The Court viewed the union as having surrendered its bargaining freedom under the alleged agreement and therefore viewed the agreement as one primarily intended to help the big unionized employers obtain higher prices free from incorvenient price competition. It accordingly imposed antitrust liability. In a companion case decided the same day, the Supreme Court did uphold a direct product market restraint which it saw as being very closely related to a traditional union interest." This case involved a collectively bargained agreement which prohibited the employer from selling meat to the public during evening hours when the store was open. The majority of the Court stressed the ment cutters union's historic interest in not having meat cutters work at night, aecepted this interest as being an entirely legitimate labor goal, and brushed aside the suggestion that meat could be sold on a self-service basis during the evening. | To summarize, we find the distinction between “labor imposing a restraint in | its own interest" and "labor joining an employer conspiracy" to be rather artificial in many situations of the Allen-Bradley and Pennington variety. The truth is that in each situation, the union and the unionized employer are not adverseries but allies: both seek to restrain competition of non-unionized competitors; and both profit from successful restraint. There simply is no very real line betweed union-generated restraints and management conspiracies joined by the union. In fact, despite the rationale, the cases in fact seem to have been decided by balancing (1) the historic importance and the legitimacy or illegitimacy of the labor interest at stake and (2) how directly it impinges on secondary market competition. This is an appropriate, and indeed necessary, way to approach such cases. The special problem of independent contractors In many cases, persons who would be considered "independent contracts" under the usual economic criteria have joined unions and/or participated with unions in activities challenged as violations of the antitrust laws. Such cases raise the issue whether the interests of the "independent contractors" are so closely related to those of union members as to bring the case within the "la or dispute" exemption provided by the Norris-LaGuardia Act and the Supree Court's decision in Hutcheson. This issue was directly raised in American Federation of Musicians v. Carroll® The Supreme Court considered whether union by-laws which set minimum charges for contracts between orchestra leaders and third parties were so closely related to the wage levels of musicians-who were union members-as to fall within the labor exemption. Using a balancing test similar to that in Pennington and Jewel Tea, the Court determined that rates charged by orchestra leaders, even tho who did not conduct or play an instrument, had a sufficient effect upon the wages of union members to bring the union's by-laws within the labor exemption. A recurring type of "independent contractor" problem concerns the attent of organizations of professional entrepreneurs to take shelter under the Norris LaGuardia umbrella. In American Medical Association v. United States," the Court held that defendant medical associations were not associations of ett ployees in any proper sense of the term, but rather "an association of individuai practitioners each exercising his calling as an independent unit." and hence their activities were not exempted by the Clayton and Norris-LaGuardia Act The Court reached a similar decision with respect to an association of rea estate brokers in United States v. National Association of Real Estate Boards The whole issue of an exempt laborer versus an "independent contractor continues to be a difficult one and it is almost inevitable that the results of each case will have to turn on its particular facts. Recent developments While the Task Group was considering the labor exemption, the Suprete Court handed down an important new labor-antitrust case. It seemed to sha a tendency on the part of the present Court to construe the labor anturist exemption somewhat more narrowly than has been the case during the 35 years from 1940 until 1975. Local Union 189 Amalgamated Meat Cutters v. Jewel Tea Co., 381 U.8 676-1967 50 391 U.S. 99 (1968). 57 317 U.S. 519 (1943). 58 317 .8. at 536. 5339 U.S. 485 (1950). 60 In Connell Construction Co., Inc. v. Plumbers & Steamfitters Local Union 100, the Court was faced with an agreement between a contractor and a plumbing union that the contractor would not employ any plumbing subcontractors which were not organized by the union. The contractor employed no plumbers itself and the union did not stand in a direct bargaining relationship with the contractor. The Court found "no evidence that the union's goal was anything other than organizing as many subcontractors as possible. This goal was legal, even though a successful organizing campaign ultimately would reduce the competition that unionized employers face from non-union firms. But the methods the union chose are not immune from antitrust sanction simply because the goal is legal." The Court treated the agreement as a “direct constraint on the business market" for plumbing services and therefore an unreasonable intrusion into the competitive secondary market not mandated by labor policy. "The federal policy favoring collective bargaining . . . can offer no shelter for the union's coercive action against [the contractor] or its campaign to exclude non-union firms from the subcontracting market.”“ Conclusion The history of the labor exemption makes clear the very close relationship between primary labor markets in which federal labor policy is dominant and the secondary product or service markets where antitrust law is dominant. We do not believe that this line can be drawn by any broad brush statutory formula. What is important is to proscribe any unreasonable secondary market restraints, even when generated by unions in support of legitimate union goals. We agree with the Attorney General's Committee Report in 1955 that “union actions aimed at directly fixing the kind or amount of products which may be used, produced or sold, their market price, the geographic area in which they may be used, produced or sold, or the number of firms which may engage in their production or distribution are contrary to antitrust policy." 63 We believe that this goal can be achieved best by orderly law enforcement and development of judicial decisions. The recent Connell decision gives us reason to believe that the Supreme Court will be willing to give important weight to antitrust policy in resolving such issues, and that it will not feel unduly bound by some past decisions (such as Jewel Tea) which some believe may have given undue weight to the labor interest in upholding direct anticompetitive restraints on secondary product market competition. Thus, the Task Group does not recommend any legislative initiative to resolve the ambiguities surrounding the antitrust exemption for labor activities. LEARNED PROFESSIONS At the time the Task Group was established, there was some concern that courts would recognize a "learned professions" exemption to the antitrust laws which would exempt many professions, such as law and medicine, from antitrust scrutiny. The argument supporting such an exemption was based largely upon dicta in certain older cases dealing with the definition of the word "trade." 64 This issue was squarely presented to the Supreme Court in the Goldfarb case, decided in June 1975. There the Virginia State Bar and various local bar associations were accused of violating the antitrust laws by promulgating and enforcing minimum fee schedules for legal services. They defended on a variety of grounds, one of which was the alleged "learned professions" exemption. The Supreme Court refused to recognize such an exemption: We cannot find support for the proposition that Congress intended any such sweeping exclusion. The nature of an occupation, standing alone, does not provide sanctuary from the Sherman Act, Associated Press v. United 421 U.S. 616 (1975). 1421 C.S. at 625. 421 U.S. at 626. A large part of the opinion in fact concerned the application of a special Construction industry proviso permitting secondary activities that would otherwise be egal under the antitrust laws. 29 U.S.C. § 158(e). The Court in a rather technical decis sion held that the proviso did not extend to use of secondary activities to organized subcontractors. Four Justices dissented from the latter holding. Report of the Attorney General's National Committee to Study the Antitrust Laws 294 (1955). Goldfarb v. Virginia State Bar Association, 497 F. 2d 1 (4th Cir. 1974). the Court has stated that any remedy is for the Congress and not the courts. It has made clear, however, that the exemption does not apply to other profes sional sports, even though there is no logical basis for any distinction." During the life of the Task Group, the baseball antitrust exemption was the subject of study by the House Select Committee on Professional Sports. As a representative of the Autitrust Division of the Department of Justice testified during hearings conducted by the Select Committee the rationale for the baseball exemption, if one ever existed, exists no longer. There is no economic or other evidence that supports the conclusion that baseball, or other professional sports, should be exempted from the antitrust laws. This historical anomoly, once described by Justice Douglas as "a derelict in the stream of the law," almost surely has no substantial effect on the Nation's economy. It is, however, highly visible. Its repeal would have some symbolic importance, and perhaps make it easier to reject appeals for similar exemptions by other special interests of greater economic importance, but less public visibility. We note that the House Select Committee has unanimously recommended the repeal of the baseball exemption," and the Task Group endorses that recommendation. Professional sports broadcasting The Sports Broadcasting Act of 1961, as amended in 1966 grants antitrust immunity to certain joint agreements among professional football, baseball, bas ketball and hockey teams concerning the telecasting of their games. This exemp tion is expressly limited to only permit the sports leagues to negotiate and sell television rights for their respective members. Because of its limited economic significance, and the fact the Congress has intermittently considered various related legislative measures prohibiting television "blackouts" of home games, the Task Force did not believe that this exemption merited detailed study. 83 "STATE ACTION" In 1943, the Supreme Court upheld, against a Sherman Act attack, a Callfornia agricultural proration program and marketing plan, adopted under the California Agricultural Prorate Act. The Court held that the Sherman Act was never intended by the Congress to apply to state action or official action imposed and directed by a state. The key to the Court's holding, in the case of Parker v. Brown." was the determination that "nothing in the language of the Sherman Act or its history . . . suggests that its purpose was to restrain a state or its officers or agents from activities directed by its legislature." At the time the Task Group began its work, the Parker doctrine of state action antitrust immunity had been extended by some lower courts to situations involv ing state authorization, approval, encouragement or participation in restrictive private conduct. The Task Group considered the possibility of suggesting legis lative modification of what threatened to become a significant barrier to competition, especially in the service sector of the economy. Because the Supreme Court had not directly faced the issue since the Parker decision, and because seemed likely to have to deal with it shortly, the Task Group concluded tha this area, a judicially created exemption, should be left to judicial construction The issue was presented to the Supreme Court in 1975 in Goldfarb v. Virginia State Bar, a case challenging lawyers' minimum fee schedules as violations of the Sherman Act. Although several other defenses were raised," one of the Radovich v. National Football League, 352 U.S. 445 (1957). 78 See Inquiry into Professional Sports, Hearings before the House Select Commit on Professional Sports (94th Cong.. 2d sess.). To See Testimony of Joe Sims, Deputy Assistant Attorney General, Antitrust Diviste Department of Justice. Hearings, supra, Part 2 at p. 285. so Flood v. Kuhn, 407 U.S. at 286n (Douglas J., dissenting). 81 Report of House Select Comm. on Professional Sports, H.R. Doc. 94-1786, 94th Corg 2d sess. (1976). T.S.C. $8 1291-1295. 83 Public Law 93-107. 47 U.S.C. 330, amended the Communications Act of 1974 1 prohibit the television blackout of certain home games played by professional sports ca That law expired on Dec. 31, 1975. In the 94th Congress, both the House and bela” passed bills designed to extend the anti-blackout law; however, final agreement was c reached concerning the provisions of that extension. See H.R. 11070, 94th Cong.. Ist sens (1975); S. 2554, 94th Cong., 1st sess. (1975). **317 U.S. 341 (1943). 421 U.S. 773 (1975). luding the "learned profession" exemption, discussed earlier in this report defenses relied upon was that the defendant Virginia State Bar was a state agency within the meaning of Parker and thus its activities were exempt from the Sherman Act. The Department of Justice, in an amicus curiae brief, argued for a restrictive interpretation of the Parker exemption, seeking to limit it only to actions undertaken by the state itself or actions undertaken at the command of the state through legislation or its equivalent. The Department's position was largely sustained by the Court, which held that "[t]he threshold inquiry in determining if an anticompetitive activity is state action of the type the Sherman Act was not meant to proscribe is whether the activity is required by the state acting as sovereign." The Court concluded that the activities of the defendant state bar and county bar associations in publishing and enforcing a minimum fee schedule were not "required" by state law or the State Supreme Court, and thus were not state action for the purposes of the Sherman Act. The Goldfarb litigation was eventually settled by an agreement with the defendants that they would create a fund of over $200,000 to reimburse those members of the plaintiff class injured by the use of minimum fee schedules. In the following term, the Supreme Court was again faced with a state action issue in Cantor v. Detroit Edison. There, the issue was whether a state utility commission's approval of an electric utility company's tariff, which included a light bulb exchange program initiated by the electric utility, exempted that program from antitrust attack. The tariff had the force of law once approved by the State Utility Commission, and could not be altered without the filing of another tariff by the utility. The Supreme Court held that “neither Michigan's approval of the tariff filed by [the utility] nor the fact that the lamp exchange program may not be terminated until a new tariff is filed is a sufficient basis for implying an exemption from the antitrust laws for that program." The Department of Justice filed an amicus curiae brief in Cantor as well, once again arguing for limitations on the scope of the state action exemption; its position on the merits was again largely sustained by the Court's holding. Taken together, Goldfarb and Cantor have significantly narrowed the scope of the state action exemption from that generally considered to exist at the time of the creation of the Task Group. In addition to participation as amicus curiae in Supreme Court cases, the Antitrust Division of the Department of Justice has taken enforcement initiatives designed to test the state action immunity. In November 1976, the Department filed suit against the Texas State Board of Public Accountancy, charging that its promulgation and enforcement of a rule prohibiting competitive bidding by accountants practicing in Texas violated the Sherman Act. The Board, composed of practicing accountants appointed by the state governor, is authorized to promulgate "rules of professional conduct appropriate to establish and maintain the high standard of integrity in the profession of public accountancy," subject to referendum approval by a majority of the state's practicing accountants. The Teras State Board of Public Accountancy case raises not only the question whether the competitive bidding prohibition is necessary to make the state statute work but also the question whether a self-regulating board composed of members of the industry or profession being regulated qualifies as "the state acting as sovereign" for the purpose of Sherman Act immunity. As a result of these court actions, the trend toward the broadening of the "state action" immunity has not only been stopped, but reversed. Absent some unexpected change in this action of judicial decision, continued litigation by the Department of Justice should be sufficient to establish the appropriate limits for this exemption." TRANSPORTATION: AIR Under the Federal Aviation Act, essentially unchanged since its enactment in 1938, the Civil Aeronautics Board is given comprehensive powers to regulate the economic activity of air carriers. Before an airline may provide air transpor 96 S. Ct. 3110 (1976). United States v. Teras State Board of Public Accountancy, Civ. No. A-76-CA-219 (W.D. Texas, complaint filed Nov. 18, 1976). The "state action" issue is again before the Supreme Court this term. Bates and O'Steen v. State Bar of Arizona, No. 73-316 (October Term 1976), and the Department of Justice has again filed an amicus brief. This case involves a restraint directly imposed on the legal profession by a body of independent public officials (the Arizona Supreme Court) and the Department stated that such action was in fact exempt as acts of the state as sovereign. tation in any particular market, it must receive a certificate of public convenience and necessity from the Board, and its rates are subjected to CAB scrutiny. Indeed, at the present time all domestic normal fares are set according to an elaborate fare formula which requires air carriers to charge nationally uniform fares for trips of equal length regardless of the cost or demand characteristics of a given transportation market. In addition, the CAB is also given the power to approve air carrier mergers and other control relationships, the establishment of interlocking directorates among air carriers and other firms in the aviation industry, and agreements among air carriers affecting the provision of air transportation. Section 414 of the Aviation Act provides that the antitrust laws shall not apply to persons affected by CAB orders issued under the merger, interlocking directorate, and agreements sections of the act to the extent "necessary to enable such person to do anything authorized, approved, or required by such order." 99.90 This exemption power vested in the Board appears to be the most comprehen sive power of this sort granted to any Federal regulatory agency. Its existence, a legacy of the Great Depression, appears to reflect the then-current belief that "expert" Federal regulatory agencies could do a better job than the forces of the market place in regulating the activities of firms in important economic sectors, particularly transportation. This philosophy is clearly illustrated by the breadth of the Board's power to approve intercarrier agreements. The statute specifically authorizes the Board to approve agreements, to set fares, pool earnings in traffic, control capacity, or “otherwise eliminat[e] destructive, oppres sive, or wasteful competition. . . ." The fundamental problem with current law is that under the "public interest" tests used by the Board to approve such agreements, the Board may allow anticompetitive agreements among carriers without the necessity for finding that the anticompetitive effects of such agreements are clearly outweighed by an overriding public interest, and without requiring carriers to look for less anticompetitive ways of achieving any legitimate objectives sought by the agree ment. Moreover, the Board has been highly reluctant to hold evidentiary hear ings to evaluate claims presented on behalf of an agreement's proponents. The Board has utilized its ability to immunize transactions and thus remove agreements from strict judicial scrutiny-to approve arrangements which clearly are designed to increase carrier profitability at the expense of the traveling public. The most clear-cut example of such a practice by the Board is the series of capacity limitation agreements established on an interim basis in 1971 and continually renewed through 1975. These agreements remained in effect until judicially overturned as a result of the Board's failure to hold a full hearing on their approval." The purpose of these agreements was to increase carrier load factors on the affected markets so as to eliminate the "excess" capacity resulting from the Board's high fare structure and carrier overinvestment in equipment. As a consequence, passengers on these routes served for four years as "profit generators" for the airlines, since the much increased load factors and resulting passenger inconvenience did not result in any offsetting fare decreases. Likewise, in deciding merger cases there has been a tendency for the Board to approve mergers as a remedy for the temporary financial problems of a particular carrier and not on the basis of a careful analysis of the effects of the transaction on the airline industry. The Board has also frequently omitted con sideration of whether merging carriers were potential--as opposed to actualcompetitors, a criterion by which mergers must be evaluated under the usual Clayton Act standards. During the life of the Task Group, the issue of the CAB's power to immunize various intercarrier transactions was given extensive study by an interagency task force established under the Domestic Council Review Group for Regulatory Reform, which was assigned the task of examining the entire range of problems posed by CAB regulation. The major result of the group's efforts was the formu lation of a draft CAB reform measure which the President submitted to Congress 90 49 U.S.C. § 1384. 91 It should be noted that many intercarrier agreements, such as those regarding inter lining of baggage, provision of ground services, establishment of uniform standards for ticket size, interconnecting reservation systems, and joint ventures for the operation of nationwide communication systems, have little anticompetitive effect, and very likely en hance the ability of airlines to provide efficient air transportation to the public. These ventures, as a result, would have little difficulty passing muster under the antitrust laws If constructed so as to avoid unnecessary anticompetitive effects. United States v. CAB, 511 F. 2d 1315 (D.C. Cir. 1975). |