Opinion ID: 392693
Heading Depth: 1
Heading Rank: 3

Heading: the antitrust question

Text: 35 The remaining federalism issue is whether the Sherman Act preempts and displaces local legislation creating municipal monopolies whether restraining competition in solid waste by local government stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress in enacting the antitrust laws. Hines v. Davidowitz, 312 U.S. 52, 67, 61 S.Ct. 399, 404, 85 L.Ed. 581 (1941). 36 Plaintiffs argue that the state action exemption to the antitrust laws first articulated in Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943) (upholding a California agricultural program restricting the marketing of raisins in order to maintain farm prices), does not apply to cities unless the state by legislation has explicitly authorized the local anti-competitive conduct and maintains a high degree of supervision over the local conduct. 37 For this argument the plaintiffs rely primarily on City of Lafayette v. Louisiana Power & Light Co., 435 U.S. 389, 98 S.Ct. 1123, 55 L.Ed.2d 364 (1978), a case in which a municipal electric utility sought to force customers who lived outside the city into tying and other anticompetitive arrangements. Four members of the Court in that case agreed that the state action exemption does not protect municipalities from antitrust liability when their anticompetitive actions are not (a) directed or authorized and (b) supervised by the state as a part of a state policy to substitute regulation or monopoly for competition. Id. at 410, 98 S.Ct. at 1135 (discussing Bates v. State Bar of Arizona, 433 U.S. 350, 97 S.Ct. 2691, 53 L.Ed.2d 810 (1977)). Accord, California Retail Liquor Dealers Ass'n v. Midcal Aluminum, Inc., 445 U.S. 97, 100 S.Ct. 937, 63 L.Ed.2d 233 (1980). Chief Justice Burger concurred specially in the opinion, finding the city subject to liability under the Sherman Act, but his reasoning was entirely different from the other members of the majority. He reasoned that the state action exemption should be inapplicable when cities are engaged in business activity, as distinguished from a governmental function. He viewed the operation of a municipal electric company as an entrepreneurial or proprietary function and therefore subject to the antitrust laws. Four members of the Court dissented on the ground that local governmental bodies are simply not subject to the Sherman Act. Another possible rationale for the decision of the majority arises from the fact that the city was seeking to exercise market or monopoly power outside its corporate boundaries, that is, outside the area in which it was empowered to act as a government under state law. Although the opinions do not stress this fact, it may turn out that the narrow holding of the case is that a city loses its antitrust exemption if it competes with others outside the boundaries of its governmental authority in an area in which it is not politically accountable. 38 It is difficult for us to apply the Lafayette decision since the plurality and dissenting opinions are each supported by four justices, and no line of reasoning commands a majority of the Court. Whatever principle the Supreme Court may settle on in the future respecting municipal antitrust liability, however, we believe the city of Akron is exempt from the Sherman Act in this case. Garbage collection and the operation of incineration plants are traditional activities of local government. As discussed above, the reported cases, state and federal, have long allowed municipalities to create monopolies and restrain competition in carrying out this function. Moreover, in Ohio, the home rule provisions of the state Constitution, as interpreted by the Ohio Supreme Court in the Cincinnati case, supra, authorize local government to create a municipal solid waste monopoly. The legal system of the state specifically allows the municipal ordinance in question here, and an agency of the state, the Water Authority, maintains some oversight of the facility. In addition, the City is acting entirely within its own governmental boundaries. It is affecting people to whom it is politically accountable. Finally, the United States government has advised us that this municipal activity is in accord with federal energy and environmental policy as established in the Resource Conservation and Recovery Act, and as practiced by the Environmental Protection Agency and the Department of Energy. 5 These departments are encouraging and assisting cities and towns in building such facilities and controlling solid waste collection and disposal. 39 Scholars have pointed out that the essential conflict of values here is the conflict between the ideals of competition and free markets embodied in the Sherman Act and the principles of federalism contained in the Tenth and Eleventh Amendments. 6 In National League of Cities v. Usery, 426 U.S. 833, 96 S.Ct. 2465, 49 L.Ed.2d 245 (1976), the Supreme Court reviewed the limits imposed by the Tenth Amendment upon Congressional authority to regulate state governmental activities under its commerce clause power. The Court held that Congress could not directly displace the States' freedom to structure integral operations in areas of traditional governmental functions.... Id. at 852, 96 S.Ct. at 2474. Various courts have since used and refined the National League of Cities test to determine which of the multitude of local governmental activities are insulated from federal regulation. See, e. g. Amersbach v. City of Cleveland, 598 F.2d 1033 (6th Cir. 1979) (operation of metropolitan airport an integral governmental function; terms 'traditional' or 'integral' are to be given a meaning permitting expansion to meet changing times); United Transportation Union v. Long Island Ry. Co., 634 F.2d 19 (2d Cir. 1980) (provision of commuter rail service an integral governmental function; not only is (rail service) essential to the public, but it is also essential that the government step in to furnish it). Although the scope of Tenth Amendment limitations on affirmative congressional action is narrow, Tenth Amendment values should not be narrowly read when Congress has not expressly or by clear implication displaced a traditional exercise of local police power. 40 Since solid waste disposal including the regulation of garbage collection, incineration and recycling is a customary area of local concern long reserved to state and local governments by practice, tradition and legal precedent, the Sherman Act should not apply. Tenth and Eleventh Amendment values support the authority of local governments to act in this field. Their plenary, governmental power to deal with such local problems affecting the public interest should not be preempted or displaced by general statutory policies favoring an economic model of competition for businessmen and industrialists operating in private markets. 41 Finally, there is a policy argument that even if defendants may regulate or monopolize the collection and disposal of nonrecyclable, valueless waste whether for public health and safety or economic reasons they may not do so for recyclables. This is because once recyclables are separated from the mass of garbage, their transport and reuse cause no danger to the public health and impose no costs upon the community. In addition, a market for recyclables has grown up in recent years, whose development should be encouraged rather than inhibited by the government. Finally, because no market failures exist leading to the creation of a natural monopoly, defendants are not economically justified in their intervention and regulation in the market for recyclables. 42 We are uncertain whether or not this argument represents good public policy. The legislators, planners and administrators involved do not agree with it. The planners and legislators for the City, the Environmental Protection Agency and the Department of Energy agree that private markets should be replaced by municipal control of recyclable wastes in this instance. The policy question here, in our judgment, is debatable and should not be taken out of municipal hands by federal courts in the absence of congressional intent clearly expressed. 43 Accordingly, the judgment of the District Court is affirmed.