indisputable public records make it abundantly clear that the Texas regulatory scheme is a far cry from the passive regulatory schemes at issue in Ticor which failed the Midcal test. The systems contested in Ticor provided virtually no actual state supervision, allowing rates to come into effect with only minimal review of some of the rates for mathematical accuracy. 32 Instead of featuring independent state ratemaking, the title insurance rates at issue were set by the title insurance industry itself, with no input from or control by the states. Obviously, under such schemes, the absence of any state involvement prevents the private conduct at issue from qualifying for anti-trust immunity under the state action doctrine. 27 The Texas public utilities regulatory scheme, by contrast, does not suffer from this flaw. The Texas system authorizes the state, through the Commission, to control the initial establishment of rates, rules and regulations of the utilities, and allows a complaining party to challenge the application of a particular rate through the PUC. And, more importantly, the record before us confirms that the PUC acts under that grant of authority with sufficient involvement to satisfy Ticor's interpretation of the second prong of the Midcal test. IV