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Thursday, July 4, 2024 | Back issues
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Federal judge dismisses antitrust suit over Chicago parking meters

A federal judge in Chicago tossed a lawsuit claiming the company that owns the city's parking meter system is running a price-gouging monopoly.

CHICAGO (CN) — A Chicago federal judge on Monday threw out an antitrust lawsuit that challenged the private ownership of the city's parking meters by the for-profit company Chicago Parking Meters LLC.

The 2021 suit filed by Windy City residents alleged that CPM is a monopoly in violation of the Sherman Antitrust Act of 1890, and that it uses its extensive control of the parking meter system to price-gouge parking fees and stymie developments in public transit.

CPM's control of the city's parking meters began in 2008. Facing a severe budget shortfall as part of the wider recession, then-Mayor Richard M. Daley and the City Council agreed to sell the city's parking meter system to CPM for about $1.15 billion. The company's primary owner is Morgan Stanley, though it also has ties to Abu Dhabi investors.

The contract reached between the city and CPM granted the company extensive control of the parking system, by mandating the city maintain at least 30,000 CPM parking meters on average in a given year. The city cannot remove any meters without first compensating CPM for the loss, except in particular circumstances. The company can also hold the city accountable for any depreciation in the parking system’s value, incentivizing parking rate increases to meet CPM’s revenue expectations.

The contract was set to last for 75 years, and was amended and reapproved under Mayor Rahm Emanuel in 2013.

"Plaintiffs frequently use public transit and ride sharing, and expect to soon use driverless cars, all of which are more attractive and safer means of transportation that do not require on-street parking, and which would be more widely available to plaintiffs but for the city granting CPM the 75-year monopoly and allowing it to set a fixed number of parking spaces on public streets for its exclusive benefit throughout that lengthy period," the lawsuit states, seeking an injunction against enforcement of the 2013 amended contract.

The plaintiffs are not alone in objecting to the deal. By 2013, parking rates in the city had risen to $2 per hour in most city neighborhoods, with rates in some downtown areas reaching as high as $6.50. The contract also compelled the city to pay CPM for street closures that would prevent it from collecting parking fees, such as during street festivals or maintenance.

Within two years, the $1.15 billion the city got from the sale was mostly spent, while by 2019 CPM had made back its original investment plus a profit of about $500 million. It turned a profit of almost $87 million in 2020 alone.

The arrangement was so harmful to Chicago drivers that Rolling Stone journalist Matt Taibbi included it in his book on the 2008 financial crisis, "Griftopia", as an example of private interests overtaking public good. The Better Government Association called the deal "a lesson in worst practices."

"Native Chicagoans are now completely at the mercy of private interests when it comes to parking rates, collections, even holidays," Taibbi wrote in 2012. "When elected officials in Illinois can’t shut off the parking meters on Abe Lincoln’s birthday because a bunch of sheiks in Dubai don’t want the revenue stream turned off even for a day, you know something has gone seriously sideways in the national body politic."

These decade-old criticisms did not stop Senior U.S. District Judge Matthew Kennelly from dismissing the case on Monday. The Bill Clinton-appointed judge did not dispute whether CPM is a monopoly in his ruling, but instead found that Chicago's municipal government was well within its rights to turn over the parking meters to a private company.

"Nothing in the text of the [Illinois Municipal Code] suggests that the city is required to own and operate parking meters on public streets," Kennelly wrote.

The judge invoked both the legal doctrine of state action antitrust immunity, which states that the federal government must respect state-level legislation that willingly allows for seemingly monopolizing conduct, as well as the Illinois municipal code. The code allows municipalities to manage and control their own parking meters, and also to "enter into contracts dealing in any manner with... the leasing of space on, or in connection with, parking meters for advertising purposes,"

"The state action immunity doctrine shields state action from federal antitrust liability if the challenged conduct is 'clearly articulated and affirmatively expressed as state policy,'" Kennelly wrote. "This immunity extends to a municipality if its 'anticompetitive activities were authorized by the state pursuant to state policy to displace competition with regulation or monopoly public service.' To be authorized by the state, the challenged conduct need not be compelled by the state's policy... it is enough that the challenged action was a foreseeable result of the state's policy."

Kennelly also waved away the wording of "advertising purposes," which could imply that the city could only lease its parking meters out in very specific circumstances. He argued that such an interpretation would override the code's assertion that municipalities can enter into contracts "in any manner."

"The phrase 'dealing in any manner' indicates that the legislature intended to authorize municipalities to enter into a variety of different contracts. Adopting the plaintiffs' interpretation would improperly read this phrase out of the Municipal Code," the ruling states.

Kennelly dismissed the suit with prejudice, meaning that the plaintiffs in the original suit who intended to turn the case into a class action cannot refile it in federal court. The dismissal can be appealed to the Chicago-based Seventh Circuit.

The current street parking rate in downtown Chicago is $7 per hour between 8 a.m. and 9 p.m. Per a 2019 study released by the parking spot locator Parkopedia, Chicago is the third-most expensive city in the U.S. for street parking, and second only to New York City for off-street parking.

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