Hallie v. Eau Claire, 471 U.S. 34 (1985)

Town of Hallie v. City of Eau Claire

No. 82-1832

Argued November 26, 1984
Decided March 27, 1985
471 U.S. 34

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE

SEVENTH CIRCUIT

Syllabus

Petitioners, unincorporated townships located in Wisconsin adjacent to respondent city, filed suit against respondent in Federal District Court, alleging that petitioners were potential competitors of respondent in the collection and transportation of sewage, and that respondent had violated the Sherman Act by acquiring a monopoly over the provision of sewage treatment services in the area and by tying the provision of such services to the provision of sewage collection and transportation services. Respondent refused to supply sewage treatment services to petitioners, but supplied the services to individual landowners in petitioners’ areas if a majority of the individuals in the area voted by referendum election to have their homes annexed by respondent and to use its sewage collection and transportation services. The District Court dismissed the complaint, finding, inter alia, that Wisconsin statutes regulating the municipal provision of sewage services expressed a clear state policy to replace competition with regulation. The court concluded that respondent’s allegedly anticompetitive conduct fell within the "state action" exemption to the federal antitrust laws established by Parker v. Brown, 317 U.S. 341. The Court of Appeals affirmed.

Held: Respondent’s anticompetitive activities are protected by the state action exemption to the federal antitrust laws. Pp. 38-47.

(a) Before a municipality may claim the protection of the state action exemption, it must demonstrate that it is engaging in the challenged activity pursuant to a "clearly articulated" state policy. Lafayette v. Louisiana Power & Light Co., 435 U.S. 389. Pp. 38-40.

(b) Wisconsin statutes grant authority to cities to construct and maintain sewage systems, to describe the district to be served, and to refuse to serve unannexed areas. The statutes are not merely neutral on state policy but, instead, clearly contemplate that a city may engage in anticompetitive conduct. To pass the "clear articulation" test, the legislature need not expressly state in a statute or the legislative history that it intends for the delegated action to have anticompetitive effects. The Wisconsin statutes evidence a clearly articulated state policy to displace competition with regulation in the area of municipal provision of sewage services. Pp. 40-44.

(c) The "clear articulation" requirement of the state action test does not require that respondent show that the State "compelled" it to act. Although compulsion affirmatively expressed may be the best evidence of state policy, it is by no means a prerequisite to a finding that a municipality acted pursuant to clearly articulated state policy. Cantor v. Detroit Edison Co., 428 U.S. 579, and Goldfarb v. Virginia State Bar, 421 U.S. 773, distinguished. Pp. 45-46.

(d) Active state supervision of anticompetitive conduct is not a prerequisite to exemption from the antitrust laws where the actor is a municipality, rather than a private party. The requirement of active state supervision serves essentially the evidentiary function of ensuring that the actor is engaging in the challenged conduct pursuant to state policy. Where the actor is a municipality, rather than a private party, there is little or no danger that it is involved in a private price-fixing arrangement. The danger that a municipality will seek to further purely parochial public interests at the expense of more overriding state goals is minimal, because of the requirement that the municipality act pursuant to a clearly articulated state policy. Pp. 46-47.

700 F.2d 376, affirmed.

POWELL, J., delivered the opinion for a unanimous Court.