Opinion ID: 2615183
Heading Depth: 1
Heading Rank: 4

Heading: The Cartwright Act is applicable to interstate activities.

Text: The anticompetitive activity in the present case  being both interstate and intrastate in character  is in the penumbral zone of the antitrust jurisdictional continuum, i.e., subject to overlapping state and federal authority. As I have explained, there is no supremacy clause bar to concurrent state jurisdiction in this area. The inquiry, then, is whether, given the requisite local nexus, the state is precluded by the commerce clause from affecting interstate commerce in its regulation of restraints on trade. The Chargers contend that no California case has upheld state regulation of interstate conduct comparable to the national practices here at issue, and that Cartwright Act enforcement has been limited to activities wholly within California. They further argue that prior cases deal only with supremacy clause preemption and not commerce clause preclusion. [12] The Chargers mischaracterize our case law. California cases have held, despite the lack of an unambiguous Supreme Court directive, that the state may, consistent with the commerce clause, regulate restraints on trade which affect interstate commerce. This court has recently stated that [n]either the Sherman Act nor the federal prohibition of undue burdens on interstate commerce ... prevents [the Cartwright Act] from reaching transactions that have interstate aspects, but significantly affect state interests. ( Younger v. Jensen, supra, 26 Cal.3d 397, 405; citing Speegle v. Board of Fire Underwriters, supra, 29 Cal.2d 34; R.E. Spriggs v. Coors Co., supra, 37 Cal. App.3d 653.) Although the issue in Younger concerned the authority of the Attorney General to investigate into the existence of antitrust violations, this court's statement regarding preclusion reaffirmed prior cases which have held that our state may regulate anticompetitive activities that affect interstate commerce. Speegle and Coors inescapably support the conclusion that Cartwright Act enforcement is not limited to wholly intrastate activities. Coors involved a Cartwright Act action alleging antitrust violations in the California beer distribution system of an out-of-state brewer. Although the Court of Appeal was primarily confronted with a preemption challenge, it explicitly recognized that any holding against federal exclusivity would affect interstate commerce; accordingly, it proceeded to discuss commerce clause preclusion. While acknowledging that only Coors' California distribution scheme was being challenged, the court correctly noted that as this state's regulation of the distribution scheme would clearly affect Coors' overall methods of distribution which are in interstate commerce, interstate commerce is both involved and affected. (37 Cal. App.3d at p. 658, fn. 4.) It had earlier observed that [t]here is no question but that at all times relevant to this case, Coors was engaged in interstate commerce. ( Id., at p. 656.) After concluding that neither the supremacy clause nor the Sherman Act preempted the Cartwright Act, the court turn[ed] to the question of whether the nature of the regulated subject requires federal preeminence. ( Id., at p. 660, original italics.) The court answered this question in the negative by employing the balancing approach enunciated in California v. Zook, supra, 336 U.S. 725. The approach has been to reconcile the relevant state and federal interests and to find that the states have a valid interest in regulating unfair competitive practices within their jurisdictions, and that this power is not lost merely because the activity affects interstate commerce.  ( Id., at p. 663, italics added.) Earlier, the Coors opinion had observed that there was no undue burden on interstate commerce in that the Cartwright Act, ... is complementary to the relevant provisions of the federal statutes and may be justified as a reasonable means of protecting a significant state interest, i.e., prevention of unfair competition. ( Id., at p. 659.) Of significance is the Coors court's recognition that finding state preclusion whenever interstate commerce is involved would effectively destroy most state antitrust enforcement since, in light of the vastly increased domain of federal commerce clause authority, states would be relegated to a severely restricted realm of intrastate commerce. With the demise of the mechanical dual sovereignty theory and the development of expansive federal power over activities merely affecting interstate commerce (see, e.g., Manderille Farms v. Sugar Co. (1948) 334 U.S. 219 [92 L.Ed. 1328, 68 S.Ct. 996]; United States v. Frankfort Distilleries (1945) 324 U.S. 293, 298 [89 L.Ed. 951, 956, 65 S.Ct. 661] [Congress in passing the Sherman Act, left no area of its constitutional power unoccupied]), the regulatory power of the national government has become so broad that, if fully exercised, virtually all intrastate activity might be regulated to the complete exclusion of state authority (see, e.g., Perez v. United States (1971) 402 U.S. 146 [28 L.Ed.2d 686, 91 S.Ct. 1357] [loan sharking]; Atlanta Motel v. United States (1964) 379 U.S. 241 [13 L.Ed.2d 258, 85 S.Ct. 348] [public accommodations]). Recognizing the potential for nullification of much state effort in the antitrust field[,] the Court of Appeal aptly observed: If state regulations were to lose effectiveness as soon as interstate commerce is affected, a large policing area would be excluded, and the states would become helpless to protect [their] citizens, though no national benefit would accrue. ( Commonwealth v. McHugh, 326 Mass. 249 [93 N.E.2d 751, 761-764].) Exclusion would necessarily result whenever the subject activity `substantially affects' interstate commerce. [13] (37 Cal. App.3d at p. 660; citing Burke v. Ford (1967) 389 U.S. 320 [19 L.Ed.2d 554, 88 S.Ct. 443].) Similarly, a federal court has recently noted that [d]espite the broad reach of the federal commerce power, state antitrust laws retain vitality in dealing with matters which, while having interstate aspects, significantly affect local interests. ( Salveson v. Western States Bankcard Ass'n. (N.D.Cal. 1981) 525 F. Supp. 556, 573-574.) An earlier decision by this court, Speegle v. Board of Fire Underwriters, supra, 29 Cal.2d 34, further supports the view that the state is not precluded from regulating interstate activity once a local nexus is established. The issue before this court was whether the application of the Cartwright Act to the insurance business was precluded in light of a then-recent Supreme Court decision holding that insurance transactions were interstate commerce. ( U.S. v. Underwriters Assn. (1944) 322 U.S. 533 [88 L.Ed. 1440, 64 S.Ct. 1142].) For three-quarters of a century prior to South-Eastern, insurance had been regulated by the states, as this business had been held not to constitute interstate commerce. ( Paul v. Virginia (1869) 75 U.S. (8 Wall.) 168 [19 L.Ed. 357].) However, the Supreme Court strongly suggested that the redefinition of insurance as interstate activity did not necessarily deprive state courts of jurisdiction to regulate this business, [14] and, accordingly, the court set forth a balancing test to decide the preclusion question: ... [T]he primary test applied by the Court is not the mechanical one of whether the particular activity affected by the state regulation is part of interstate commerce, but rather whether, in each case, the competing demands of the state and national interests involved can be accommodated. And the fact that particular phases of an interstate business or activity have long been regulated or taxed by states has been recognized as a strong reason why, in the continued absence of conflicting Congressional action, the state regulatory and tax laws should be declared valid.... ( South-Eastern, supra, at pp. 548-549 [88 L.Ed. at pp. 1454-1455].) Relying on the above-quoted language, this court held in Speegle that since there is no conflict between the Cartwright Act and the Sherman Act, state law applies even if interstate commerce is involved. (29 Cal.2d at p. 51.) Speegle stated: `State laws are not invalid under the Commerce Clause unless they actually discriminate against interstate commerce or conflict with a regulation enacted by Congress.' ( Id., at p. 50.) (The Speegle court, however, omitted mention of the additional limitation  enunciated in Supreme Court cases dealing with state regulations outside the antitrust context  that the state may not impose an undue burden on interstate commerce  see, e.g., Pike v. Bruce Church Inc. (1970) 397 U.S. 137, 142 [25 L.Ed.2d 174, 178-179, 90 S.Ct. 844]; Bibb v. Navajo Freight Lines (1959) 359 U.S. 520 [3 L.Ed.2d 1003, 79 S.Ct. 962].) The foregoing demonstrates that the courts of this state have held, consistent with Supreme Court authority, [15] that the state may regulate interstate anticompetitive activity subject to certain limitations. These limitations may be summarized as a three-part test of commerce clause preclusion: states may regulate interstate activity unless (1) the activity is exclusively in interstate commerce without intrastate aspects or a local nexus ( Coors, supra, 37 Cal. App.3d 653); or (2) regulation of the activity imposes an undue burden upon or discriminates against interstate commerce ( Bruce Church, supra, 397 U.S. 137; Bibb, supra, 359 U.S. 520); or (3) regulation of the activity conflicts with federal law or policy ( Speegle, supra, 29 Cal.2d 34; South-Eastern, supra, 322 U.S. 533). [16] I have thus far concluded that the anticompetitive conduct before us has significant intrastate aspects and is not exclusively in interstate commerce, and that the state may, consistent with the commerce clause, regulate restraints on trade which affect interstate conduct. The remaining inquiries focus on the second and third part of the test, and specifically, on the central issue before us in this case: whether state regulation of professional football burdens interstate commerce or conflicts with federal law or policy. We must undertake[] a balancing approach in resolving these issues. ( Pike v. Bruce Church, Inc. (1970) 397 U.S. 137, 142 [25 L.Ed.2d 174, 178]; see also Huron Cement Co. v. Detroit, supra, 362 U.S. 440; Southern Pacific Co. v. Arizona, supra, 325 U.S. 761.) The majority, however, do not engage in the impartial balancing of conflicting interests mandated in a host of Supreme Court decisions; instead they accept the Chargers' contention that Supreme Court authority compels this court to hold that state regulation of all professional sports is prohibited by the commerce clause.