Opinion ID: 1058225
Heading Depth: 3
Heading Rank: 2

Heading: Scope of the TTPA

Text: We must next determine whether the conduct complained of falls within the scope of the TTPA. Tennessee Code Annotated section 47-25-101 (2001) provides that [a]ll arrangements, contracts, agreements, trusts, or combinations between persons or corporations made with a view to lessen, or which tend to lessen, full and free competition in the importation or sale of articles imported into this state, or in the manufacture or sale of articles of domestic growth or of domestic raw material, and all arrangements, contracts, agreements, trusts, or combinations between persons or corporations designed, or which tend, to advance, reduce, or control the price or the cost to the producer or the consumer of any such product or article, are declared to be against public policy, unlawful, and void. This Court last addressed the reach of the TTPA in Standard Oil Co. v. State, 117 Tenn. 618, 100 S.W. 705, 709 (1907), in which we held that this state's antitrust statutes did not apply to interstate commerce when properly construed and that the statute's purpose was to correct and prohibit abuses of trade within the state. At the time of this holding, a theory of dual sovereignty presuming mutually exclusive jurisdiction for state and federal regulation prevailed. See Abbott Labs. v. Durrett, 746 So.2d 316, 330-34 (Ala.1999) (discussing the theory of dual sovereignty). In Standard Oil Co., this Court reasoned that the state legislature knew it did not have the power to enact laws that regulated interstate commerce and thus did not intend to enact unconstitutional law. 100 S.W. at 710. We further reasoned that the state legislature intended to correct and punish the wrongs to trade that were being perpetrated against commerce within the state, which the Sherman Antitrust Act could not reach and for which no efficient remedy was available. Id. Thus, we concluded that [t]he Legislature clearly intended to prohibit trusts, combinations, and agreements affecting all commerce not covered by the federal statute, and upon which it had a right to legislate. It did not intend to stop short of its power or to exceed it. Id. at 711. The language of Tennessee's antitrust statutes have not changed significantly since Standard Oil Co. Compare Standard Oil Co., 100 S.W. at 707, with Tenn.Code Ann. § 47-25-101 (2001). In Standard Oil Co., however, this Court did not rely upon the plain language of this state's antitrust statutes in determining its scope. Rather, our holding was based upon two principles of statutory construction. First, courts have a duty to construe statutes in such a manner as to avoid conflict with the United States Constitution if the construction can be accomplished without disregarding the legislature's intent. Standard Oil Co., 100 S.W. at 710. Second, although a statute includes terms that are overly broad, courts have a duty to limit a statute's application to circumstances within the legislature's intent. Id. at 711. We based our holding upon the state legislature's constitutionally permitted scope of authority in the areas of antitrust law and interstate commerce that prevailed at that time as well as upon our duty to construe a statute so as to avoid any unconstitutionality. The dual sovereignty theory presuming mutually exclusive jurisdiction for state antitrust laws and federal antitrust laws has since been rejected. The United States Supreme Court now considers state antitrust regulations to supplement and complement the federal antitrust laws and the enforcement of these state laws to be consistent with the federal antitrust laws. See ARC Am. Corp., 490 U.S. at 101-02, 109 S.Ct. 1661. Furthermore, a state generally is not prohibited from giving effect to its antitrust laws merely because the regulation affects interstate commerce. See Standard Oil Co. v. Tenn., 217 U.S. 413, 30 S.Ct. 543, 54 L.Ed. 817 (1910). Specifically, a state antitrust regulation that has only incidental effects on interstate commerce and is regulated evenhandedly to effectuate a legitimate local interest does not run afoul of the Commerce Clause unless the burden imposed on interstate commerce is clearly excessive when compared to the punitive local benefits. See Pike v. Bruce Church, Inc., 397 U.S. 137, 142, 90 S.Ct. 844, 25 L.Ed.2d 174 (1970). In construing statutes, we must ascertain and give effect to the legislature's intent and purpose. See Lipscomb v. Doe, 32 S.W.3d 840, 844 (Tenn.2000). Furthermore, we must construe a statute so as to avoid a constitutional conflict if any reasonable construction exists that satisfies the Constitution's requirements. Davis-Kidd Booksellers, Inc. v. McWherter, 866 S.W.2d 520, 529 (Tenn.1993). Thus, in construing the reach of the TTPA, we must develop a standard that is consistent with the legislature's intent and purpose without offending constitutional provisions. The TTPA prohibits agreements adversely affecting competition in the sale of articles imported into this state or influencing the price or the cost to the producer or the consumer of any such product or article. Tenn.Code Ann. § 47-25-101 (2001). According to its plain language, the TTPA prohibits arrangements that decrease competition or affect the prices of goods even if those goods arrived in Tennessee through interstate commerce. The act does not contain any language indicating that the legislature intended that the scope of the act be limited to intrastate commerce. Had the legislature intended such a limitation, the legislature simply could have included the limitation in the act. In developing a standard for determining the application of the TTPA to a particular set of circumstances, we must determine whether the focus should be upon the anticompetitive conduct of the defendant or the effects of the anticompetitive conduct. In examining whether the circumstances of a particular case fall within the TTPA, the Court of Appeals has employed a conduct-based test focusing upon the character of the defendant's anticompetitive conduct giving rise to the dispute. See Lynch Display Corp. v. Nat'l Souvenir Ctr., Inc., 640 S.W.2d 837, 840 (Tenn.Ct.App.1982) (holding that a lease between a Tennessee corporation and a Maryland corporation and an associated franchise agreement between a Tennessee corporation and a District of Columbia corporation were predominantly interstate in character and only incidentally affect[ed] intrastate commerce). Any test focusing upon the anticompetitive conduct giving rise to the dispute, however, would be difficult to apply when the plaintiff is an indirect purchaser who did not transact directly with the defendant. Furthermore, the purpose of the TTPA is to protect the state's trade or commerce affected by the anticompetitive conduct. See State ex rel. Astor v. Schlitz Brewing Co., 104 Tenn. 715, 59 S.W. 1033, 1039 (1900) (The thing condemned and punished by the Act is injury to trade. The thing intended to be protected is trade. . . .). Thus, we reject any standard that requires examination of the anticompetitive conduct in determining whether a particular case falls within the scope of the TTPA. Rather, the effect of the anticompetitive conduct on Tennessee trade or commerce is determinative of whether the TTPA is applicable under the circumstances. We must now determine the standard to employ in examining whether the effects of the anticompetitive conduct on Tennessee trade or commerce fall within the scope of the TTPA. One possible standard is a predominant effects standard. The term predominant is defined as [s]omething greater or superior in power and influence to others with which it is connected or compared. Black's Law Dictionary 1177 (6th ed.1990). Thus, anticompetitive conduct cannot predominantly affect both intrastate commerce and interstate commerce. Under a predominant effects standard, courts would be required to weigh the effects of anticompetitive conduct on Tennessee commerce against its effects on interstate commerce and determine which effects are greater. If the effects on interstate commerce are greater than the effects on Tennessee commerce, the TTPA would not apply. In construing the TTPA, other jurisdictions have utilized a predominant standard in applying a conduct-based test. See e.g., In re Terazosin Hydrochloride Antitrust Litig., 160 F.Supp.2d 1365, 1378 (S.D.Fla.2001); FTC v. Mylan Labs., Inc., 99 F.Supp.2d 1, 4 (D.C.Cir.1999). In our modern society, however, interstate and international transactions have become more common. Numerous technological advances, including the internet, enable consumers and businesses from opposite areas of the country to engage in transactions with ease. See generally, John Rothchild, Protecting the Digital Consumer: The Limits of Cyberspace Utopianism, 74 Ind. L.J. 893 (1999) (discussing the increase in business-to-consumer online commerce). Adoption of a predominant effects standard would render the TTPA obsolete except in those rare circumstances in which the effects on intrastate commerce are greater than the effects on interstate commerce. We do not believe that this standard is sufficient to advance the TTPA's purpose of protecting Tennessee trade and commerce. We conclude that the proper standard for determining whether a case falls within the scope of the TTPA is a substantial effects standard. Pursuant to this standard, courts must decide whether the alleged anticompetitive conduct affects Tennessee trade or commerce to a substantial degree. Federal courts have applied the substantial effects standard to the Sherman Antitrust Act. See Hartford Fire Ins. Co. v. California, 509 U.S. 764, 796, 113 S.Ct. 2891, 125 L.Ed.2d 612 (1993) (concluding that the Sherman Act applies to foreign conduct that was meant to produce and did in fact produce some substantial effect in the United States); McLain v. Real Estate Bd. of New Orleans, Inc., 444 U.S. 232, 242, 100 S.Ct. 502, 62 L.Ed.2d 441 (1980) (holding that [t]o establish the jurisdictional element of a Sherman Act violation it would be sufficient for petitioners to demonstrate a substantial effect on interstate commerce generated by activity that is primarily local in nature). Other states also apply a form of substantial effects standard in determining whether an action falls within their antitrust statute. See e.g., Amarel v. Connell, 202 Cal.App.3d 137, 248 Cal.Rptr. 276, 284 (1988) (holding that a cause of action under California's antitrust law is not precluded so long as the anticompetitive conduct had a direct, substantial and reasonably foreseeable effect within the state); Olstad v. Microsoft Corp., 700 N.W.2d 139 (Wis.2005) (concluding that Wisconsin's antitrust statute applies if the actionable conduct `substantially affects' the people of Wisconsin and has impacts in [the] state, even if the illegal activity resulting in those impacts occurred predominantly or exclusively outside [the] state). We believe that a substantial effects standard furthers the TTPA's goal of protecting Tennessee commerce without offending constitutional provisions. The determination of whether an effect is substantial does not involve mathematical nicety. Anesthesia Advantage, Inc. v. Metz Group, 912 F.2d 397, 401 (10th Cir.1990). Rather, the test is pragmatic, turning upon the particular facts of the case. See id. at 402; Huelsman v. Civic Ctr. Corp., 873 F.2d 1171, 1175 (8th Cir.1989). The anticompetitive conduct, however, need not threaten the demise of Tennessee businesses or affect market prices to substantially affect intra-state commerce. See Hospital Bldg. Co. v. Trs. of Rex Hosp., 425 U.S. 738, 745-47, 96 S.Ct. 1848, 48 L.Ed.2d 338 (1976) (referring to the Sherman Antitrust Act). In the present case, Freeman alleges that Eastman engaged in conduct from its principal place of business in Kingsport, Tennessee, including: 1) communicating with its co-defendants through in-person meetings, telephone calls, letters, and email resulting in an agreement to fix the prices of sorbates; 2) implementing the agreement by drafting price schedules and letters to third parties, adjusting prices and production volumes of sorbates, and taking orders and implementing sales to customers at the new prices; and 3) attempting to conceal its conduct by limiting the number of its employees having knowledge of the agreement. These allegations primarily relate to the defendants' actions in conspiring and implementing the conspiracy to fix the prices of sorbates. The focus under the substantial effects standard, however, is not on the anticompetitive conduct itself but on the effects of the conduct on Tennessee commerce. While Freeman alleged that Eastman took orders and implemented sales to customers at the new prices from Tennessee, we do not believe that this bare allegation without more is sufficient to establish that Tennessee commerce was substantially affected. Furthermore, Freeman fails to establish how the defendants' anticompetitive conduct affected Tennessee commerce to a substantial degree even though the conduct resulted in Freeman paying higher prices to retailers for items containing sorbates. To the contrary, there is no indication that the items that Freeman purchased contained sorbates manufactured by Eastman, the lone defendant with ties to Tennessee. Therefore, we conclude that Freeman's claim does not fall within the scope of the TTPA and that the trial court properly granted the defendants' motion to dismiss Freeman's claim.