(CN) -The California Travel and Tourism Commission did not violate antitrust law when it allowed the state’s rental car industry to charge tourism fees in exchange for funding that “greatly increased” the commission’s budget, the 9th Circuit ruled.
The federal appeals court in San Francisco upheld the dismissal of a class action challenging a bill passed by the state Legislature in 2006 that consumers deemed an illegal collusion between the rental car industry and the commission.
The bill permits rental car companies to add a 2.5 percent “tourism assessment fee” to the price of rentals, a portion of which helps fund the commission. The agreement also allows the industry to “unbundle” an existing airport concession fee, which traditionally amounts to 9 percent of the rental price.
Consumers said the agreement amounts to price-fixing, a violation of the federal Sherman Act.
But the district court held that the commission is shielded from antitrust liability under state law, and three-judge appellate panel agreed.
The commission’s alleged anticompetitive conduct “constitutes an authorized and reasonably foreseeable result” and comes from a “clearly articulated state policy,” thus satisfying one of the well-established prerequisites for state action immunity, Judge Michael Daly Hawkins wrote.
That state policy was articulated through legislation, the text of which “strongly suggests that the Legislature envisioned the fee being uniformly passed on to rental car customers,” Hawkins wrote.
The commission is further shielded from antitrust liability because it’s “a state agency … designed to promote tourism which the California Legislature found is ‘vital’ to the state’s economy,” even though it’s largely controlled by industry players, Hawkins wrote.
“Although there are twenty-four industry-appointed commissioners, these positions come from five different tourism industry categories whose interests will not always align, and the passenger car rental industry itself is limited to only six commissioners,” he wrote.
The panel, like the lower court, refused to consider the plaintiff’s claim that the commission violated open meeting laws.