Supreme Court Shields Local Officials From Antitrust Suits

The Supreme Court on Monday gave local government officials broad immunity from antitrust lawsuits, even when they conspire to protect a business monopoly.

The 6-3 decision means that excluded competitors cannot use federal antitrust laws to challenge decisions made by a city or county. So long as local officials are exercising a legal power conferred by the state, they are shielded from liability, the court said.

The ruling, written by Justice Antonin Scalia, frees the city of Columbia, S.C., and officials of its leading billboard advertiser from a $3-million antitrust verdict.

A jury had found that the mayor and City Council had conspired to enact a special ordinance that kept nearly all the billboard advertising business in the hands of a local firm, Columbia Outdoor Advertising Inc., which had close ties to city politicians.

But the high court overturned that decision Monday, giving local officials the kind of immunity already enjoyed by state politicians and regulators. Blanket antitrust immunity was granted to state officials in 1943 by the high court in a case involving California’s price controls on raisins.

Monday’s ruling also shields private business owners who work out favorable deals with public officials. They may not be forced to pay antitrust damages to their competitors, the court said.

The decision is consistent with two tendencies of the more conservative Supreme Court. In recent years, the justices have narrowed the scope of the antitrust laws and have also given more power to state and local governments.

City officials nationwide told the court that it is important that they not face lawsuits simply because one business is more successful in lobbying the government.

However, attorneys for the excluded competitors said the ruling will encourage “back-room deals” at the expense of the free market.

“This decision says the wrongdoers will go free,” said Steven C. McCracken, who filed a court brief on behalf of the Associated Builders and Contractors. The Newport Beach attorney had urged the court to allow antitrust suits against local officials who ignore the public interest and steer contracts to political favorites.

“This means that a back-room deal or campaign contributions can determine who gets the business, rather than the free market,” McCracken said.

The case (Columbia vs. Omni Outdoor Advertising, 89-1671) arose in 1982 when Omni tried to break into the market in South Carolina’s largest city. Until then, 95% of the billboards in the area were managed by Columbia Outdoor Advertising. Its owner was a close friend of the city’s mayor and several city council members and had given them free advertising space during their campaigns.

On March 10, 1983, the council hurriedly drafted and enacted an ordinance restricting billboards to a series of locations in the city. The day before, Columbia had taken out permits for billboards in just the locations authorized by the ordinance. Omni was thereby excluded from the market.

Attorneys for Omni filed a suit against the city and Columbia under the Sherman Act, which makes illegal “every contract, combination . . . or conspiracy in restraint of trade.” After a two-week trial, a jury returned a verdict in favor of Omni. A federal appeals court in Richmond upheld the verdict on a 2-1 vote.

But the Supreme Court threw it out Monday. The court’s opinion suggests that those who disagree with decisions made by city officials should challenge them at the ballot box, not in federal court.