Petitioner cities, which own and operate electric utility systems both within and beyond their respective city limits as authorized by Louisiana law, brought an action in District Court against respondent investor-owned electric utility with which petitioners compete, alleging that it committed various federal antitrust offenses that injured petitioners in the operation of their electric utility systems. Respondent counterclaimed, alleging that petitioners had committed various antitrust offenses that injured respondent in its business and property. Petitioners moved to dismiss the counterclaim on the ground that, as cities and subdivisions of the State, the "state action" doctrine of Parker v. Brown, 317 U.S. 341, rendered federal antitrust laws inapplicable to them. The District Court granted the motion, but the Court of Appeals reversed and remanded. Held: Apart from whether petitioners are exempt from the antitrust laws as agents of the State under the Parker doctrine there are insufficient grounds for inferring that Congress did not intend to subject cities to antitrust liability.
(a) The definition of "person" or "persons" covered by the antitrust laws clearly includes cities, whether as municipal utility operators suing as plaintiffs seeking damages for antitrust violations or as such operators being sued as defendants. Chattanooga Foundry & Pipe Works v. Atlanta, 203 U.S. 390; Georgia v. Evans, 316 U.S. 159.
(b) Petitioners have failed to show the existence of any overriding public policy inconsistent with a construction of coverage of the antitrust laws. The presumption against implied exclusion from such laws cannot be negated either on the ground that it would be anomalous to subject municipalities to antitrust liability or on the ground that the antitrust laws are intended to protect the public only from abuses of private power and not from action of municipalities that exist to serve the public weal.
The U.S. Supreme Court held:
1. Parker v. Brown does not automatically exempt from the antitrust laws all governmental entities, whether state agencies or subdivisions of a State, simply by reason of their status as such, but exempts only anticompetitive conduct engaged in as an act of government by the State as sovereign, or by its subdivisions, pursuant to state policy to displace competition with regulation or monopoly public service.
2. The Court of Appeals did not err in holding that further inquiry should be made to determine whether petitioners' actions were directed by the State, since when the State itself has not directed or authorized an anticompetitive practice, the State's subdivisions in exercising their delegated power must obey the antitrust laws. While a subordinate governmental unit's claim to Parker immunity is not as readily established as the same claim by a state government sued as such, an adequate state mandate for anticompetitive activities of cities and other subordinate governmental units exists when it is found "from the authority given a governmental entity to operate in a particular area, that the legislature contemplated the kind of action complained of."
THE CHIEF JUSTICE, while agreeing with the directions for remand in Part III because they represent at a minimum what is required to establish an exemption, would insist that the State compel the alleged anticompetitive activity and that the cities demonstrate that the exemption is essential to the state regulatory scheme.
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