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| Agency: Federal Trade Commission
Date: 30 October 2003 |
"The Commission has reviewed each of these matters very carefully to see if the associations' conduct was protected by the state action doctrine," said Susan Creighton, Director of the FTC's Bureau of Competition. "In each case, it was determined that the conduct alleged in the complaints was not covered by the doctrine because the states' oversight fell below the requirements of the doctrine's active supervision component."
Creighton noted that the FTC recently released a report from the State Action Task Force, now available on the Commission's Web site, that examines how the doctrine applies to antitrust policy and provides recommendations designed to keep the doctrine in line with its original purposes and goals.
During remarks made last month at the 2003 Antitrust Seminar of the National Association of Attorneys General, Creighton stated, "The state action doctrine does not permit a state simply to authorize anticompetitive conduct. Rather, in order to make the state action exemption available, a state must substitute a different form of economic organization - a positive regulatory program - for the competition it is displacing."
The State Action Doctrine
Under the state action doctrine, the actions of some private firms may be shielded from antitrust scrutiny - if they are conducted pursuant to state authority. States may not, however, simply authorize private parties to violate the antitrust laws. That is, to utilize the state action doctrine as a defense for allegedly anticompetitive conduct, the private party must show that its conduct meets a strict two-pronged standard established by the U.S. Supreme Court. First, "the challenged restraint must be 'one clearly articulated and affirmatively expressed as state policy'" and second, "the policy must be 'actively supervised' by the state itself."
A more detailed discussion of the state action doctrine - and specifically the Supreme Court's standard of active supervision - as well as a description of the doctrine's impact on these cases is provided in the two analyses to aid public comment in the Mississippi and Alabama matters. In addition, a complete discussion of the Commission's application of the state action doctrine to each of the cases announced today is provided in their respective analyses to aid public comment, which are available on the FTC's Web site as a link to this press release.
The Associations
ATA. The Alabama Trucking Association is a group of approximately 80 household goods movers that do business within Alabama. The association functions primarily to prepare and file tariffs and supplements with the Alabama Public Service Commission on behalf of its members. These tariffs and supplements contain rates and charges for the intrastate transportation of household goods and for related services.
MCM. The Movers Conference of Mississippi is a group of 39 household goods movers that conduct business within the state. One of its primary functions is to file tariffs and supplements with the Mississippi Public Service Commission. These tariffs and supplements contain rates and charges for the intrastate transportation of household goods and for related services.
NHMTA. The New Hampshire Motor Transport Association is a group of approximately 400 firms primarily engaged in the trucking industry, of which approximately 19 are household goods movers doing business in New Hampshire. The Association is organized for and serves its members through functions including preparing and filing tariffs and supplements with the New Hampshire Department of Safety's Bureau of Common Carriers. These tariffs and supplements contain rates and charges for the intrastate and local transportation of household goods and for related services.
The Commission's Complaints
The Commission filed three complaints, each of which details the alleged anticompetitive conduct by the respective moving association. The Commission filed complaints against the ATA and MCM on July 9, 2003, and subsequently withdrew them from the administrative hearing process. The FTC announced its complaint against the NHMTA for the first time today. All three complaints allege violations of Section 5 of the FTC Act. The Commission contends that parties have unlawfully hindered, restrained, restricted, suppressed, or eliminated competition among household goods movers within Alabama, Mississippi, and New Hampshire.
ATA and MCM. According to the complaints against the ATA and MCM, both associations have initiated, prepared, developed, disseminated, and taken other actions to establish and maintain collective rates that had the purpose or effect of fixing, establishing, or stabilizing rates within Alabama and Mississippi for the transportation of household goods. In addition, the FTC contends the associations organized and conducted meetings that provided a forum for discussion or agreement between competing carriers regarding household goods transportation rates. According to the FTC, for the reasons detailed below, the alleged conduct was not protected by the state action doctrine.
NHMTA. In contrast to the Commission's complaints against ATA and MCM, the complaint against the NHMTA does not charge that the association filed collective rates. Rather, the Commission's complaint against NHMTA charges the association with engaging in anticompetitive behavior by the initiation, preparation, development and dissemination of certain tariff rules. Specifically, the FTC contends that the tariffs filed by the NHMTA on behalf of its members mandate automatic rate increases during the summer months and that this conduct is not protected by the state action doctrine because New Hampshire does not actively supervise the association's filings.
The Proposed Consent Orders
ATA and MCM. Under the terms of the proposed consent orders, the ATA and MCM will be barred from continuing their practice of filing tariffs containing collective intrastate rates.
In addition, they will be required to cancel all tariffs that have been filed that contain intrastate rates, effectively ensuring that the tariffs now on file with Alabama and Mississippi, respectively, are no longer in force and allowing for independent rates to be filed. The associations also are required to send a letter to their members explaining the terms of the order, making it clear that they can no longer engage in collective rate-making activities and that they must inform the FTC of any changes in their structure or function that could affect their compliance with the proposed order.
NHMTA. The proposed order concerning the NHMTA requires it to cease its practice of filing tariffs with the state that mandate automatic increases in movers' intrastate rates. The association also is required to cancel all tariff provisions filed in New Hampshire that mandate price increases, ensuring that future tariff provisions will be filed individually. Finally, the proposed order requires the NHMTA to send a letter explaining the order to its members and to inform the FTC of any changes that may affect its ability to comply with its terms.
All three proposed orders allow the associations to seek to modify their terms to permit them to engage in a collective action regarding prices if they can demonstrate that the state action defense would apply to their conduct. The proposed orders will terminate in 20 years.
FTC's Standard for Active Supervision
The Commission's analyses to aid public comment for the ATA and MCM cases contain detailed information about the standards a state must adopt to meet the active supervision standard of the state action doctrine. According to the FTC, three specific elements were considered in these cases and will be considered in future investigations, as well: 1) the development of an adequate factual record, including notice and opportunity to be heard; 2) a written decision on the merits; and 3) a specific assessment - both qualitative and quantitative - of how the private action comports with the substantive standards established by the relevant state legislature. The FTC's analyses explain how each element furthers the central purpose of the active supervision prong by ensuring that responsibility for private conduct is fairly attributed to the state.
ATA. Regarding ATA, the association made no showing that Alabama had done research into the economic conditions of the moving industry in the state and did not produce evidence that the state independently sought to verify the accuracy of the financial information the movers submitted. In Alabama, it has been many years since the state has held a hearing to consider the rates contained in the tariff. In addition, many requests for rate increases have been approved without the opportunity for public comment on proposed increases. Many rate increases have been granted without a written explanation of the evidence supporting the increases and without a record of the state's reasoning in granting the increase.
MCM. In the case of the MCM, Mississippi had rules and regulations, as well as staff, in place to review household goods tariffs. While there were some very limited instances where the state considered specific cost increases, for the most part MCM only provided the state with very general written assertions that the movers' costs had increased. While the state did take certain supervisory actions, the association did not provide evidence that Mississippi had done research into the economic conditions of the state's moving industry. There also was no showing that the state sought to independently verify the accuracy of the financial information submitted by the movers. In addition, while the state's Public Service Commission did give notice that a hearing would take place to consider increases in rates and did hold hearings regarding increased costs, MCM did not show that the state reviewed the evidence provided at the hearings in light of the state's requirement that rates be at the "lowest cost consistent with the furnishing of [moving] services." Such a showing is an additional step considered in determining whether the state meets the active supervision standard.
The FTC concluded its analyses of the ATA and MCM matters by stating that the review techniques described may help illustrate active state supervision in other contexts. In the context of tariff filings, concrete acts of private rate setting may automatically trigger review. If a rate filing remains in place for a long period, however, the state has an obligation to review the level of those rates on an ongoing basis. This analysis applies to the household goods moving industry as well as other industries where specific events do not trigger a review of private conduct, but where the state has displaced competition and the state action doctrine applies.
The Commission vote to approve the proposed consent orders and place a copy on the public record was 4-0-1 in each matter, with Commissioner Pamela Jones Harbour not participating. The proposed orders will be subject to public comment until November 27, 2003, after which the Commission will determine whether to make them final. Comments should be sent to: FTC Office of the Secretary, 600 Pennsylvania Ave., N.W., Washington, DC 20580.
NOTE: A consent agreement is for settlement purposes only and does not constitute an admission of a law violation. When the Commission issues a final consent order, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of $11,000.
Copies of the Commission's complaints, proposed consent orders, and analyses to aid public comment are available from the FTC's Web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC's Bureau of Competition seeks to prevent business practices that restrain competition. The Bureau carries out its mission by investigating alleged law violations and, when appropriate, recommending that the Commission take formal enforcement action. To notify the Bureau concerning particular business practices, call or write the Office of Policy and Evaluation, Room 394, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, DC 20580, Electronic Mail: antitrust@ftc.gov; Telephone (202) 326-3300. For more information on the laws that the FTC enforces, the Commission has published "Promoting Competition, Protecting Consumers: A Plain English Guide to Antitrust Laws," which can be accessed at http://www.ftc.gov/bc/compguide/index.htm.
(FTC File Nos. 021-0115, D09307, D09308)