Opinion ID: 602387
Heading Depth: 3
Heading Rank: 2

Heading: State Supervision

Text: 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