State Action Doctrine Shields California Tourism Commission . . .

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

The California Travel and Tourism Commission (CTTC) was shielded by the state action immunity doctrine from consumers' claims that the CTTC conspired with the passenger rental car companies to pass on CTTC tourism assessments to consumers, the U.S. Court of Appeals in San Francisco has decided. Dismissal of the antitrust claims (2008-2 Trade Cases ¶76,370) was affirmed.

The CTTC is a California nonprofit mutual benefit corporation created by a state tourism marketing statute for the benefit of the industry and the state. As required for state action immunity, the CTTC’s alleged anticompetitive conduct constituted an authorized and reasonably foreseeable result of a statutory authorization, the court ruled.

The California legislature had explicitly authorized tourism assessment fees on passenger car rentals for the funding of state tourism. Moreover, it appeared that the legislature envisioned the fee being uniformly passed on to rental car customers.

Because the CTTC was not a private party, but a state agency created by statute to promote tourism in California, adequate state supervision of the challenged conduct was irrelevant. The court rejected the plaintiffs' argument that active supervision was required because the CTTC was industry-controlled.

The June 8 decision is Shames v. California Travel and Tourism Commission, 2010-1 Trade Cases ¶77,044


. . . And Florida County Waste System from Antitrust Liability

A Florida county was immune under the state action doctrine from antitrust claims for establishing a franchise system for waste collection, the U.S. Court of Appeals in Atlanta has decided.

A district court's decision (2009-2 Trade Cases ¶76,695), denying dismissal of the antitrust claims based on “faulty application of the state action immunity framework” was reversed.

Florida law empowered the county to take “exclusive control over the collection and disposal of solid waste” within the county. Pursuant to the law, the county passed an ordinance establishing a franchise system for waste disposal.

Award of Franchises

Under the system, the county awarded franchises within the service area to waste disposal services for both residential and commercial customers. The county's board of commissioners determined the collection charges assessed residential customers; however, it did not set collection rates for commercial entities, leaving those to negotiation between the franchisees and commercial customers.

Hybrid Restraint of Trade

A commercial customer located within the county and a disposal service that was not awarded a franchise by the county filed suit to enjoin application of the ordinance. They alleged a “hybrid restraint” on trade. They contended that the county’s restriction on the size of the competitive market essentially authorized the franchisees to collude and impose fixed prices on their customers.

Preemption by Sherman Act

Challenges to state action that are not preempted by the Sherman Act fail, the court explained. Preemption required an “irreconcilable conflict” between the underlying state statute and the antitrust laws. Assuming that the Sherman Act preempted both the statute on its face and the county’s application of the ordinance, the county—acting in its authorized capacity as regulator of waste collection services—was immune because it acted pursuant to a clearly articulated anticompetitive policy of the state.

The challenged conduct was a “foreseeable result” of the state’s authorizing statute. Because the defendant was a municipality and not a private actor, active state supervision of the regulatory scheme was not required, according to the court.

The June 8 decision is Danner Construction Co. v. Hillsborough County Florida, 2010-1 Trade Cases ¶77,045.