Court Opinion

ID: 9428647
Source: CourtListenerOpinion
Date Created: 2023-08-02 23:24:20.011729+00
Date Added: 2024-06-11T17:23:14.536363
License: Public Domain

Justice Rehnquist,
with whom The Chief Justice and Justice O’Connor join,
dissenting.
The Court’s decision in this case is flawed in two serious respects, and will thereby impede, if not paralyze, local governments’ efforts to enact ordinances and regulations aimed at protecting public health, safety, and welfare, for fear of subjecting the local government to liability under the Sherman Act, 15 U. S. C. § 1 et seq. First, the Court treats the issue in this case as whether a municipality is “exempt” from the Sherman Act under our decision in Parker v. Brown, 317 U. S. 341 (1943). The question addressed in Parker and in this case is not whether state and local governments are exempt from the Sherman Act, but whether statutes, ordinances, and regulations enacted as an act of government are pre-empted by the Sherman Act under the operation of the Supremacy Clause. Second, in holding that a municipality’s ordinances can be “exempt” from antitrust scrutiny only if the enactment furthers or implements a “clearly articulated and affirmatively expressed state policy,” ante, at 52, the Court treats a political subdivision of a State as an entity indistinguishable from any privately owned business. As I read the Court’s opinion, a municipality may be said to violate the antitrust laws by enacting legislation in conflict with the Sherman Act, unless the legislation is enacted pursuant to an affirmative state policy to supplant competitive market forces in the area of the economy to be regulated.
*61* — I
Pre-emption and exemption are fundamentally distinct concepts. Pre-emption, because it involves the Supremacy Clause, implicates our basic notions of federalism. Preemption analysis is invoked whenever the Court is called upon to examine “the interplay between the enactments of two different sovereigns — one federal and the other state.” Handler, Antitrust — 1978, 78 Colum. L. Rev. 1363, 1379 (1978). We are confronted with questions under the Supremacy Clause when we are called upon to resolve a purported conflict between the enactments of the Federal Government and those of a state or local government, or where it is claimed that the Federal Government has occupied a particular field exclusively, so as to foreclose any state regulation. Where pre-emption is found, the state enactment must fall without any effort to accommodate the State’s purposes or interests. Because pre-emption treads on the very sensitive area of federal-state relations, this Court is “reluctant to infer pre-emption,” Exxon Corp. v. Governor of Maryland, 437 U. S. 117, 132 (1978), and the presumption is that preemption is not to be found absent the clear and manifest intention of Congress that the federal Act should supersede the police powers of the States. Ray v. Atlantic Richfield Co., 435 U. S. 151, 157 (1978).
In contrast, exemption involves the interplay between the enactments of a single sovereign — whether one enactment was intended by Congress to relieve a party from the necessity of complying with a prior enactment. See, e. g., National Broiler Marketing Assn. v. United States, 436 U. S. 816 (1978) (Sherman Act and Capper-Volstead Act); United States v. Philadelphia National Bank, 374 U. S. 321, 356-355 (1963) (Clayton Act and Bank Merger Act of 1960); Silver v. New York Stock Exchange, 373 U. S. 341, 357-361 (1963) (Sherman Act and Securities Exchange Act). Since the enactments of only one sovereign are involved, no problems of federalism are present. The court interpreting the *62statute must simply attempt to ascertain congressional intent, whether the exemption is claimed to be express or implied. The presumptions utilized in exemption analysis are quite distinct from those applied in the pre-emption context. In examining exemption questions, “the proper approach . . . is an analysis which reconciles the operation of both statutory schemes with one another rather than holding one completely ousted.” Silver v. New York Stock Exchange, supra, at 357.
With this distinction in mind, I think it quite clear that questions involving the so-called “state action” doctrine are more properly framed as being ones of pre-emption rather than exemption. Issues under the doctrine inevitably involve state and local regulation which, it is contended, are in conflict with the Sherman Act.
Our decision in Parker v. Brown, supra, was the genesis of the “state action” doctrine. That case involved a challenge to a program established pursuant to the California Agricultural Prorate Act, which sought to restrict competition in the State’s raisin industry by limiting the producer’s ability to distribute raisins through private channels. The program thus sought to maintain prices at a level higher than those maintained in an unregulated market. This Court assumed that the program would violate the Sherman Act were it “organized and made effective solely by virtue of a contract, combination or conspiracy of private persons, individual or corporate,” and that “Congress could, in the exercise of its commerce power, prohibit a state from maintaining a stabilization program like the present because of its effect on interstate commerce.” 317 U. S., at 350. In this regard, we noted that “[Occupation of a legislative field by Congress in the exercise of a granted power is a familiar example of its constitutional power to suspend state laws.” Ibid. We then held, however, that “[w]e find nothing in the language of the Sherman Act or in its history which suggests that its purpose was to restrain a state or its officers or agents from activities directed by its legislature. In a dual system of government *63in 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.” Id., at 350-351.
This is clearly the language of federal pre-emption under the Supremacy Clause. This Court decided in Parker that Congress did not intend the Sherman Act to override state legislation designed to regulate the economy. There was no language of “exemption,” either express or implied, nor the usual incantation that “repeals by implication are disfavored.” Instead, the Court held that state regulation of the economy is not necessarily pre-empted by the antitrust laws even if the same acts by purely private parties would constitute a violation of the Sherman Act. The Court recognized, however, that some state regulation is pre-empted by the Sherman Act, explaining that “a state does got give immunity to those who violate the Sherman Act by authorizing them to violate it, or by declaring that their action is law-ful_” Id., at 351.
Our two most recent Parker doctrine cases reveal most clearly that the “state action” doctrine is not an exemption at all, but instead a matter of federal pre-emption.
In New Motor Vehicle Bd. of California v. Orrin W. Fox Co., 439 U. S. 96 (1978), we examined the contention that the California Automobile Franchise Act conflicted with the Sherman Act. That Act required a motor vehicle manufacturer to secure the approval of the California New Motor Vehicle Board before it could open a dealership within an existing franchisee’s market area, if the competing franchisee objected. By so delaying the opening of a new dealership whenever a competing dealership protested, the Act arguably gave effect to privately initiated restraints of trade, and thus was invalid under Schwegmann Bros. v. Calvert Distillers Corp., 341 U. S. 384 (1951). We held that the Act was outside the purview of the Sherman Act because it con*64templated “a system of regulation, clearly articulated and affirmatively expressed, designed to displace unfettered business freedom in the matter of the establishment and relocation of automobile dealerships.” 439 U. S., at 109. We also held that a state statute is not invalid under the Sherman Act merely because the statute will have an anticompetitive effect. Otherwise, if an adverse effect upon competition were enough to render a statute invalid under the Sherman Act, “ ‘the States’ power to engage in economic regulation would be effectively destroyed.’” Id., at 111 (quoting Exxon Corp. v. Governor of Maryland, 437 U. S., at 133). In New Motor Vehicle Bd., we held that a state statute could stand in the face of a purported conflict with the Sherman Act.
In California Retail Liquor Dealers Assn. v. Midcal Aluminum, Inc., 445 U. S. 97 (1980), we invalidated California’s wine-pricing system in the face of a challenge under the Sherman Act. We first held that the price-setting program constituted resale price maintenance, which this Court has consistently held to be a “per se” violation of the Sherman Act. Id., at 102-103. We then concluded that the program could not fit within the Parker doctrine. Although the restraint was imposed pursuant to a clearly articulated and affirmatively expressed state policy, the program was not actively supervised by the State itself. The State merely authorized and enforced price fixing established by private parties, instead of establishing the prices itself or reviewing their reasonableness. In the absence of sufficient state supervision, we held that the pricing system was invalid under the Sherman Act. 445 U. S., at 105-106.
Unlike the instant case, Parker, Midcal, and New Motor Vehicle Bd. involved challenges to a state statute. There was no suggestion that a State violates the Sherman Act when it enacts legislation not saved by the Parker doctrine from invalidation under the Sherman Act. Instead, the statute is simply unenforceable because it has been pre-empted by the Sherman Act. By contrast, the gist of the Court’s *65opinion is that a municipality may actually violate the antitrust laws when it merely enacts an ordinance invalid under the Sherman Act, unless the ordinance implements an affirmatively expressed state policy.1 According to the majority, a municipality may be liable under the Sherman Act for enacting anticompetitive legislation, unless it can show that it is acting simply as the “instrumentality” of the State.
Viewing the Parker doctrine in this manner will have troubling consequences for this Court and the lower courts who must now adapt antitrust principles to adjudicate Sherman Act challenges to local regulation of the economy. The majority suggests as much in footnote 20. Among the many problems to be encountered will be whether the “per se” rules of illegality apply to municipal defendants in the same manner as they are applied to private defendants. Another is the question of remedies. The Court understandably leaves open the question whether municipalities may be liable for treble damages for enacting anticompetitive ordinances which are not protected by the Parker doctrine.2
Most troubling, however, will be questions regarding the factors which may be examined by the Court pursuant to the Rule of Reason. In National Society of Professional Engi*66neers v. United States, 435 U. S. 679, 695 (1978), we held that an anticompetitive restraint could not be defended on the basis of a private party’s conclusion that competition posed a potential threat to public safety and the ethics of a particular profession. “[T]he Rule of Reason does not support a defense based on the assumption that competition itself is unreasonable.” Id., at 696. Professional Engineers holds that the decision to replace competition with regulation is not within the competence of private entities. Instead, private entities may defend restraints only on the basis that the restraint is not unreasonable in its effect on competition or because its procompetitive effects outweigh its anti-competitive effects. See Continental T. V., Inc. v. GTE Sylvania Inc., 433 U. S. 36 (1977).
Applying Professional Engineers to municipalities would mean that an ordinance could not be defended on the basis that its benefits to the community, in terms of traditional health, safety, and public welfare concerns, outweigh its anti-competitive effects. A local government would be disabled from displacing competition with regulation. Thus, a municipality would violate the Sherman Act by enacting restrictive zoning ordinances, by requiring business and occupational licenses, and by granting exclusive franchises to utility services, even if the city determined that it would be in the best interests of its inhabitants to displace competition with regulation. Competition simply does not and cannot further the interests that lie behind most social welfare legislation. Although state or local enactments are not invalidated by the Sherman Act merely because they may have anticompetitive effects, Exxon Corp. v. Governor of Maryland, supra, at 133, this Court has not hesitated to invalidate such statutes on the basis that such a program would violate the antitrust laws if engaged in by private parties. See California Retail Liquor Dealers Assn. v. Midcal Aluminum, Inc., supra, at 102-103 (resale price maintenance); Schwegmann Bros. v. Calvert Distillers Corp., 341 U. S. 384 (1951) (same). Cf. Parker v. Brown, 317 U. S., at 350 *67(Court assumed the stabilization program would violate the Sherman Act if organized and effected by private persons). Unless the municipality could point to an affirmatively expressed state policy to displace competition in the given area sought to be regulated, the municipality would be held to violate the Sherman Act and the regulatory scheme would be rendered invalid. Surely, the Court does not seek to require a municipality to justify every ordinance it enacts in terms of its procompetitive effects. If municipalities are permitted only to enact ordinances that are consistent with the procom-petitive policies of the Sherman Act, a municipality’s power to regulate the economy would be all but destroyed. See Exxon Corp. v. Governor of Maryland, 437 U. S., at 133. This country’s municipalities will be unable to experiment with innovative social programs. See New State Ice Co. v. Liebmann, 285 U. S. 262, 311 (1932) (Brandeis, J., dissenting).
On the other hand, rejecting the rationale of Professional Engineers to accommodate the municipal defendant opens up a different sort of Pandora’s Box. If the Rule of Reason were “modified” to permit a municipality to defend its regulation on the basis that its benefits to the community outweigh its anticompetitive effects, the courts will be called upon to review social legislation in a manner reminiscent of the Lochner (Lochner v. New York, 198 U. S. 45 (1905)) era. Once again, the federal courts will be called upon to engage in the same wide-ranging, essentially standard-less inquiry into the reasonableness of local regulation that this Court has properly rejected. Instead of “liberty of contract” and “substantive due process,” the procom-petitive principles of the Sherman Act will be the governing standard by which the reasonableness of all local regulation will be determined.3 Neither the Due Process Clause nor the Sherman Act authorizes federal courts to invalidate *68local regulation of the economy simply upon opining that the municipality has acted unwisely. The Sherman Act should not be deemed to authorize federal courts to “substitute their social and economic beliefs for the judgment of legislative bodies, who are elected to pass laws.” Ferguson v. Skrupa, 372 U. S. 726, 730 (1963). The federal courts have not been appointed by the Sherman Act to sit as a “superlegislature to weigh the wisdom of legislation.” Lincoln Federal Labor Union v. Northwestern Iron & Metal Co., 335 U. S. 525, 535 (1949).
Before this Court leaps into the abyss and holds that municipalities may violate the Sherman Act by enacting economic and social legislation, it ought to think about the consequences of such a decision in terms of its effect both upon the very antitrust principles the Court desires to apply to local governments and upon the role of the federal courts in examining the validity of local regulation of the economy.
Analyzing this problem as one of federal pre-emption rather than exemption will avoid these problems. We will not be confronted with the anomaly of holding a municipality liable for enacting anticompetitive ordinances.4 The federal courts will not be required to engage in a standardless review of the reasonableness of local legislation. Rather, the question simply will be whether the ordinance enacted is preempted by the Sherman Act. I see no reason why a different rule of pre-emption should be applied to testing the validity of municipal ordinances than the standard we presently apply in assessing state statutes. I see no reason why a municipal ordinance should not be upheld if it satisfies the *69Midcal criteria: the ordinance survives if it is enacted pursuant to an affirmative policy on the part of the city to restrain competition and if the city actively supervises and implements this policy.5 As with the case of the State, I agree that a city may not simply authorize private parties to engage in activity that would violate the Sherman Act. See Parker v. Brown, 317 U. S., at 351. As in the case of a State, a municipality may not become “a participant in a private agreement or combination by others for restraint of trade.” Id., at 351-352.
Apart from misconstruing the Parker doctrine as a matter of “exemption” rather than pre-emption, the majority comes to the startling conclusion that our federalism is in no way implicated when a municipal ordinance is invalidated by the Sherman Act. I see no principled basis to conclude, as does the Court, that municipal ordinances are more susceptible to invalidation under the Sherman Act than are state statutes. The majority concludes that since municipalities are not States, and hence are not “sovereigns,” our notions of federalism are not implicated when federal law is applied to invalidate otherwise constitutionally valid municipal legislation. I find this reasoning remarkable indeed. Our notions of federalism are implicated when it is contended that a municipal ordinance is pre-empted by a federal statute. This Court has made no such distinction between States and their subdivisions with regard to the pre-emptive effects of federal law. *70The standards applied by this Court are the same regardless of whether the challenged enactment is that of a State or one of its political subdivisions. See, e. g., City of Burbank v. Lockheed Air Terminal, Inc., 411 U. S. 624 (1973); Huron Portland Cement Co. v. Detroit, 362 U. S. 440 (1960). I suspect that the Court has not intended to so dramatically alter established principles of Supremacy Clause analysis. Yet, this is precisely what it appears to have done by holding that a municipality may invoke the Parker doctrine only to the same extent as can a private litigant. Since the Parker doctrine is a matter of federal pre-emption under the Supremacy Clause, it should apply in challenges to municipal regulation in similar fashion as it applies in a challenge to a state regulatory enactment. The distinction between cities and States created by the majority has no principled basis to support it if the issue is properly framed in terms of pre-emption rather than exemption.
As with the States, the Parker doctrine should be employed to determine whether local legislation has been preempted by the Sherman Act. Like the State, a municipality should not be haled into federal court in order to justify its decision that competition should be replaced with regulation. The Parker doctrine correctly holds that the federal interest in protecting and fostering competition is not infringed so long as the state or local regulation is so structured to ensure that it is truly the government, and not the regulated private entities, which is replacing competition with regulation.
(-H > — t
By treating the municipal defendant as no different from the private litigant attempting to invoke the Parker doctrine, the Court’s decision today will radically alter the relationship between the States and their political subdivisions. Municipalities will no longer be able to regulate the local economy’ without the imprimatur of a clearly expressed state policy *71to displace competition.6 The decision today effectively destroys the “home rule” movement in this country, through which local governments have obtained, not without persistent state opposition, a limited autonomy over matters of local concern.7 The municipalities that stand most to lose by the decision today are those with the most autonomy. Where the State is totally disabled from enacting legislation dealing with matters of local concern, the municipality will be defenseless from challenges to its regulation of the local economy. In such a case, the State is disabled from articulating a policy to displace competition with regulation. Nothing short of altering the relationship between the municipality and the State will enable the local government to legislate on matters important to its inhabitants. In order to defend itself from Sherman Act attacks, the home rule municipality will have to cede its authority back to the State. It is unfortunate enough that the Court today holds that our federalism is not implicated when municipal legislation is invalidated by a federal statute. It is nothing less than a novel and egregious error when this Court uses the Sherman Act to regulate the relationship between the States and their political subdivisions.

 Most challenges to municipal ordinances undoubtedly will be made pursuant to § 1. One of the elements of a § 1 violation is proof of a contract, combination, or conspiracy. It may be argued that municipalities will not face liability under § 1, because it will be difficult to allege that the enactment of an ordinance was the product of such a contract, combination, or conspiracy. The ease with which the ordinance in the instant case has been labeled a “contract” will hardly give municipalities solace in this regard.

 It will take a considerable feat of judicial gymnastics to conclude that municipalities are not subject to treble damages to compensate any person “injured in his business or property.” Section 4 of the Clayton Act, 15 U. S. C. § 15, is mandatory: “Any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws . . . shall recover threefold the damages by him sustained.” See City of Lafayette v. Louisiana Power & Light Co., 435 U. S. 389, 442-443 (1978) (Blackmun, J., dissenting).

 During the Lochner era, this Court’s interpretation of the Due Process Clause complemented its antitrust policies. This Court sought to compel competitive behavior on the part of private enterprise and generally for*68bade government interference with competitive forces in the marketplace. See Strong, The Economic Philosophy of Lochner: Emergence, Embrasure and Emasculation, 15 Ariz. L. Rev. 419, 435 (1973).

 Since a municipality does not violate the antitrust laws when it enacts legislation pre-empted by the Sherman Act, there will be no problems with the remedy. Pre-empted state or local legislation is simply invalid and unenforceable.

 The Midcal standards are not applied until it is either determined or assumed that the regulatory program would violate the Sherman Act if it were conceived and operated by private persons. See Parker v. Brown, 317 U. S., at 350; California Retail Liquor Dealers Assn. v. Midcal Aluminum, Inc., 445 U. S. 97, 102-103 (1980). A statute is not pre-empted simply because some conduct contemplated by the statute might violate the antitrust laws. See Joseph E. Seagram & Sons, Inc. v. Hostetler, 384 U. S. 35, 45-46 (1966). Conversely, reliance on a state statute does not insulate a private party from liability under the antitrust laws unless the statute satisfies the Midcal criteria.

 The Court understandably avoids determining whether local ordinances must satisfy the “active state supervision” prong of the Midcal test. It would seem rather odd to require municipal ordinances to be enforced by the State rather than the city itself.

 Seeing this opportunity to recapture the power it has lost over local affairs, the State of Colorado, joined by 22 other States, has supported petitioner as amicus curiae. It is curious, indeed, that these States now seek to use the Supremacy Clause as a sword, when they so often must defend their own enactments from its invalidating effects.