State must act as a sovereign
For the doctrine to apply, the state must act as a sovereign, rather than as a "participant in a private agreement or combination by others for restraint of trade. [3] Antitrust laws do not bar anticompetitive restraints that sovereign states impose "as an act of government". [4] "The key question is whether the allegedly anticompetitive restraint may be considered the product of sovereign state action. If it is not, then even if sectors of state government are involved, the activity will not constitute "state action" under the Parker doctrine and will not receive immunity." [5]
Moreover, the Parker court found that "a state does not give immunity to those who violate the Sherman Act by authorizing them to violate it, or by declaring that their action is lawful." [6] Instead, the anticompetitive conduct "must be compelled by direction of the State acting as a sovereign," not merely prompted by state action, to be immunized under the state action doctrine. [7]
Special definition of "state action" in Parker immunity cases
"State action," as defined in cases granting Parker immunity, is qualitatively different from "state action" in other contexts such as the Fourteenth Amendment. [8] While the Fourteenth Amendment can cover
- inadvertent or unilateral acts of state officials not acting pursuant to state policy . . . the term "state action" in antitrust adjudication refers only to government policies that are articulated with sufficient clarity that it can be said that these are in fact the state's policies, and not simply happenstance, mistakes, or acts reflecting the discretion of individual officials.
Because it is grounded in federalism and respect for state sovereignty, this interest in protecting the acts of the sovereign state, even if anticompetitive, outweighs the importance of a freely competitive marketplace, especially in the absence of contrary congressional intent.
"State action" as defined by the Parker doctrine differs from the government "actions" which results from petitioning. The two are not coterminous. A finding of immunity from injury caused by government action under the Noerr-Pennington doctrine does not require a finding of Parker state action. [9] If the government "action" taken is the result of petitioning, Noerr-Pennington immunity attaches to a broader range of government action than does Parker immunity. Noerr-Pennington immunity protects petitioning, so long as it is not a sham. [10] Under Noerr-Pennington immunity, the government actions which flow from valid petitioning need not qualify as Parker "state action." Petitioning "would be considerably chilled by a rule which would require an advocate to predict whether the desired legislation would withstand a constitutional challenge in the courts and to expose itself to a potential treble antitrust action based on that prediction." [11]
Congress intended the Sherman Act to address business combination, not state combination
Without clear congressional intent to preempt, federal laws should not invalidate state programs. "In a dual system of government in 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." [12] While individual anticompetitive acts of state governments may be considered unwise or counterproductive, the decision to make such choices lies within the sovereign power of the states. Congress did not intend to override important state interests in passing the Sherman Act. "The general language of the Sherman Act should not be interpreted to prohibit anticompetitive actions by the States in their governmental capacities as sovereign regulators." [13]
The Sherman Act was enacted to address the unlawful combination of private businesses. [14] "There is no suggestion of a purpose to restrain state action in the Act's legislative history." [15] The Sherman Act was passed "in the era of 'trusts' and of 'combinations' of businesses and of capital organized and directed to control of the market by suppression of competition in the marketing of goods and services, the monopolistic tendency of which had become a matter of public concern." [16] Given its focus on the problems of private monopolies and combinations, it is not surprising that the Sherman Act does not set out to curb clearly defined anticompetitive state actions. [17]
When a state clearly acts in its sovereign capacity it avoids the constraints of the Sherman Act and may act anticompetitively to further other policy goals. [18] For example, state governments frequently sanction monopolies to ensure consistent provision of essential services like electric power, gas, cable television, or local telephone service. But "a state does not give immunity to those who violate the Sherman Act by authorizing them to violate it, or by declaring that their action is lawful." [19] Only an affirmative decision by the state itself, acting in its sovereign capacity, and with active supervision, can immunize otherwise anticompetitive activity.
Midcal's two-part test for whether to treat an action as a "state action"
Applying Midcal is unnecessary if the alleged antitrust injury was the direct result of a clear sovereign state act. [20] In Massachusetts School of Law, the Court held that where "the states are sovereign in imposing the bar admission requirements [the alleged anticompetitive restraints], the clear articulation and active supervision requirements . . . are inapplicable." [21] There is less need for scrutiny "when the conduct is that of the sovereign itself . . . [because] the danger of unauthorized restraint of trade does not arise." [22] Similarly, concerns about the legitimacy of the action are reduced. The test to determine sufficient state involvement as sovereign is unnecessary when the state legislature or state supreme court acts directly. As the Supreme Court explained: "Closer analysis is required when the activity at issue is not directly that of the legislature or supreme court, but is carried out by others pursuant to state authorization.... When the conduct is that of the sovereign itself, on the other hand, the danger of unauthorized restraint of trade does not arise. When the conduct at issue is in fact that of the state legislature or supreme court, we need not address the issues of 'clear articulation' and 'active supervision.' [23]
However, when it is uncertain whether an act should be treated as state action for the purposes of Parker immunity, courts apply the test set forth in California Retail Liquor Dealers Association v. Midcal Aluminum, Inc. (1980) [24] to "determine whether anticompetitive conduct engaged in by private parties should be deemed state action and thus shielded from the antitrust laws." [25] "First, the challenged restraint must be one clearly articulated and affirmatively expressed as state policy; second, the policy must be actively supervised by the State itself." [26]
- The Supreme Court has recognized state legislative and judicial action as sovereign under Parker. But "closer analysis is required" when the action is less directly that of the legislature or judiciary. [27] One Court of Appeals has decided that executive officers and agencies "are entitled to Parker immunity for actions taken pursuant to their constitutional or statutory authority, regardless whether these particular actions or their anticompetitive effects were contemplated by the legislature," without the need for Midcal analysis. [28]
- Parker, by its own terms, immunizes only states. But in order to give effect to Parker immunity, private parties to state action must also be immune. [29] Otherwise, plaintiffs could sue only the private parties and by winning antitrust judgments against them, could thwart state policies as if there were no state immunity. No state could enter into an agreement with private groups, even to further clear state policies, because the potential liability of the private groups would prevent them from joining. Artful pleading should not frustrate state policy. [30] "If Parker immunity attaches, it would also reach the private participants of the [tobacco] Multistate Settlement Agreement." [5]
In Midcal, the Supreme Court clarified that requires states to meet two conditions before antitrust immunity will attach: "First, the challenged restraint must be 'one clearly articulated and affirmatively expressed as state policy'; second, the policy must be 'actively supervised' by the State itself." [31] This clearly articulated state policy may be inferred "if suppression of competition is the 'foreseeable result' of what the statute authorizes". [32] Under Midcal, a state "may displace competition with active state supervision if the displacement is both intended by the State and implemented in its specific details. Actual state involvement, not deference to private pricefixing arrangements under the general auspices of state law, is the precondition for immunity from federal law." [33]
To qualify as state action under the Midcal test, "the challenged restraint must be one 'clearly articulated and affirmatively expressed as state policy.'" [34] A government entity need not "be able to point to a specific, detailed, legislative authorization" to assert a successful Parker defense. [35] But it must be evident that under the "clear articulation" standard the challenged restraint is part of state policy. As the Supreme Court has stated, "Midcal confirms that while a State may not confer antitrust immunity on private persons by fiat, it may displace competition with active state supervision if the displacement is both intended by the State and implemented in its specific details". [36]
The second prong of the Midcal test is whether the resulting antitrust violation was "actively supervised" by the state. This standard is more problematic. The essential inquiry of the "actively supervised" prong is to determine if the "anticompetitive scheme is the State's own". [37] The active supervision prong "requires that state officials have and exercise power to review particular anticompetitive acts of private parties and disapprove those that fail to accord with state policy." [38] "Absent such a program of supervision, there is no realistic assurance that a private party's anticompetitive conduct promotes state policy, rather than merely the party's individual interests." Id. at 100-01. "Such active state review is clearly necessary where private defendants are empowered with some type of discretionary authority in connection with the anticompetitive acts (e.g. to determine price or rate structures)." [39] Rubberstamp approval of private action does not constitute state action. A state must independently review and approve the anticompetitive behavior to satisfy this prong of the Parker doctrine. [40]
A "hybrid restraint" is discussed by Justice Stevens in his concurrence in Rice v. Norman Williams Co. . [41] They are not purely private actions, nor are they entirely attributable to the state in the manner of a legislative act. Hybrid restraints are not the type of sovereign state action found in Massachusetts School of Law or Zimomra, that avoid Midcal treatment. Instead, hybrid restraints involve a degree of private action which calls for Midcal analysis. [42]
The Sherman Antitrust Act of 1890 is a United States antitrust law which prescribes the rule of free competition among those engaged in commerce and consequently prohibits unfair monopolies. It was passed by Congress and is named for Senator John Sherman, its principal author.
In the United States, antitrust law is a collection of mostly federal laws that govern the conduct and organization of businesses in order to promote economic competition and prevent unjustified monopolies. The three main U.S. antitrust statutes are the Sherman Act of 1890, the Clayton Act of 1914, and the Federal Trade Commission Act of 1914. These acts serve three major functions. First, Section 1 of the Sherman Act prohibits price fixing and the operation of cartels, and prohibits other collusive practices that unreasonably restrain trade. Second, Section 7 of the Clayton Act restricts the mergers and acquisitions of organizations that may substantially lessen competition or tend to create a monopoly. Third, Section 2 of the Sherman Act prohibits monopolization.
The Nonintercourse Act is the collective name given to six statutes passed by the United States Congress in 1790, 1793, 1796, 1799, 1802, and 1834 to set boundaries of American Indian reservations. The various acts were also intended to regulate commerce between White Americans and citizens of Indigenous nations. The most notable provisions of the act regulate the inalienability of aboriginal title in the United States, a continuing source of litigation for almost 200 years. The prohibition on purchases of Indian lands without the approval of the federal government has its origins in the Royal Proclamation of 1763 and the Confederation Congress Proclamation of 1783.
In United States patent law, patent misuse is a patent holder's use of a patent to restrain trade beyond enforcing the exclusive rights that a lawfully obtained patent provides. If a court finds that a patent holder committed patent misuse, the court may rule that the patent holder has lost the right to enforce the patent. Patent misuse that restrains economic competition substantially can also violate United States antitrust law.
Under the Noerr–Pennington doctrine, private entities are immune from liability under the antitrust laws for attempts to influence the passage or enforcement of laws, even if the laws they advocate for would have anticompetitive effects. The doctrine is grounded in the First Amendment protection of political speech, and "upon a recognition that the antitrust laws, 'tailored as they are for the business world, are not at all appropriate for application in the political arena.'"
Milan Dale Smith, Jr. is an American attorney and jurist serving as a United States circuit judge of the United States Court of Appeals for the Ninth Circuit. Smith's brother, Gordon H. Smith, was a Republican U.S. Senator from 1997 to 2009. Milan Smith is neither a Republican nor a Democrat, and he considers himself to be a political independent.
Restraints of trade is a common law doctrine relating to the enforceability of contractual restrictions on freedom to conduct business. It is a precursor of modern competition law. In an old leading case of Mitchel v Reynolds (1711) Lord Smith LC said,
it is the privilege of a trader in a free country, in all matters not contrary to law, to regulate his own mode of carrying it on according to his own discretion and choice. If the law has regulated or restrained his mode of doing this, the law must be obeyed. But no power short of the general law ought to restrain his free discretion.
Dennis G. Jacobs is a senior United States circuit judge of the United States Court of Appeals for the Second Circuit.
Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447 (1993), was a case in which the Supreme Court of the United States rejected the assertion that attempted monopolization may be proven merely by demonstration of unfair or predatory conduct. Instead, conduct of a single firm could be held to be unlawful attempted monopolization only when it actually monopolized or dangerously threatened to do so. Thus, the Court rejected the conclusion that injury to competition could be presumed to follow from certain conduct. The causal link must be demonstrated.
Goldfarb v. Virginia State Bar, 421 U.S. 773 (1975), was a U.S. Supreme Court decision. It stated that lawyers engage in "trade or commerce" and hence ended the legal profession's exemption from antitrust laws.
A.D. Bedell Wholesale Co., Inc. v. Philip Morris Inc., 263 F.3d 239, was an early appellate case testing the legality of the Tobacco Master Settlement Agreement (MSA), in this instance whether it could properly be alleged to violate the Sherman Antitrust Act.
California Retail Liquor Dealers Assn. v. Midcal Aluminum, Inc., 445 U.S. 97 (1980), was a United States Supreme Court case in which the Court created a two-part test for the application of the state action immunity doctrine that it had previously developed in Parker v. Brown.
Rice v. Norman Williams Co., 458 U.S. 654 (1982), was a decision of the U.S. Supreme Court involving the preemption of state law by the Sherman Act. The Supreme Court held, in a 9–0 decision, that the Sherman Act did not invalidate a California law prohibiting the importing of spirits not authorized by the brand owner.
The United States was the first jurisdiction to acknowledge the common law doctrine of aboriginal title. Native American tribes and nations establish aboriginal title by actual, continuous, and exclusive use and occupancy for a "long time." Individuals may also establish aboriginal title, if their ancestors held title as individuals. Unlike other jurisdictions, the content of aboriginal title is not limited to historical or traditional land uses. Aboriginal title may not be alienated, except to the federal government or with the approval of Congress. Aboriginal title is distinct from the lands Native Americans own in fee simple and occupy under federal trust.
Mitchel v Reynolds (1711) 1 PWms 181 is decision in the history of the law of restraint of trade, handed down in 1711 in England. It is generally cited for establishing the principle that reasonable restraints of trade, unlike unreasonable restraints of trade, are permissible and therefore enforceable and not a basis for civil or criminal liability. It is largely the basis in US antitrust law for the "rule of reason." William Howard Taft, then Chief Judge of the Sixth Circuit Court of Appeals, later US President and then Chief Justice of the Supreme Court, quoted Mitchel extensively when he first developed the antitrust rule-of-reason doctrine in Addyston Pipe & Steel Co. v. United States, which was affirmed in 1899 by the Supreme Court. The doctrine also played a major role in the 1911 Supreme Court case Standard Oil Company of New Jersey v. United States 221 U.S. 1 (1911).
Kimble v. Marvel Entertainment, LLC, 576 U.S. 446 (2015), is a significant decision of the United States Supreme Court for several reasons. One is that the Court turned back a considerable amount of academic criticism of both the patent misuse doctrine as developed by the Supreme Court and the particular legal principle at issue in the case. Another is that the Court firmly rejected efforts to assimilate the patent misuse doctrine to antitrust law and explained in some detail the different policies at work in the two bodies of law. Finally, the majority and dissenting opinions informatively articulate two opposing views of the proper role of the doctrine of stare decisis in US law.
Princo Corp. v. ITC, 616 F.3d 1318 was a 2010 decision of the United States Court of Appeals for the Federal Circuit, that sought to narrow the defense of patent misuse to claims for patent infringement. Princo held that a party asserting the defense of patent misuse, absent a case of so-called per se misuse, must prove both "leveraging" of the patent being enforced against it and a substantial anticompetitive effect outside the legitimate scope of that patent right. In so ruling, the court emphasized that the misuse alleged must involve the patent in suit, not another patent.
North Carolina State Board of Dental Examiners v. Federal Trade Commission, 574 U.S. 494 (2015), was a United States Supreme Court case on the scope of immunity from US antitrust law. The Supreme Court held that a state occupational licensing board that was primarily composed of persons active in the market it regulates has immunity from antitrust law only when it is actively supervised by the state. The North Carolina Board of Dental Examiners had relied on the Parker immunity doctrine, established by the Supreme Court case Parker v. Brown, which held that actions by state governments acting in their sovereignty did not violate antitrust law.
United States v. Masonite Corp., 316 U.S. 265 (1942), is a United States Supreme Court decision that limited the scope of the 1926 Supreme Court decision in the General Electric case that had exempted patent licensing agreements from antitrust law's prohibition of price fixing. The Court did so by applying the doctrine of the Court's recent Interstate Circuit hub-and-spoke conspiracy decision.
California Motor Transport Co. v. Trucking Unlimited, 404 U.S. 508 (1972), was a landmark decision of the US Supreme Court involving the right to make petitions to the government. The right to petition is enshrined in the First Amendment to the United States Constitution as: "Congress shall make no law...abridging...the right of the people...to petition the Government for a redress of grievances." This case involved an accusation that one group of companies was using state and federal regulatory actions to eliminate competitors. The Supreme Court ruled that the right to petition is integral to the legal system but using lawful means to achieve unlawful restraint of trade is not protected.
