State Agency Not Immune|From Antitrust Claim

(CN) - The 9th Circuit on Wednesday revived an antitrust class action against the California Travel and Tourism Commission for allegedly fixing prices to boost its coffers.

The 9th Circuit in San Diego reversed a district court's finding that the commission was immune from antitrust liability. The three-judge panel ruled that the state-action immunity only applies where a state acts with regulation or monopoly to displace competition.

The California Travel and Tourism Commission (CTTC) did not qualify for state-action immunity because there was no "clear and affirmative state policy to displace pure competition with regulation or monopoly," according to the ruling.

Lead plaintiffs, Michael Shames and Gary Gramkow, sued the commission after the rental car industry sponsored a 2006 law to join the CTTC in exchange for an assessment fee that "greatly increased the CTTC's budget," according to the ruling.

The class claims that the commission violated the Sherman Act when it allowed the industry to fix prices and pass fees to customers instead of including them in the base rental rate.

The district court dismissed the complaint, finding that the commission was immune from Sherman Act charges because its actions "were a foreseeable result of a broader statutory authorization."

But the appellate panel reversed, ruling that such immunity only exists in the presence of a clear state policy.

"In this case, there is no indication California authorized interference by the CTTC with normal industry competition," Senior Circuit Judge Michael Hawkins wrote for the court. "There is no authorization by the California legislature of anticompetitive regulation or monopoly in the rental car field. ... The legislature merely imposed an assessment on the rental car companies and gave the CTTC the authority to spend these funds to promote California tourism."

Hawkins added that while the result of the legislation was foreseeable, "the alleged anticompetitive conduct - that the CTTC facilitated a collusive agreement among rental car companies to uniformly pass through these charges to consumers and ensured rogue companies adhered to the agreement - is not a 'natural and foreseeable' result of the limited power granted to the CTTC." (Emphasis in original.)

The appellate court also revived the plaintiffs' state Open Meeting Act claims against the commission, remanding the matter to the district court.

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