Two recent Federal court decisions typify the expansion of antitrust claims being brought, successfully, against municipalities.

The first, involving the University of Alabama, its hospitals, and a county hospital pharmacy, held that the sale of pharmaceutical products to State and local government hospitals for resale in competition with private pharmacies, is not exempt from the Robinson-Patman Act's proscriptions. This case* involved alleged price-discrimination proscriptions of the Robinson-Patman Act and the court held that that Act, by its terms, does not exempt state purchases, in that the statutory language is sufficiently broad to cover governmental bodies.

The court further held that such an exemption is not supported by the purposes of the antitrust laws because those laws represent a carefully studied attempt to bring within them every person engaged in a business whose activities might restrain or monopolize commercial intercourse among the states.

In a strongly worded dissent filed by Justices O'Connor, Brennan, Renquist and Stevens, serious questions were raised as to the interpretation given by the court to the term "person" as including state and local government entities. The dissent suggests that the legislative history clearly indicates that states and cities were not intended by Congress to be included within the purview of the liability provisions of the Robinson-Patman Act.

Equally disturbing is a recent Federal Appeals Court decision, Affiliated Capital Corp. v. City of Houston, (No. 81-2335, U.S. Ct. App.) in which the court imposed a $2.1 million antitrust judgment against the former mayor of Houston, Texas and a cable television company involved in a 1978 franchising arrangement. Under the provisions of the antitrust law the $2.1 million award, if it is sustained by the court, would be tripled to $6.3 million. This appears to be one of the most significant court decisions under the antitrust laws since the Boulder decision in 1982. In addition to the damage award, the court ruled that the agreement to allocate cable television franchising territories among competitors in order to minimize competition is "an uncontestable violation" of the Sherman Antitrust Act. As to the liability of public officials the court stated "It is not relevant whether a government official knows he can be held liable for a particular violation of antitrust law, but only whether a clearly established violation exists." In other words, good faith is not a defense and municipal officials find themselves faced with exposure to substantial legal liability when they are not even aware that they are violating the law. In his defense, the mayor attempted to rely upon the civil rights case which we reported to you last month, Harlow v. Fitzgerald, for the proposition that a public official, if he can establish that he is dealing in good faith, is entitled to claim immunity against a civil rights claim. He asserted that such a good faith immunity should carry over to an antitrust claim. The court of appeals rejected that view, holding that the act of committing "a clearly-established violation" creates liability regardless of knowledge or good faith.

*Jefferson County Pharmaceutical Association, Inc. v. Abbott Laboratories, et al., 51 L.W. 4195 (2-22-83).

Page 4 / Illinois Municipal Review / May 1983