Taking the Government’s Thumb Off the Scales

Date: February 26, 2018

One recurrent problem that we hear about from small business owners is that they often feel that they are losing business to public actors who have chosen to begin providing services—often at subsidized (below market) rates. Of course, the fact that a city may open a public gym may be problematic for small business gym owners in the area, but that does not necessarily raise any legal problems. On the other hand, if a public or quasi-public entity is acting anticompetitively it should be held to account under federal antitrust law. As NFIB Small Business Legal Center has argued repeatedly in antitrust cases (and even in opposition to certain eminent domain takings) a public corporation should be held to the same rules as private sector businesses when engaged as a competitor in the market.

This brings us to Salt River Project v. Tesla, which is currently pending before the U.S. Supreme Court, where we recently filed an amicus brief. In this case, a private company is suing an Arizona public utility for anti-competitive conduct after the utility imposed excessive fees on homeowners who had installed solar panels. Not surprisingly these fees discouraged homeowners from investing in solar energy, which helped preserve the utility’s monopoly in the electric energy market. In defense the utility claimed “state action immunity,” which boils down to the bald assertion that there can be no antitrust liability when the government has expressly approved and supervised anti-competitive conduct. But we maintain that this supposed immunity does not apply when a public corporation is actively competing with private businesses. In other words, when a branch of state or local government (or another entity acting pursuant to state authorization) is acting in a regulatory capacity on behalf of the state, it may be acting legitimately—but not when it has a financial interest in protecting its own for-profit enterprise from competition.

In the proceedings below a federal district court rejected the government’s “state action immunity” defense, which we think makes sense. But then rather than allowing the case to move on to the next stage—i.e. to determine the utility’s antitrust liability—the defendant sought an immediate appeal. Now the Supreme Court is set to decide whether public or quasi-public defendants are entitled to an immediate appeal of decisions rejecting stat action immunity. And of course, we weighed-in arguing that public or quasi-public defendants should receive no special privileges in litigation that would not apply to private parties. At the end of day, we’re optimistic that the Supreme Court may use this case to validate our larger point that there is no room for anticompetitive conduct under federal antitrust law—whether from government and public utilities or big business.

For more on this case, check-out this post from Jarod Bona and Aaron Gott, which digs in a little further into the meat of the issue here. Also, for those interested, here is an article discussing the market-participant issue further.

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