Tuesday, March 15, 2011

State Action Doctrine Bars Antitrust Challenge to Municipalities' Trash Hauling Contracts

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

Illinois municipalities’ exclusive contracts for the disposal of waste, including recyclables, were shielded under the state action doctrine from antitrust attack, the U.S. Court of Appeals in Chicago ruled yesterday.

The state-action doctrine allows municipalities to engage in conduct that would otherwise violate antitrust law when the conduct is authorized by the state under a policy to displace competition, the court explained.

The doctrine stems from the fact that the Sherman Antitrust Act does not apply to sovereign entities. It has been extended to shield municipalities from antitrust law when the municipality’s actions are authorized by the state pursuant to state policy to displace competition.

Complaining trash haulers and businesses that wished to hire a cheaper trash hauler sued several municipalities, claiming that their exclusive contracts ran afoul of federal antitrust law. The plaintiffs objected to the requirement that they use the specific company with which the municipality had an exclusive contract for removal of waste that is placed in large roll-off dumpsters.

The plaintiffs unsuccessfully argued that the municipalities' authority under Illinois law to enter into exclusive contracts was limited to the collection and disposal of garbage, refuse and ashes.

They contended that the municipalities did not have the power to make contracts concerning recyclables and that because recyclables were being placed in the roll-off dumpsters, the municipalities could not make exclusive contracts for the roll-offs’ removal.

The appellate court, however, was satisfied that Illinois Municipal Code gave the municipalities the authority to enter into the challenged contracts.

The fact that the contracts created monopolies did not alter the immunity determination. These anticompetitive effects were a foreseeable result of the states authorization of the exclusive contracts, in the court’s view. Dismissal of the antitrust claim (2010-1 Trade Cases ¶76,953) was affirmed.

The March 14, 2011, decision is Active Disposal, Inc. v. City of Darien, 2011-1 Trade Cases ¶77,381.

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