New England Motor Rate Bureau, Inc. v. F.T.C., 89-1963

• Citation: 908 F.2d 1064
• Decision Date: 06 March 1990
• Docket Number: No. 89-1963,89-1963
• Parties: , 1990-2 Trade Cases 69,108 NEW ENGLAND MOTOR RATE BUREAU, INC., Petitioner, v. FEDERAL TRADE COMMISSION, Respondent. . Heard
• Court: United States Courts of Appeals. United States Court of Appeals (1st Circuit)

Page 1064

908 F.2d 1064

59 USLW 2089, 1990-2 Trade Cases 69,108

NEW ENGLAND MOTOR RATE BUREAU, INC., Petitioner, v. FEDERAL TRADE COMMISSION, Respondent.

No. 89-1963.

United States Court of Appeals First Circuit.

Heard March 6, 1990.

Decided July 20, 1990.

Bryce Rea, Jr., with whom Patrick McEligot, William E. Kenworthy, Leo C. Franey and Rea, Cross & Auchincloss, Washington, D.C., were on brief for petitioner.

Frederick E. Dooley with whom Jay C. Shaffer, Acting General Counsel, and Ernest J. Isenstadt, Asst. General Counsel, Washington, D.C., were on brief for respondent.

Before CAMPBELL, Chief Judge, COFFIN and BOWNES, Senior Circuit Judges.

LEVIN H. CAMPBELL, Circuit Judge.

New England Motor Rate Bureau, Inc. ("NEMRB") petitions this court for review of a cease and desist order of the Federal Trade Commission ("FTC"). The opinion of At issue is whether Massachusetts' supervision of motor carrier rates is sufficiently active to immunize NEMRB--the motor carriers' private rate-making bureau--from the federal antitrust laws.

the FTC in this case appears as New England Motor Rate Bureau, Inc., 112 F.T.C. ____, Docket No. 9170, slip op. (Aug. 18, 1989). Our jurisdiction over this petition derives from 15 U.S.C. Sec. 45(c).

Massachusetts, like other states and federal agencies, regulates rates through a so-called negative option process, viz. rates are required to be formulated and published by the carriers or their agent (i.e., here, NEMRB) and filed with a regulatory agency having ultimate rate-setting powers (here, the Massachusetts Department of Public Utilities ("MDPU")). The filed rates become legally binding unless rejected or suspended within a period of time by the agency. Under Massachusetts law, motor carrier rates must be non-discriminatory and "just and reasonable," and the MDPU is charged by law with enforcing compliance with these criteria. To this end, it has extensive power to suspend, reject or modify rates using hearing, investigatory and complaint procedures. However, the MDPU has not in recent history rejected any of the rates filed by NEMRB nor held hearings or investigations. Because of this, the FTC ruled that Massachusetts failed the "active supervision" prong of the Supreme Court's two-prong test for determining whether a regulated activity qualifies for "state action" immunity. NEMRB now challenges the FTC's finding, contending that Massachusetts' comprehensive regulatory scheme and MDPU's regulatory activities meet the "active supervision" requirement.

PROCEEDINGS BELOW

On October 24, 1983, the FTC issued a complaint alleging that NEMRB, its members, officers, and directors, had engaged in a conspiracy to fix prices in violation of 15 U.S.C. Sec. 45 by collectively formulating and filing rates for the transportation by motor carrier of commodities moving within the states of Massachusetts, New Hampshire, Rhode Island, and Vermont. This conspiracy and these activities were alleged to have deprived motor carriers, shippers and consumers in the four states of the benefits of free and open competition. Petitioner raised various defenses, including that its collective rate-making activity was "state action," immune from federal antitrust challenges under the state action doctrine first enunciated in Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943). The Administrative Law Judge (ALJ) who heard the case disallowed all defenses except the state action defense, which he held in abeyance until this court could hand down a decision in a pending appeal, Mass. Furniture & Piano Movers Association v. FTC, 773 F.2d 391 (1st Cir.1985). In Mass. Furniture, we ruled that because Mass.Gen.L. ch. 159B (1986) "clearly establishes Massachusetts' intent to countenance collective rate setting among motor carriers," the relevant carrier trade association satisfied the first prong of the test for Parker immunity set out in California Retail Liquor Dealers Association v. Midcal Aluminum, Inc., 445 U.S. 97, 105-06, 100 S.Ct. 937, 943-44, 63 L.Ed.2d 233 (1980): namely, that a private party's conduct be undertaken pursuant to "clearly articulated and affirmatively expressed" state policies to displace competition. While upholding the state action defense thus far, we noted that the Association need also meet Midcal 's second prong, viz. "that the anticompetitive activity was 'actively supervised' by the state." Mass. Furniture, 773 F.2d at 397. We remanded to the FTC for findings on the active supervision requirement. Id.

Following the decision in Mass. Furniture, the ALJ in the FTC proceeding below disallowed NEMRB's defense that its collective rate filing activity in Massachusetts was state action, hence immune from the federal antitrust laws. While he accepted Mass. Furniture 's ruling that the governing state law met Midcal 's first prong, supra, he found that Massachusetts' regulation of the filed rates was, in practice, too passive to satisfy Midcal 's "active supervision" requirement. The ALJ also disallowed the state action defense in New

                Hampshire as well, finding that rate regulation by New Hampshire authorities failed both aspects of the Midcal test.  In Rhode Island, however, the ALJ upheld NEMRB's rate-making activities as immune.  He concluded that Rhode Island's regulatory supervision was active enough to make NEMRB's collective rate filings with the Rhode Island Public Utilities Commission a form of protected state action. 1   The FTC adopted the ALJ's findings, with one Commissioner dissenting as to the finding that NEMRB's Massachusetts rate filings were not entitled to "state action" immunity.  NEMRB now seeks our review of the FTC's holding that Massachusetts state regulation is, in practice, too passive to immunize NEMRB's rate filings under the state action doctrine. 2
                

FACTS

1. The Nature and Functioning of NEMRB

Petitioner NEMRB is a Massachusetts nonprofit organization composed of competing common (motor) carriers that service customers in New England. It develops and files collective tariffs and tariff supplements governing interstate and intrastate rates and commodity classifications within Massachusetts, New Hampshire, Rhode Island, and, formerly, Vermont. Collective tariffs are initiated and developed by NEMRB's General Rate and Classification Committee, consisting of officers or employees of the carrier members of NEMRB. Tariff proposals approved by the Committee are filed with the official regulatory agencies of each of the four states and sent to all members of NEMRB. ³ The carrier members of NEMRB ratify its tariff proposals at annual meetings, and formally acquiesce in such tariffs by granting to NEMRB a power of attorney with respect to such filings.

In neither Massachusetts, New Hampshire, nor Rhode Island are common carriers required to file joint tariffs or to cooperate in their establishment. A carrier may, if it wishes, file its own proposed rates. However, in each jurisdiction, carriers are permitted to utilize a filing agent and to adopt and participate in a tariff filed by an agent or another carrier. If a carrier does elect to participate in a tariff filed by another carrier or by an agent such as NEMRB, the carrier is obliged by law to adhere to the specified rates once the tariff becomes effective.

2. The Nature and Functioning of Massachusetts' Regulatory System

As explained in greater detail later in this opinion, Massachusetts regulates common carriers by motor vehicle, and their rates, according to a comprehensive regulatory scheme that gives to the MDPU authority, inter alia, to license common carriers and to prescribe and alter their rates. Carriers are required to adhere to their filed rates, which Massachusetts law provides must be nondiscriminatory, just and reasonable. The MDPU is controlled by three full-time commissioners appointed by the Governor. Mass.Gen.L. ch. 25, Sec. 2 (1986). The Massachusetts motor carrier statute, including its rate provisions, is enforced by the MDPU's transportation division headed by a director. Id. Sec. 12F.

The following picture of the Massachusetts regulatory apparatus was provided by stipulations the ALJ accepted for purposes of this proceeding. The MDPU employs one rate analyst to review NEMRB rate filings. ⁴ The rate analyst has never requested financial information to support a tariff nor rejected a rate because it was too high or too low. However, if confronted with a tariff containing rates that in his judgment were out of line with the average rates that have been established in a particular pricing zone or seem extraordinarily high--such as a 20 percent to 50 percent increase--the Massachusetts rate analyst would recommend suspension and investigation of the tariff by the MDPU Commissioners. The same would hold true if the tariff appeared to contain discriminatory provisions. Moreover, the law provides for the MDPU to hold a hearing upon the complaint of any common carrier by motor vehicle or of any other person or upon the MDPU's own motion. The MDPU will investigate any complaint alleging a violation of the statute or any order, rule or regulation issued thereunder, and will take action that is warranted in response to a violation. Rates go into effect automatically 30 days after they are filed unless the rate analyst has recommended rejection or suspension before the end of the 30-day period. It is the stipulated opinion of the rate analyst that whenever tariffs become effective without rejection, suspension or a hearing, that action results from a determination that the proposed rates meet the regulatory criteria of the Massachusetts statute and regulations pertaining to motor carriers of property (i.e., that such rates be just and reasonable, infra ).

In Massachusetts, NEMRB files general rate restructures, general rate increases, and supplements thereto that have been previously filed with the federal Interstate Commerce Commission (ICC). NEMRB accompanies such filings...