July 6, 1976
CANTOR, DBA SELDEN DRUGS CO
DETROIT EDISON CO.
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT
Burger, Brennan, Stewart, White, Marshall, Blackmun, Powell, Rehnquist, Stevens.
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MR. JUSTICE STEVENS delivered the opinion of the Court.*fn*
In Parker v. Brown, 317 U.S. 341, the Court held that the Sherman Act was not violated by state action displacing competition in the marketing of raisins. In this case we must decide whether the Parker rationale immunizes private action which has been approved by a State and which must be continued while the state approval remains effective.
The Michigan Public Service Commission pervasively regulates the distribution of electricity within the State and also has given its approval to a marketing practice which has a substantial impact on the otherwise unregulated business of distributing electric light bulbs. Assuming, arguendo, that the approved practice has unreasonably restrained trade in the light-bulb market, the District Court*fn1 and the Court of Appeals*fn2 held, on the authority of Parker, that the Commission's approval exempted the practice from the federal antitrust laws. Because we questioned the applicability of Parker to this situation, we granted certiorari, 423 U.S. 821. We now reverse.
Petitioner, a retail druggist selling light bulbs, claims that respondent is using its monopoly power in the distribution of electricity to restrain competition in the sale of bulbs in violation of the Sherman Act.*fn3 Discovery
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and argument in connection with defendant's motion for summary judgment were limited by stipulation to the issue raised by the Commission's approval of respondent's light-bulb-exchange program. We state only the facts pertinent to that issue and assume, without opining, that without such approval an antitrust violation would exist. To the extent that the facts are disputed, we must resolve doubts in favor of the petitioner since summary judgment was entered against him. We first describe respondent's "lamp exchange program," we next discuss the holding in Parker v. Brown, and then we consider whether that holding should be extended to cover this case. Finally, we comment briefly on additional authorities on which respondent relies.
Respondent, the Detroit Edison Co., distributes electricity and electric light bulbs to about five million people in southeastern Michigan. In this marketing area, respondent is the sole supplier of electricity, and supplies consumers with almost 50% of the standard-size light bulbs they use most frequently.*fn4 Customers are billed for the electricity they consume, but pay no separate charge for light bulbs. Respondent's rates, including the omission of any separate charge for bulbs, have been approved by the Michigan Public Service Commission, and may not be changed without the Commission's approval. Respondent must, therefore, continue
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its lamp-exchange program until it files a new tariff and that new tariff is approved by the Commission.
Respondent, or a predecessor, has been following the practice of providing limited amounts of light bulbs to its customers without additional charge since 1886.*fn5 In 1909 the State of Michigan began regulation of electric utilities.*fn6 In 1916 the Michigan Public Service Commission first approved a tariff filed by respondent setting forth the lamp-supply program. Thereafter, the Commission's approval of respondent's tariffs has included implicit approval of the lamp-exchange program. In 1964 the Commission also approved respondent's decision to eliminate the program for large commercial customers.*fn7 The elimination of the service for such customers became effective as part of a general rate reduction for those customers.
In 1972 respondent provided its residential customers with 18,564,381 bulbs at a cost of $2,835,000.*fn8 In its accounting to the Michigan Public Service Commission, respondent included this amount as a portion of its cost of providing service to its customers. Respondent's accounting records reflect no direct profit as a result of the
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distribution of bulbs. The purpose of the program, according to respondent's executives, is to increase the consumption of electricity. The effect of the program, according to petitioner, is to foreclose competition in a substantial segment of the light-bulb market.*fn9
The distribution of electricity in Michigan is pervasively regulated by the Michigan Public Service Commission. A Michigan statute*fn10 vests the Commission with "complete power and jurisdiction to regulate all public utilities in the state...." The statute confers express power on the Commission "to regulate all rates, fares, fees, charges, services, rules, conditions of service, and all other matters pertaining to the formation, operation, or direction of such public utilities." Respondent advises us that the heart of the Commission's function is to regulate the "'furnishing... [of] electricity for the production of light, heat or power....'"*fn11
The distribution of electric light bulbs in Michigan is unregulated. The statute creating the Commission contains no direct reference to light bulbs. Nor, as far as we have been advised, does any other Michigan statute authorize the regulation of that business. Neither the Michigan Legislature, nor the Commission, has ever made any specific investigation of the desirability of a lamp-exchange program or of its possible effect on competition in the light-bulb market. Other utilities regulated by the Michigan Public Service Commission do not follow the practice of providing bulbs to their customers at no
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additional charge. The Commission's approval of respondent's decision to maintain such a program does not, therefore, implement any statewide policy relating to light bulbs. We infer that the State's policy is neutral on the question whether a utility should, or should not, have such a program.
Although there is no statute, Commission rule, or policy which would prevent respondent from abandoning the program merely by filing a new tariff providing for a proper adjustment in its rates, it is nevertheless apparent that while the existing tariff remains in effect, respondent may not abandon the program without violating a Commission order, and therefore without violating state law. It has, therefore, been permitted by the Commission to carry out the program, and also is required to continue to do so until an appropriate filing has been made and has received the approval of the Commission.
Petitioner has not named any public official as a party to this litigation and has made no claim that any representative of the State of Michigan has acted unlawfully.
In Parker v. Brown the Court considered whether the Sherman Act applied to state action. The way the Sherman Act question was presented and argued in that case sheds significant light on the character of the state-action concept embraced by the Parker holding.
The plaintiff, Brown, was a producer and packer of raisins; the defendants were the California Director of Agriculture and other public officials charged by California statute with responsibility for administering a program for the marketing of the 1940 crop of raisins. The express purpose of the program was to restrict competition among the growers and maintain prices in the distribution
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of raisins to packers.*fn12 Nevertheless, in the District Court, Brown did not argue that the defendants had violated the Sherman Act. He sought an injunction against the enforcement of the program on the theory that it interfered with his constitutional right to engage in interstate commerce. Because he was attacking the constitutionality of a California statute and regulations having statewide applicability, a three-judge District Court was convened.*fn13 With one judge dissenting, the District Court held that the program violated the Commerce Clause and granted injunctive relief.*fn14
The defendant state officials took a direct appeal to this Court. Probable jurisdiction was noted on April 6, 1942, and the Court heard oral argument on the Commerce
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Clause issue on May 5, 1942. In the meantime, on April 27, 1942, the Court held that the State of Georgia is a "person" within the meaning of § 7 of the Sherman Act and therefore entitled to maintain an action for treble damages. Georgia v. Evans, 316 U.S. 159.
Presumably because the Court was then concerned with the relationship between the sovereign States and the antitrust laws, it immediately set Parker v. Brown for reargument*fn15 and, on its own motion, requested the Solicitor General of the United States to file a brief as amicus curiae and directed the parties to discuss the question whether the California statute was rendered invalid by the Sherman Act.*fn16
In his supplemental brief the Attorney General of
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California*fn17 advanced three arguments against using the Sherman Act as a basis for upholding the injunction entered by the District Court. He contended (1) that even though a State is a "person" entitled to maintain a treble-damage action as a plaintiff, Congress never intended to subject a sovereign State to the provisions of the Sherman Act; (2) that the California program did not, in any event, violate the federal statute; and (3) that since no evidence or argument pertaining to the Sherman Act had been offered or considered in the District Court, the injunction should not be sustained on an antitrust theory.*fn18
In his brief for the United States as amicus curiae, the Solicitor General did not take issue with the appellants' first argument. He contended that the California program was inconsistent with the policy of the Sherman Act, but expressly disclaimed any argument that the State of California or its officials had violated federal law.*fn19 Later in his brief the Solicitor General drew an
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important distinction between economic action taken by the State itself and private action taken pursuant to a state statute permitting or requiring individuals to engage in conduct prohibited by the Sherman Act. The Solicitor General contended that the private conduct would clearly be illegal but recognized that a different problem existed with respect to the State itself.*fn20 It was the latter problem that was presented in the Parker case.
This Court set aside the injunction entered by the District Court. In the portion of his opinion for the Court discussing the Sherman Act issue, Mr. Chief Justice Stone addressed only the first of the three arguments advanced by the California Attorney General. The Court held that even though comparable programs organized by private persons would be illegal, the action taken by state officials pursuant to express legislative command did not violate the Sherman Act.*fn21
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This narrow holding made it unnecessary for the Court to agree or to disagree with the Solicitor General's view that a state statute permitting or requiring private conduct prohibited by federal law "would clearly be void."*fn22 The Court's narrow holding also avoided any question about the applicability of the antitrust laws to private action taken under color of state law.
Unquestionably the term "state action" may be used broadly to encompass individual action supported to some extent by state law or custom. Such a broad use of the term, which is familiar in civil rights litigation,*fn23 is not,
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however, what Mr. Chief Justice Stone described in his Parker opinion. He carefully selected language which plainly limited the Court's holding to official action taken by state officials.*fn24
In this case, unlike Parker, the only defendant is a private utility. No public officials or agencies are named as parties and there is no claim that any state action violated the antitrust laws. Conversely, in Parker there was no claim that any private citizen or company had violated the law. The only Sherman Act issue decided was whether the sovereign State itself, which had been held to be a person within the meaning of § 7 of the statute, was also subject to its prohibitions. Since the case now before us does not call into question the legality of any
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act of the State of Michigan or any of its officials or agents, it is not controlled by the Parker decision.
In this case we are asked to hold that private conduct required by state law is exempt from the Sherman Act. Two quite different reasons might support such a rule. First, if a private citizen has done nothing more than obey the command of his state sovereign, it would be unjust to conclude that he has thereby offended federal law. Second, if the State is already regulating an area of the economy, it is arguable that Congress did not intend to superimpose the antitrust laws as an additional, and perhaps conflicting, regulatory mechanism. We consider these two reasons separately.
We may assume, arguendo, that it would be unacceptable ever to impose statutory liability on a party who had done nothing more than obey a state command. Such an assumption would not decide this case, if, indeed, it would decide any actual case. For typically cases of this kind involve a blend of private and public decisionmaking.*fn25 The Court has already decided that state authorization,*fn26 approval,*fn27 encouragement,*fn28 or
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participation*fn29 in restrictive private conduct confers no antitrust immunity. And in Schwegmann Bros. v. Calvert Corp., 341 U.S. 384, the Court invalidated the plaintiff's entire resale price maintenance program even though it was effective throughout the State only because the Louisiana statute imposed a direct restraint on retailers who had not signed fair trade agreements.*fn30
In each of these cases the initiation and enforcement of the program under attack involved a mixture of private and public decisionmaking. In each case, notwithstanding the state participation in the decision, the private party exercised sufficient freedom of choice to enable the Court to conclude that he should be held responsible for the consequences of his decision.
The case before us also discloses a program which is the product of a decision in which both the respondent and the
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Commission participated. Respondent could not maintain the lamp-exchange program without the approval of the Commission, and now may not abandon it without such approval. Nevertheless, there can be no doubt that the option to have, or not to have, such a program is primarily respondent's, not the Commission's.*fn31 Indeed, respondent initiated the program years before the regulatory agency was even created. There is nothing unjust in a conclusion that respondent's participation in the decision is sufficiently significant to require that its conduct implementing the decision, like comparable conduct by unregulated businesses, conform to applicable federal law.*fn32 Accordingly, even though there may be cases in which the State's participation in a decision is so dominant
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that it would be unfair to hold a private party responsible for his conduct in implementing it, this record discloses no such unfairness.
Apart from the question of fairness to the individual who must conform not only to state regulation but to the federal antitrust laws as well, we must consider whether Congress intended to superimpose antitrust standards on conduct already being regulated under a different standard. Amici curiae forcefully contend that the competitive standard imposed by antitrust legislation is fundamentally inconsistent with the "public interest" standard widely enforced by regulatory agencies, and that the essential teaching of Parker v. Brown is that the federal antitrust laws should not be applied in areas of the economy pervasively regulated by state agencies.
There are at least three reasons why this argument is unacceptable. First, merely because certain conduct may be subject both to state regulation and to the federal antitrust laws does not necessarily mean that it must satisfy inconsistent standards; second, even assuming inconsistency, we could not accept the view that the federal interest must inevitably be subordinated to the State's; and finally, even if we were to assume that Congress did not intend the antitrust laws to apply to areas of the economy primarily regulated by a State, that assumption would not foreclose the enforcement of the antitrust laws in an essentially unregulated area such as the market for electric light bulbs.
Unquestionably there are examples of economic regulation in which the very purpose of the government control is to avoid the consequences of unrestrained competition. Agricultural marketing programs, such as that involved in Parker, were of that character. But all economic regulation does not necessarily suppress competition. On the contrary, public utility regulation typically
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assumes that the private firm is a natural monopoly and that public controls are necessary to protect the consumer from exploitation.*fn33 There is no logical inconsistency between requiring such a firm to meet regulatory criteria insofar as it is exercising its natural monopoly powers and also to comply with antitrust standards to the extent that it engages in business activity in competitive areas of the economy.*fn34 Thus, Michigan's regulation of respondent's distribution of electricity poses no necessary conflict with a federal requirement that respondent's activities in competitive markets satisfy antitrust standards.*fn35
The mere possibility of conflict between state regulatory policy and federal antitrust policy is an insufficient basis for implying an exemption from the federal antitrust laws. Congress could hardly have intended state regulatory agencies to have broader power than federal agencies to exempt private conduct from the antitrust laws.*fn36 Therefore, assuming that there are situations in
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which the existence of state regulation should give rise to an implied exemption, the standards for ascertaining the existence and scope of such an exemption surely must be at least as severe as those applied to federal regulatory legislation.
The Court has consistently refused to find that regulation gave rise to an implied exemption without first determining that exemption was necessary in order to make the regulatory Act work, "and even then only to the minimum extent necessary."*fn37
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The application of that standard to this case inexorably requires rejection of respondent's claim. For Michigan's regulatory scheme does not conflict with federal antitrust policy and, conversely, if the federal antitrust laws should be construed to outlaw respondent's lightbulb-exchange program, there is no reason to believe that Michigan's regulation of its electric utilities will no longer be able to function effectively. Regardless of the outcome of this case, Michigan's interest in regulating its utilities' distribution of electricity will be almost entirely unimpaired.
We conclude that neither Michigan's approval of the tariff filed by respondent, nor the fact that the lamp-exchange program may not be terminated until a new tariff is filed, is a sufficient basis for implying an exemption from the federal antitrust laws for that program.*fn38
The dissenting opinion voices the legitimate concern that violation of the antitrust laws by regulated companies may give rise to "massive treble damage liabilities." This is an oft-repeated criticism of the inevitably
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imprecise language of the Sherman Act and of the consequent difficulty in predicting with certainty its application to various specific fact situations.*fn39 The far-reaching value of this basic part of our law, however, has enabled it to withstand such criticism in the past.*fn40
The concern about treble-damage liability has arguable relevance to this case in two ways. If the hazard of violating the antitrust laws were enhanced by the fact of regulation, or if a regulated company had engaged in anticompetitive conduct in reliance on a justified understanding that such conduct was immune from the antitrust laws, a concern with the punitive aspects of the treble-damage remedy would be appropriate. But neither of those circumstances is present in this case.
When regulation merely takes the form of approval of a tariff proposed by the company, it surely has not increased the company's risk of violating the law. The
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respondent utility maintained its lamp-exchange program both before and after it was regulated. The approval of the program by the Michigan Commission provided the company with an arguable defense to the antitrust charge, but did not increase its exposure to liability.
Nor can the utility fairly claim that it was led to believe that its conduct was exempt from the federal antitrust laws. A claim of immunity or exemption is in the nature of an affirmative defense to conduct which is otherwise assumed to be unlawful. This Court has never sustained a claim that otherwise unlawful private conduct is exempt from the antitrust laws because it was permitted or required by state law.
In the Court's most recent consideration of this subject, it described the defendant's claim with pointed precision as "this so-called state-action exemption." Goldfarb v. Virginia State Bar, 421 U.S., 773, 788. The Court then explained that the question whether the anticompetitive activity had been required by the State acting as sovereign was the "threshold inquiry" in determining whether it was state action of the type the Sherman Act was not meant to proscribe.*fn41 Certainly that careful use of language could not have been read as a guarantee that compliance with any state requirement would automatically confer federal antitrust immunity.
The dissenting opinion in this case makes much of the obvious fact that Parker v. Brown implicitly held that California's raisin-marketing program was not a violation of the Sherman Act. That is, of course, perfectly
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true. But the only way the legality of any program may be tested under the Sherman Act is by determining whether the persons who administer it have acted lawfully. The federal statute proscribes the conduct of persons, not programs, and the narrow holding in Parker concerned only the legality of the conduct of the state officials charged by law with the responsibility for administering California's program. What sort of charge might have been made against the various private persons who engaged in a variety of different activities implementing that program is unknown and unknowable because no such charges were made.*fn42 Even if the state program had been held unlawful, such a holding would not necessarily have supported a claim that private individuals who had merely conformed their conduct to an invalid program had thereby violated the Sherman Act. Unless and until a court answered that question, there would be no occasion to consider an affirmative defense of immunity or exemption.
Nor could respondent justifiably rely on either the holding in Eastern R. Conf. v. Noerr Motors, 365 U.S. 127, or the reference in that opinion to Parker.*fn43 The holding in Noerr was that the concerted activities of the railroad defendants in opposing legislation favorable to the plaintiff motor carriers was not prohibited by the Sherman Act. The case did not involve any question of either liability or exemption for private action taken in compliance with state law.
Moreover, nothing in the Noerr opinion implies that
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the mere fact that a state regulatory agency may approve a proposal included in a tariff, and thereby require that the proposal be implemented until a revised tariff is filed and approved, is a sufficient reason for conferring antitrust immunity on the proposed conduct. The passage quoted in the dissent, post, at 622, sets up an assumed dichotomy between a restraint imposed by governmental action, as contrasted with one imposed by private action, and then cites United States v. Rock Royal Co-op., 307 U.S. 533, and Parker for the conclusion that the former does not violate the Sherman Act.*fn44 That passing reference to Parker sheds no light on the significance of state action which amounts to little more than approval of a private proposal. It surely does not qualify the categorical statement in Parker 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." 317 U.S., at 351. Yet the dissent would allow every state agency to grant precisely that immunity by merely including a direction to engage in the proposed conduct in an approval order.*fn45
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MR. JUSTICE STEWART's separate opinion possesses a virtue which ours does not. It announces a simple rule that can easily be applied in any case in which a state regulatory agency approves a proposal and orders a regulated company to comply with it. No matter what the impact of the proposal on interstate commerce, and no matter how peripheral or casual the State's interests may be in permitting it to go into effect, the state act would confer immunity from treble-damages liability. Such a rule is supported by the wholesome interest in simplicity in the regulation of a complex economy. In our judgment, however, that interest is heavily outweighed by the fact that such a rule may give a host of state regulatory agencies broad power to grant exemptions from an important federal law for reasons wholly unrelated either to federal policy or even to any necessary significant state interest. Although it is tempting to try to fashion a rule which would govern the decision of the liability issue and the damages issue in all future cases presenting state-action issues, we believe the Court should adhere to its settled policy of giving concrete meaning to the general language of the Sherman Act by a process of case-by-case adjudication of specific controversies.
Since the District Court has not yet addressed the question whether the complaint alleged a violation of the antitrust laws, the case is remanded for a determination of that question and for such other proceedings as may be appropriate.
Reversed and remanded.
MR. JUSTICE BLACKMUN, concurring in the judgment.
MR. CHIEF JUSTICE BURGER, concurring in the judgment and in all except Parts II and IV of the Court's opinion.
I concur in the judgment and in all except Parts II and IV of the Court's opinion. I do not agree, however, that Parker v. Brown, 317 U.S. 341 (1943), can logically be limited to suits against state officials. In interpreting Parker, the Court has heretofore focused on the challenged activity, not upon the identity of the parties to the suit.S
"The threshold inquiry in determining if an anticompetitive activity is state action of the type the Sherman Act was not meant to proscribe is whether the activity is required by the State acting as sovereign." Goldfarb v. Virginia State Bar, 421 U.S. 773, 790 (1975) (emphasis added).I
If Parker's holding were limited simply to the non-liability of state officials, then the Court's inquiry in Goldfarb as to the County Bar Association's claimed exemption could have ended upon our recognition that the organization was "a voluntary association and not a state agency. . . ." 421 U.S., at 790. Yet, before determining that there was no exemption from the antitrust laws, the Court proceeded to treat the Association's contention that its action, having been "prompted" by the State Bar, was "state action for Sherman Act purposes." Ibid.
The reading of Parker in Part II is unnecessary to the result in this case; that decision simply does not address the precise issue raised by the present case. There was no need in Parker to focus upon the situation where the State, in addition to requiring a public utility "to meet regulatory criteria insofar as it is exercising its natural monopoly powers," ante, at 596, also purports, without any independent regulatory purpose, to control the utility's activities in separate, competitive markets. Today the Court correctly concludes:S
"The Commission's approval of respondent's decision to maintain such a program does not . . .implement any statewide policy relating to light bulbs. We infer that the State's policy is neutral on the question
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whether a utility should, of should not, have such a program." Ante, at 585 (emphasis added).I
To find a "state action" exemption on the basis of Michigan's undifferentiated sanction of this ancillary practice could serve no federal or state policy.
Mr. Justice Blackmun, concurring in the judgment.
I agree with the Court insofar as it holds that the fact that anticompetitive conduct is sanctioned, or even required, by state law does not of itself put that conduct beyond the reach of the Sherman Act. Since the opposite proposition is the ground on which the Court of Appeals affirmed the dismissal of this suit, I also agree that its judgment must be reversed. My approach, however, is somewhat different from that of the Court.
As to the principal question in the case, that of the Sherman Act's pre-emptive effect upon inconsistent state laws, it is, as the dissent points out, one of congressional intent. No one denies that Congress could, if it wished, override those state laws whose operation would subvert the federal policy of free competition in interstate commerce. In discerning that intent, however, I find somewhat less assistance in the legislative history than does the dissent. It is true that the framers of the Sherman Act expressed the view that certain areas of economic activity were left entirely to state regulation. The dissent quotes several of these expressions. Post, at 632-634. A careful reading of those statements reveals, however, that they little more than reflect the then-prevailing view that Congress lacked the power, under the Commerce Clause, to regulate economic activity that was within the domain of the States. The Court since then has recognized a greatly expanded Commerce Clause
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power. Arguably, the Sherman Act should have remained confined within the outlines of that power as it was thought to exist in 1890, on the theory that if Congress believed it could not regulate any more broadly, it must not have attempted to do so. But that bridge already has been crossed, for it has been held that Congress intended the reach of the Sherman Act to expand along with that of the commerce power. Hospital Building Co. v. Rex Hospital Trustees, 425 U.S. 738, 743 n. 2 (1976), and cases cited.
Our question in this case is one that the Sherman Act's framers did not directly confront or explicitly address: What was to be the result if the expanding ambit of the Sherman Act should bring it into conflict with inconsistent state law? But it seems to me that this bridge also has been crossed. In Schwegmann Bros. v. Calvert Distillers Corp., 341 U.S. 384 (1951), the issue was whether the Sherman Act permitted enforcement of a Louisiana statute requiring compliance by liquor retailers with resale price agreements to which they were not parties, but which had been entered into by other retailers with their wholesale suppliers. The Court held the Louisiana statute unenforceable; there is no plausible reading of that decision other than that the statute was pre-empted by the Sherman Act.*fn1 Northern Securities Co. v. United States, 193 U.S. 197 (1904), is to the same effect. The defenders of the railroad holding company attacked in that case argued that it was beyond the Sherman Act's reach because it was lawful under the corporation
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laws of New Jersey. The holding company was nonetheless held unlawful, and, to that extent, the law of New Jersey was forced to give way.*fn2 Indeed, I suppose that some degree of state-law pre-emption is implicit in the most fundamental operation of the Sherman Act. If a State had no antitrust policy of its own, anticompetitive combinations of all kinds would be sanctioned and enforced under that State's general contract and corporation law. Yet, there has never been any doubt that if such combinations offend the Sherman Act, they are illegal, and state laws to that extent are overridden.*fn3
Congress itself has given support to the view that inconsistent state laws are pre-empted by the Sherman Act. Were it the case that state statutes held complete sway, Congress would not have found it necessary in 1937 to pass the Miller-Tydings Fair Trade Act, 50 Stat. 693, amending the Sherman Act, specifically exempting from the latter's operation certain price maintenance agreements sanctioned by state law. 15 U.S.C. § 1. There are other instances of Congress' acting to protect state-sanctioned anticompetitive schemes from the Sherman
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Act. In response to Schwegmann, see H.R. Rep. No. 1437, 82d Cong., 2d Sess., 1-2, Congress in 1952 passed the McGuire bill, 66 Stat. 632, extending the Miller-Tydings exemption to state statutes that enforced resale price agreements against nonsigners. 15 U.S.C.§§ 45 (a)(2) to (5). A similar enactment is the McCarran-Ferguson Act of 1945, 59 Stat. 34, exempting from federal statutes "any law enacted by any State for the purpose of regulating the business of insurance," with provision that the Sherman Act, and other named federal statutes, should apply to that business after a specified date "to the extent that such business is not regulated by State law." 15 U.S.C. § 1012 (b).*fn4 These express grants of Sherman Act immunity seem significant to me. As the Court stated in United States v. Borden Co., 308 U.S. 188, 201 (1939), construing the immunity granted to certain agreements by the Agricultural Marketing
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Agreement Act of 1937, "[i]f Congress had desired to grant any further immunity, Congress doubtless would have said so."
I also agree with MR. JUSTICE STEVENS that the particular anticompetitive scheme attacked in this case must fall despite the imprimatur it claims to have received from the State of Michigan. To say, as I have, that the Sherman Act generally pre-empts inconsistent state laws is not to answer the much more difficult question as to which such laws are pre-empted and to what extent. I fear there are no easy solutions, though several suggest themselves.
It cannot be decisive, for example, simply that a state law goes so far as to require, rather than simply to authorize, the anticompetitive conduct in question. The Court accepted this as a prerequisite to antitrust immunity in Goldfarb v. Virginia State Bar, 421 U.S. 773, 790 (1975), but it cannot alone be sufficient. The whole issue in Schwegmann was whether the State could require obedience to a fixed resale price arrangement. Similarly, compliance with an anticompetitive contract, or adherence to an illegal corporate combination, might well be "required" by a State's general contract and corporation law.
Neither can it be decisive that a particular state-sanctioned scheme was initiated by the private actors rather than by the State. I see no difference in the degree of private initiation as between the marketing arrangement approved in Parker v. Brown, 317 U.S. 341 (1943) (and properly approved, I think, for reasons set forth below), and the resale price maintenance scheme disapproved in Schwegmann. In each case the particular scheme was initiated by the private actors at the invitation of a general statute, with which they may or may
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not have had anything to do. The same was true in Northern Securities, and the same is true here. To be sure, there is a certain rough justice, as well as an appearance of simplicity, in a rule based upon who actually is responsible for the scheme in question, but I fear that both the justice and the simplicity would prove illusory in the rule's actual application. Every state enactment is initiated, in its way, by its beneficiaries. It would scarcely make sense to immunize only those powerful enough to speak entirely through their governmental representatives, or, for that matter, to stifle such speech with the threat that it will destroy antitrust immunity. Moreover, the process of enactment is likely to involve such a complex interplay between those regulating and those regulated that it will be impossible to identify the true "initiator."
A final, ostensibly simple, solution that I find wanting would be to insist only on some degree of affirmative articulation by the State of its conscientious intent to sanction the challenged scheme, and its reasons therefor. This also is a tempting solution, particularly in this case, where there is little to suggest (at least in recent years) that the Michigan Public Service Commission has even actively considered the light-bulb tie-in, much less articulated a justification for it. Yet such a solution would also lead to perverse results. A regulation whose justification was too plain to require explication would be vulnerable; a questionable one could be immunized if its proponents had the skill or influence to generate the proper legislative history. And, of course, deciding how much "affirmative articulation" of state policy is enough is not a simple matter.
I would apply at least for now, a rule of reason, taking it as a general proposition that state-sanctioned anticompetitive activity must fall like any other if its potential harms outweigh its benefits. This does not mean
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that state-sanctioned and private activity are to be treated alike. The former is different because the fact of state sanction figures powerfully in the calculus of harm and benefit. If, for example, the justification for the scheme lies in the protection of health or safety, the strength of that justification is forcefully attested to by the existence of a state enactment. I would assess the justifications of such enactments in the same way as is done in equal protection review, and where such justifications are at all substantial (as one would expect them to be in the case of most professional licensing or fee-setting schemes, for example, cf. Olsen v. Smith, 195 U.S. 332 (1904)), I would be reluctant to find the restraint unreasonable. A particularly strong justification exists for a state-sanctioned scheme if the State in effect has substituted itself for the forces of competition, and regulates private activity to the same ends sought to be achieved by the Sherman Act. Thus, an anticompetitive scheme which the State institutes on the plausible ground that it will improve the performance of the market in fostering efficient resource allocation and low prices can scarcely be assailed. One could not doubt the legality of Detroit Edison's electric power monopoly; the fear of such a monopoly is primarily its tendency to charge excessive prices, but its prices in this instance are controlled by the State.
No doubt such a rule of reason will crystallize, as it is applied, into various per se rules relating to certain kinds of state enactments, such as the regulation of the classic natural monopoly, the public utility. We should not shrink in our general approach, however, from what seems to me our constitutionally mandated task, one often set for us by conflicting federal and state laws, and that is the balancing of implicated federal and state interests with a view to assuring that when these are truly in conflict, the former prevail.
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The dissent's fears on this score appear to me to be exaggerated. The balancing of harm and benefit is, in general, a process with which federal courts are well acquainted in the antitrust field. The special problem of assessing state interests to determine whether they are strong enough to prevail against supreme federal dictates is also a familiar one to the federal courts. Indeed, a state action that interferes with competition not only among its own citizens but also among the States is already subject under the Commerce Clause to much the same searching review of state justifications as is proposed here. See, e.g., Dean Milk Co. v. Madison, 340 U.S. 349, 354 (1951) (state restriction on sale of milk not locally processed held invalid because "reasonable and adequate alternatives [were] available" to protect health interests); Southern Pacific Co. v. Arizona, 325 U.S. 761, 770-784 (1945) (state restriction of train lengths held invalid under the Commerce Clause because "the state [safety] interest is outweighed by the interest of the nation in an adequate, economical and efficient railway transportation service").
By these standards the present case does not seem a difficult one. The light-bulb tie-in presents the usual dangers of such a scheme, principally that respondent will extend its monopoly from the sale of electric power into that of light bulbs, not because it sells better light bulbs, but because its light bulbs are the ones customers must pay for if they are to have light at all. See P. Areeda, Antitrust Analysis 569-570 (2d ed. 1974). On the record before us the scheme appears to be unjustified. No doubt it originated as a means to promote electric power use, but it is difficult to see why a tie-in (rather than an optional, promotional light-bulb sale) was necessary
[ 428 U.S. Page 613]
to that end even in the 19th century, laying aside the question whether the promotion of greater electric power use remains today a plausible public goal. Respondent would justify the scheme on the ground of consumer savings, its light bulbs assertedly being cheaper and better than those commercially available. Brief for Respondent 7-9, 41-42. But again, a tie-in is not necessary to pass along these savings. A tie-in is only necessary in order to force consumers to pay for light bulbs from Detroit Edison rather than someone else. But there is no indication that one light bulb does not fit the socket as well as another, or that the sale of light bulbs is in any way crucial to respondent's successful operation. Conceivably, Michigan's aim is the very extension of the monopoly, born of a preference for having light bulbs supplied by one whose prices are already regulated. But ending competition in the light-bulb market cannot be accepted as an adequate state objective without some evidence -- of which there is not the least hint in this record -- that such competition is in some way ineffective. For all that appears, light-bulb marketing, unlike electric power production, is not a natural monopoly, nor does it implicate health or safety, nor is it beset with problems of instability or other flaws in the competitive market.*fn5
[ 428 U.S. Page 614]
This is what I take it the Court means when it says the electric light-bulb market is "essentially unregulated," and on that understanding I agree with its conclusion. It is conceivable that respondent may show, upon further evidence, a sufficient justification for the scheme, but it certainly has not done so as yet.*fn6
MR. JUSTICE STEWART, with whom MR. JUSTICE POWELL and MR. JUSTICE REHNQUIST join, dissenting.
The Court today holds that a public utility company, pervasively regulated by a state utility commission,
[ 428 U.S. Page 615]
may be held liable for treble damages under the Sherman Act for engaging in conduct which, under the requirements of its tariff, it is obligated to perform. I respectfully dissent from this unprecedented application of the federal antitrust laws, which will surely result in disruption of the operation of every state-regulated public utility company in the Nation and in the creation of "the prospect of massive treble damage liabilities"*fn1 payable ultimately by the companies' customers.
The starting point in analyzing this case is Parker v. Brown, 317 U.S. 341. While Parker did not create the "so-called state-action exemption"*fn2 from the federal antitrust laws,*fn3 it is the case that is most frequently
[ 428 U.S. Page 616]
cited for the proposition that the "[Sherman] Act was intended to regulate private practices and not to prohibit a State from imposing a restraint as an act of government." Goldfarb v. Virginia State Bar, 421 U.S. 773, 788. The plurality opinion would hold that that case decided only that "the sovereign State itself," ante, at 591, could not be sued under the Sherman Act. This view of Parker, which would trivialize that case to the point of overruling it,*fn4 flies in the face of the decisions of
[ 428 U.S. Page 617]
this Court that have interpreted or applied Parker's "state action" doctrine, and is unsupported by the sources on which the plurality relies.
As to those sources, I would have thought that except in rare instances an analysis of the positions taken by the parties in briefs submitted to this Court should play no role in interpreting its written opinions.*fn5 A
[ 428 U.S. Page 618]
contrary rule would permit the "plain meaning" of our decisions to be qualified or even overridden by their "legislative history" - i.e., briefs submitted by the contending parties. The legislative history of congressional enactments is useful in discerning legislative intent, because that history emanates from the same source as the legislation itself and is thus directly probative of the intent of the draftsmen. The conflicting views presented in the adversary briefs and arguments submitted to this Court do not bear an analogous relationship to the Court's final product.
But assuming, arguendo, that it is appropriate to look behind the language of Parker v. Brown, supra, I think it is apparent that the plurality has distorted the positions taken by the State of California and the United States as amici curiae. The question presented on reargument in Parker was "whether the state statute involved is rendered invalid by the action of Congress in passing the Sherman Act...." Ante, at 587 n. 16. This phrasing indicates that the precise issue on which the Court sought reargument was whether the California statute was pre-empted by the Sherman Act, not whether sovereign States were immune from suit under the Sherman Act.
The State of California and the Solicitor General certainly understood this to be the principal issue. As the plurality opinion correctly notes, the supplemental brief filed by the State of California in response to the question posed by this Court advanced three basic arguments. And as it further notes, this Court's decision in Parker rested on the first of those arguments. But what the plurality fails to acknowledge is that California's first argument was in principal part a straightforward contention
[ 428 U.S. Page 619]
that the Sherman Act was not intended to pre-empt state regulation of intrastate commerce.*fn6
With respect to the amicus brief of the United States,
[ 428 U.S. Page 620]
the plurality opinion states that the "Solicitor General did not take issue with the appellants' first argument." Ante, at 588. Indeed, the plurality says, the Solicitor General "expressly disclaimed any argument that the State of California or its officials had violated federal law." Ibid. In support of this assertion, the plurality opinion quotes the following language from p. 59 of the Solicitor General's brief in Parker: S
"'[T]he question we face here is not whether California or its officials have violated the Sherman Act, but whether the state program interferes with the accomplishment of the objectives of the federal statute.'" Ante, at 589 n. 19.I
This statement by the Solicitor General was indeed correct, because the question on which the Court had requested supplemental briefing was "whether the state statute involved is rendered invalid by the action of Congress in passing the Sherman Act," not "whether California or its officials have violated the Sherman Act...." As the Solicitor General noted in the very next sentence, "[a] state law may be superseded as conflicting with a federal statute irrespective of whether its administrators are subject to prosecution for violation of the paramount federal enactment."*fn7 The Solicitor General then proceeded
[ 428 U.S. Page 621]
to take strenuous issue with the principal contention advanced in the first part of the relevant section of California's brief -- that the framers of the federal legislation had not intended to pre-empt state legislation like the California Agricultural Prorate Act.*fn8
Thus, it is clear that the plurality has misread the positions taken by the State of California and the Solicitor General in Parker v. Brown. The question presented to the Court in Parker was whether the restraint on trade effected by the California statute was exempt
[ 428 U.S. Page 622]
from the operation of the Sherman Act. That was the question addressed by the Solicitor General and, in principal part, by the State of California. And it was the question resolved by this Court in its holding that "[t]he state in adopting and enforcing the prorate program made no contract or agreement and entered into no conspiracy in restraint of trade or to establish monopoly but, as sovereign, imposed the restraint as an act of government which the Sherman Act did not undertake to prohibit." 317 U.S., at 352.
The notion that Parker decided only that "action taken by state officials pursuant to express legislative command did not violate the Sherman Act," ante, at 589, and that that "narrow holding... avoided any question about the applicability of the antitrust laws to private action" taken under command of state law, ante, at 590, is thus refuted by the very sources on which the plurality opinion relies. That narrow view of the Parker decision is also refuted by the subsequent cases in this Court that have interpreted and applied the Parker doctrine.
In Eastern R. Conf. v. Noerr Motors, 365 U.S. 127, for instance, the Court held that no violation of the Sherman Act could be predicated on the attempt by private persons to influence the passage or enforcement of state laws regulating competition in the trucking industry.*fn9 The Court took as its starting point the ruling in Parker v. Brown that "where a restraint upon trade or monopolization is the result of valid governmental action, as opposed to private action, no violation of the Act can be made out." 365 U.S., at 136. The Court
[ 428 U.S. Page 623]
viewed it as "equally clear that the Sherman Act does not prohibit two or more persons from associating together in an attempt to persuade the legislature or the executive to take particular action with respect to a law that would produce a restraint or monopoly." Ibid. A contrary ruling, the Court held, "would substantially impair the power of government to take actions through its legislature and executive that operate to restrain trade." Id., at 137. Surely, if a rule permitting Sherman Act liability to arise from lobbying by private parties for state rules restricting competition would impair the power of state governments to impose restraints, then a fortiori a rule permitting Sherman Act liability to arise from private parties' compliance with such rules would impair the exercise of the States' power. But as the Court in Noerr correctly noted, the latter result was foreclosed by Parker' s holding that "where a restraint upon trade or monopolization is the result of valid governmental action, as opposed to private action, no violation of the Act can be made out." 365 U.S., at 136.
Litigation testing the limits of the state-action exemption has focused on whether alleged anticompetitive conduct by private parties is indeed "the result of" state action. Thus, in Goldfarb v. Virginia State Bar, 421 U.S. 773, the question was whether price fixing practiced by the respondents was "required by the State acting as sovereign. Parker v. Brown, 317 U.S., at 350-352...." Id., at 790. The Court held that the "so-called state-action exemption," id., at 788, did not protect the respondents because it "cannot fairly be said that the State of Virginia through its Supreme Court Rules required the anticompetitive activities of either respondent.... Respondents' arguments, at most, constitute the contention that their activities complemented the objective
[ 428 U.S. Page 624]
of the ethical codes. In our view that is not state action for Sherman Act purposes. It is not enough that, as the County Bar puts it, anticompetitive conduct is 'prompted' by state action; rather, anticompetitive activities must be compelled by direction of the State acting as a sovereign." Id., at 790-791. The plurality's view that Parker does not cover state-compelled private conduct flies in the face of this carefully drafted language in the Goldfarb opinion.
Parker, Noerr, and Goldfarb point unerringly to the proper disposition of this case. The regulatory process at issue has three principal stages. First, the utility company proposes a tariff. Second, the Michigan Public Service Commission investigates the proposed tariff and either approves it or rejects it. Third, if the tariff is approved, the utility company must, under command of state law, provide service in accord with its requirements until or unless the Commission approves a modification. The utility company thus engages in two distinct activities: It proposes a tariff and, if the tariff is approved, it obeys its terms. The first action cannot give rise to antitrust liability under Noerr and the second -- compliance with the terms of the tariff under the command of state law -- is immune from antitrust liability under Parker and Goldfarb.*fn10
[ 428 U.S. Page 625]
The plurality's contrary view would effectively overrule not only Parker but the entire body of post-Parker case law in this area, including Noerr. With the Parker holding reduced to the trivial proposition that the Sherman Act was not intended to run directly against state officials or governmental entities, the Court would fashion a new two-part test for determining whether state utility regulation creates immunity from the federal antitrust law. The first part of the test would focus on whether subjecting state-regulated utilities to antitrust liability would be "unjust." The second part of the test would look to whether the draftsmen of the Sherman Act intended to "superimpose" antitrust standards, and thus exposure to treble damages, on conduct compelled by state regulatory laws. THE CHIEF JUSTICE accedes to the new two-part test, at least where the State "purports, without any independent regulatory purpose, to control [a] utility's activities in separate, competitive
[ 428 U.S. Page 626]
markets." Ante, at 604. The new immunity test thus has the approval of a majority of the Court in instances where state-compelled anticompetitive practices are deemed "ancillary" to the State's regulatory goals.*fn11
With scarcely a backward glance at the Noerr case, the Court concludes that because the utility company's "participation" in the decision to incorporate the lamp-exchange program into the tariff was "sufficiently significant," there is nothing "unjust" in concluding that the company is required to conform its conduct to federal antitrust law "like comparable conduct by unregulated businesses...." Ante, at 594. This attempt to distinguish between the exemptive force of mandatory state rules adopted at the behest of private parties and those adopted pursuant to the State's unilateral decision is flatly inconsistent with the rationale of Noerr. There the Court pointedly rejected "[a] construction of the Sherman Act that would disqualify people from taking a public position on matters in which they are financially interested" because such a construction "would... deprive the government of a valuable source of information and, at the same time, deprive the people of their right to petition in the very instances in which that right may be of the most importance to them." 365 U.S., at 139.*fn12
[ 428 U.S. Page 627]
Today's holding will not only penalize the right to petition but may very well strike a crippling blow at state utility regulation. As the Court seems to acknowledge, such regulation is heavily dependent on the active participation of the regulated parties, who typically propose tariffs which are either adopted, rejected, or modified by utility commissions. But if a utility can escape the unpredicatable consequences of the second arm of the Court's new test, see infra, this page only by playing possum -- by exercising no "option" in the Court's terminology, ante, at 594 -- then it will surely be tempted to do just that, posing a serious threat to efficient and effective regulation.
The second arm of the Court's new immunity test, which apparently comes into play only if the utility's own activity does not exceed a vaguely defined threshold of "sufficient freedom of choice," purports to be aimed at answering the basic question of whether "Congress intended to superimpose antitrust standards on conduct already being regulated" by state utility regulation laws. Ante, at 595. Yet analysis of the Court's opinion reveals that the three factors to which the Court pays heed have little or nothing to do with discerning congressional intent. Rather, the second arm of the new test simply creates a vehicle for ad hoc judicial determinations of the substantive validity of state regulatory goals, which closely resembles the discarded doctrine of substantive due process. See Ferguson v. Skrupa, 372 U.S. 726.
The Court's delineation of the second arm of the new test proceeds as follows. Apart from the "fairness" question, the Court states, there are "at least three reasons" why the light-bulb program should not enjoy Sherman Act immunity. Ante, at 595. "First," the Court observes, "merely because certain conduct may be subject both to state regulation and to the federal antitrust laws does not necessarily mean that it must satisfy
[ 428 U.S. Page 628]
inconsistent standards...." Ibid. That is true enough as an abstract proposition, but the very question is whether the utility's alleged "tie" of light-bulb sales to the provision of electric service is immune from antitrust liability, assuming it would constitute an antitrust violation in the absence of regulation.*fn13 Second, the Court states, "even assuming inconsistency, we could not accept the view that the federal interest must inevitably be subordinated to the State's...." Ibid. The Court goes on to amplify this rationale as follows: S
"The mere possibility of conflict between state regulatory policy and federal antitrust policy is an insufficient basis for implying an exemption from the federal antitrust laws. Congress could hardly have intended state regulatory agencies to have broader power than federal agencies to exempt private conduct from the antitrust laws. Therefore,
[ 428 U.S. Page 629]
assuming that there are situations in which the existence of state regulation should give rise to an implied exemption, the standards for ascertaining the existence and scope of such an exemption surely must be at least as severe as those applied to federal regulatory legislation.
"The Court has consistently refused to find that regulation gave rise to an implied exemption without first determining that exemption was necessary in order to make the regulatory act work, 'and even then only to the minimum extent necessary.'
"The application of that standard to this case inexorably requires rejection of respondent's claim." Ante, at 596-598 (footnotes omitted).I
The Court's analysis rests on a mistaken premise. The "implied immunity" doctrine employed by this Court to reconcile the federal antitrust laws and federal regulatory statutes cannot, rationally, be put to the use for which the Court would employ it. That doctrine, a species of the basic rule that repeals by implication are disfavored, comes into play only when two arguably inconsistent federal statutes are involved. "'Implied repeal'" of federal antitrust laws by inconsistent state regulatory statutes is not only "'not favored,'" ante, at 597-598, n. 37, it is impossible. See U.S. Const., Art. VI, cl. 2.
A closer scrutiny of the Court's holding reveals that its reference to the inapposite "implied repeal" doctrine is simply window dressing for a type of judicial review radically different from that engaged in by this Court in Gordon v. New York Stock Exchange, 422 U.S. 659, and United States v. Philadelphia National Bank, 374 U.S. 321. Those cases turned exclusively on issues of statutory construction and involved no judicial scrutiny of the abstract "necessity" or "centrality" of particular
[ 428 U.S. Page 630]
regulatory provisions. Instead, the federal regulatory statute was accepted as a given, as was the federal antitrust law. The Court's interpretative effort was aimed at accommodating these arguably inconsistent bodies of law, not at second-guessing legislative judgments concerning the "necessity" for including particular provisions in the regulatory statute.
The Court's approach here is qualitatively different. The State of Michigan, through its Public Service Commission, has decided that requiring Detroit Edison to provide "free" light bulbs as a term and condition of service is in the public interest. Yet the Court is prepared to set aside that policy determination: "The lamp-supply program is by no means... imperative in the continued effective functioning of Michigan's regulation of the utilities industry." Ante, at 597 n. 36 (emphasis added). Even "if the federal antitrust laws should be construed to outlaw respondent's light-bulb-exchange program, there is no reason to believe that Michigan's regulation of its electric utilities will no longer be able to function effectively. Regardless of the outcome of this case, Michigan's interest in regulating its utilities' distribution of electricity will be almost entirely unimpaired." Ante, at 598 (emphasis added).
The emphasized language in these passages shows that the Court is adopting an interpretation of the Sherman Act which will allow the federal judiciary to substitute its judgment for that of state legislatures and administrative agencies with respect to whether particular anticompetitive regulatory provisions are "'sufficiently central,'" ante, at 597 n. 37, to a judicial conception of the proper scope of state utility regulation. The content of those "'purposes,'" ibid., which the Court will suffer the States to promote derives presumably from the mandate of the Sherman Act. On this assumption -- and no other is plausible -- it becomes apparent
[ 428 U.S. Page 631]
that the Court's second reason for extending the Sherman Act to cover the light-bulb program, when divested of inapposite references to the federal implied repeal doctrine, is merely a restatement of the third rationale, which the Court phrases as follows: "[F]inally, even if we were to assume that Congress did not intend the antitrust laws to apply to areas of the economy primarily regulated by a State, that assumption would not foreclose the enforcement of the antitrust laws in an essentially unregulated area such as the market for electric light bulbs." Ante, at 595. This statement raises at last the only legitimate question, which is whether Parker erred in holding that Congress, in enacting the Sherman Act, did not intend to vitiate state regulation of the sort at issue here by creating treble-damages exposure for activities performed in compliance therewith.
The Court's rationale appears to be that the draftsmen of the Sherman Act intended to exempt state-regulated utilities from treble damages only to the extent those utilities are complying with state rules which narrowly reflect the "typica[l] assump[tion] that the [utility] is a natural monopoly" and which regulate the utility's "natural monopoly powers" as opposed to its "business activity in competitive areas of the economy." Ante, at 595-596 (footnotes omitted). Furthermore, such regulation must be "'sufficiently central'" to the regulation of natural monopoly powers if it is to shield the regulated party from antitrust liability. Ante, at 597 n. 37. This Delphic reading of the Sherman Act, which is unaided by any reference to the language or legislative history of that Act, is, of course, inconsistent with Parker v. Brown. Parker involved a state scheme aimed at artificially raising the market price of raisins. Raisin production is not a "natural monopoly." If the limits of
[ 428 U.S. Page 632]
the state-action exemption from the Sherman Act are congruent with the boundaries of "natural monopoly" power, then Parker was wrongly decided.
But the legislative history of the Sherman Act shows conclusively that Parker was correctly decided. The floor debates and the House Report on the proposed legislation clearly reveal, as at least one commentator has noted, that "Congress fully understood the narrow scope given to the commerce clause" in 1890.*fn14 This understanding is, in many ways, of historic interest only, because subsequent decisions of this Court have "permitted the reach of the Sherman Act to expand along with expanding notions of congressional power."*fn15 But the narrow view taken by the Members of Congress in 1890 remains relevant for the limited purpose of assessing their intention regarding the interaction of the Sherman Act and state economic regulation.
The legislative history reveals very clearly that Congress' perception of the limitations of its power under the Commerce Clause was coupled with an intent not to intrude upon the authority of the several States to regulate "domestic" commerce. As the House Report stated: S
"It will be observed that the provisions of the bill are carefully confined to such subjects of legislation as are clearly within the legislative authority of Congress.
"No attempt is made to invade the legislative authority
[ 428 U.S. Page 633]
of the several States or even to occupy doubtful grounds. No system of laws can be devised by Congress alone which would effectually protect the people of the United States against the evils and oppression of trusts and monopolies. Congress has no authority to deal, generally, with the subject within the States, and the States have no authority to legislate in respect of commerce between the several States or with foreign nations.
"It follows, therefore, that the legislative authority of Congress and that of the several States must be exerted to secure the suppression of restraints upon trade and monopolies. Whatever legislation Congress may enact on this subject, within the limits of its authority, will prove of little value unless the States shall supplement it by such auxiliary and proper legislation as may be within their legislative authority."*fn16
Similarly, the floor debates on the proposed legislation reveal an intent to "[g]o as far as the Constitution permits Congress to go,"*fn17 in the words of Senator Sherman, conjoined with an intent not to "interfere with" state-law efforts to "prevent and control combinations within the limit of the State."*fn18 Far from demonstrating an intent to pre-empt state laws aimed at preventing or controlling combinations or monopolies, the legislative debates show that Congress' goal was to supplement such state efforts, themselves restricted to the geographic boundaries of the several States. As Senator Sherman stated: "Each State can deal with a combination within the State, but only the General Government can deal
[ 428 U.S. Page 634]
with combinations reaching not only the several States, but the commercial world. This bill does not include combinations within a State...."*fn19 Indeed a pre-existing body of state law forbidding combinations in restraint of trade provided the model for the federal Act. As Senator Sherman stated with respect to the proposed legislation: "It declares that certain contracts are against public policy, null and void. It does not announce a new principle of law, but applies old and well-recognized principles of the common law to the complicated jurisdiction of our State and Federal Government. Similar contracts in any State in the Union are now, by common or statute law, null and void."*fn20
It is noteworthy that the body of state jurisprudence which formed the model for the Sherman Act coexisted with state laws permitting regulated industries to operate under governmental control in the public interest. Indeed, state regulatory laws long antedated the passage of the Sherman Act and had, prior to its passage, been upheld by this Court against constitutional attacks.*fn21 Such laws were an integral part of state efforts to regulate
[ 428 U.S. Page 635]
competition to which Congress turned for guidance in barring restraints of interstate commerce, and it is clear that those laws were left undisturbed by the passage of the Sherman Act in 1890. For, as congressional spokesmen expressly stated, there was no intent to "interfere with" state laws regulating domestic commerce or "invade the legislative authority of the several States...."
As previously noted, the intent of the draftsmen of the Sherman Act not to intrude on the sovereignty of the States was coupled with a full and precise understanding of the narrow scope of congressional power under the Commerce Clause, as it was then interpreted by decisions of this Court. Subsequent decisions of the Court, however, have permitted the "jurisdictional" reach of the Sherman Act to expand along with an expanding view of the commerce power of Congress. See Hospital Building Co. v. Rex Hospital Trustees, 425 U.S. 738, 743 n. 2, and cases cited therein. These decisions, based on a determination that Congress intended to exercise all the power it possessed when it enacted the Sherman Act,*fn22 have in effect allowed the Congress of 1890 the retroactive benefit of an enlarged judicial conception of the commerce power.*fn23
It was this retroactive expansion of the jurisdictional reach of the Sherman Act that was in large part responsible for the advent of the Parker doctrine. Parker involved a program regulating the production of raisins
[ 428 U.S. Page 636]
within the State of California. Under the original understanding of the draftsmen of the Sherman Act, such in-state production, like in-state manufacturing, would not have been subject to the regulatory power of Congress under the Commerce Clause and thus not within the "jurisdictional" reach of the Sherman Act. See United States v. E. C. Knight Co., 156 U.S. 1. If the state of the law had remained static, the Parker problem would rarely, if ever, have arisen. As stated in Northern Securities Co. v. United States, 193 U.S. 197, the operative premise would have been that the "Anti-Trust Act... prescribe[d]... a rule for interstate and international commerce, (not for domestic commerce,)" id., at 337. The relevant question would have been whether the anticompetitive conduct required or permitted by the state statute was in restraint of domestic or interstate commerce. If the former, the conduct would have been beyond the reach of the Sherman Act; if the latter, the conduct would probably have violated the Sherman Act, regardless of contrary state law, on the theory that "[n]o State can, by... any... mode, project its authority into other States, and across the continent, so as to prevent Congress from exerting the power it possesses under the Constitution over interstate and international commerce, or... to exempt its corporation engaged in interstate commerce from obedience to any rule lawfully established by Congress for such commerce." Id., at 345-346.
But the law did not remain static. As one commentator has put it: "By 1942, when Parker v. Brown was decided, the interpretation and scope of the commerce clause had changed substantially. With the development of the 'affection doctrine' purely intrastate events" -- like state-mandated anticompetitive arrangements with respect to in-state agricultural production or in-state provision of utility services -- "could be regulated
[ 428 U.S. Page 637]
under the commerce clause if these events had the requisite impact on interstate commerce."*fn24 This development created a potential for serious conflict between state statutes regulating commerce which, in 1890, would have been considered "domestic" but which, in 1942, were viewed as falling within the jurisdictional reach of the Sherman Act. To have held that state statutes requiring anticompetitive arrangements with respect to such commerce were pre-empted by the Sherman Act would, in effect, have transformed a generous principle of judicial construction -- namely the "retroactive" expansion of the jurisdictional reach of the Sherman Act to the limits of an expanded judicial conception of the commerce power -- into a transgression of the clearly expressed congressional intent not to intrude on the regulatory authority of the States.
The "state action" doctrine of Parker v. Brown, as clarified by Goldfarb, represents the best possible accommodation of this limiting intent and the post-1890 judicial expansion of the jurisdictional reach of the Sherman Act. Parker's basic holding -- that the Sherman Act did not intend to displace restraints imposed by the State acting as sovereign -- coincides with the expressed legislative goal not to "invade the legislative authority of the several States...." Goldfarb clarified Parker by holding that private conduct, if it is to come within the state-action exemption, must be not merely "prompted" but "compelled" by state action. Thus refined, the doctrine performs the salutary function of isolating those areas of state regulation where the State's sovereign interest is, by the State's own judgment, at its strongest, and limits the exemption to those areas.*fn25
[ 428 U.S. Page 638]
Beyond this the Court cannot go without disregarding the purpose of the Sherman Act not to disrupt state regulatory laws.*fn26 Congress, of course, can alter its
[ 428 U.S. Page 639]
original intent and expand or contract the categories of state law which may permissibly impose restraints on competition. For example, in 1937 Congress passed the Miller-Tydings Act which attached a proviso to § 1 of the Sherman Act permitting resale price maintenance contracts where such contracts were permitted by applicable state law. This proviso was interpreted in Schwegmann Bros. v. Calvert Distillers Corp., 341 U.S. 384, not to permit a State to enforce a law providing that all retailers within a State were bound by a resale price maintenance contract executed by any one retailer in the State. As the Court today notes, Parker -- and the legislative judgment embodied in the 1890 version of the Sherman Act -- would, standing alone, have seemed to immunize the state scheme. Ante, at 593. But Congress was thought to have struck a new balance in 1937 with respect to a specific category of state-imposed restraints. Accordingly, the Court in Schwegmann determined congressional intent concerning the permissible limits of state restraints with respect to resale price maintenance by reference to the later, and more specific, expression of congressional purpose.*fn27
[ 428 U.S. Page 640]
There has been no analogous alternation of the original intent regarding the area of state regulation at issue here. Indeed, to the extent subsequent congressional action is probative at all, it shows a continuing intent to defer to the regulatory authority of the States over the terms and conditions of in-state electric utility service. Thus, § 201(a) of the Federal Power Act, 16 U.S.C. § 824(a), provides in relevant part that "Federal regulation... [is] to extend only to those matters which are not subject to regulation by the States."
The Court's opinion simply ignores the clear evidence of congressional intent and substitutes its own policy judgment about the desirability of disregarding any facet of state economic regulation that it thinks unwise or of no great importance. In adopting this freewheeling approach to the language of the Sherman Act the Court creates a statutory simulacrum of the substantive due process doctrine I thought had been put to rest long ago. See Ferguson v. Skrupa, 372 U.S. 726.*fn28 For the Court's approach contemplates the selective interdiction of those anticompetitive state regulatory measures that are deemed not "central" to the limited range of regulatory goals considered "imperative" by the federal judiciary.
Henceforth, a state-regulated public utility company must at its peril successfully divine which of its countless and interrelated tariff provisions a federal court will ultimately consider "central" or "imperative." If it guesses wrong, it may be subjected to treble damages as a penalty for its compliance with state law.
1 Sumner J. Katz filed a brief for the National Association of Regulatory Utility Commissioners as amicus curiae urging affirmance.