Central Illinois Public Service Company (CIPS) is a public
utility regulated by the Illinois Commerce Commission (ICC).
Rural Electric Convenience Cooperative (RECC) is an
unregulated, not-for-profit corporation engaged in the retail
distribution of electrical power to its members.*fn1
Plaintiffs are member-owners and customers of RECC.
In 1969, CIPS and RECC, pursuant to the Illinois Electric
Supplier Act, Ill.Rev. Stat. ch. 111 2/3, ¶ 406, entered into
an agreement which divided up service areas. In compliance with
the act, the ICC reviewed and approved the contract. RECC now
exclusively services the area where Plaintiffs live at electric
rates higher than those charged by CIPS.*fn2 Because of the
contract, CIPS refuses to service RECC customers. Due to that
refusal, Plaintiffs not only seek damages and an injunction
against the retailers invalidating the contract under §§ 1 and
2 of the Sherman Act but also a declaration that the Electric
Supplier Act is unconstitutional as violative of the Supremacy
Undoubtedly, the horizontal market allocation in which the
suppliers have engaged is a per se violation of applicable
federal antitrust laws. See Gainesville Utilities Dept. v.
Florida Power & Light Co., 573 F.2d 292, 299 (5th Cir.), cert.
denied, 439 U.S. 966, 99 S.Ct. 454, 58 L.Ed.2d 424 (1978). The
ultimate issue then is whether the Sherman Act applies to the
service area agreement between RECC and CIPS. Defendants assert
that the agreement is immune from antitrust scrutiny under the
state action doctrine enunciated by the Supreme Court in Parker
v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943).*fn3
Plaintiffs contend otherwise.
In Parker, a California raisin producer challenged the
state's Agricultural Prorate Act under which a cartel of
private raisin producers was created to stabilize prices and
prevent economic waste. The Court, relying on principles of
federalism and state sovereignty "refused to construe the
Sherman Act as applying to the anti-competitive conduct of a
State acting through its legislature. . . . Rather, it ruled
that the Sherman Act was intended to prohibit private
restraints on trade, and it refused to infer an intent to
`nullify a state's control over its officers and agents' in
activities directed by the legislature." Town of Hallie v. City
of Eau Claire, 471 U.S. 34, 38, 105 S.Ct. 1713, 1716, 85
L.Ed.2d 24 (1985).
Thus, the state action doctrine arose as an exception to
In City of Lafayette v. Louisiana Power & Light Co.,
435 U.S. 389, 410, 413, 98 S.Ct. 1123, 1135, 1136, 55 L.Ed.2d 364
(1978), a suit involving a municipally run electric utility
system, the Court enunciated what has become known as the
two-prong test of the state action doctrine. Thereafter, in
California Retail Liquor Dealers Assn. v. Midcal Aluminum,
Inc., 445 U.S. 97, 100 S.Ct. 937, 63 L.Ed.2d 233 (1980), the
Court applied the Lafayette test to a case where the state
action exemption was claimed by a private party. In Midcal, the
plaintiff challenged California's resale price maintenance and
price posting statutes for the wholesale wine trade. The Court,
quoting from Lafayette, stated that for the state action
doctrine to apply, the challenged restraint (1) must be one
clearly articulated and affirmatively expressed as state
policy, and (2) must be actively supervised by the state. Id.
at 105, 100 S.Ct. at 943.
In LaSalle Nat'l Bank of Chicago v. DuPage County,
777 F.2d 377 (7th Cir. 1985), cert. denied, ___ U.S. ___, 106 S.Ct.
2892, 90 L.Ed.2d 979 (1986), the Seventh Circuit stated of the
test's first prong: "[T]he state need not specifically
authorize conduct with anti-competitive effects. . . . It is
sufficient that anti-competitive effects are a foreseeable
consequence of engaging in the authorized activity." Id. at
381. Although LaSalle involved suit against a local government,
its principles with respect to the first prong of the test are
fully applicable here. Cf. Southern Motor Carriers Rate
Conference, Inc. v. United States, 471 U.S. 48, 56, 105 S.Ct.
1721, 1726, 85 L.Ed.2d 36 (1984) (extending Parker rationale to
suits against private parties).
A. State Policy
In the instant case, the challenged restraint is the
Illinois Electric Supplier Act. The legislature expressly
declared its purpose as follows:
The General Assembly declares it to be in the
public interest that, in order to avoid
duplication of facilities and to minimize
disputes between electric suppliers which may
result in inconvenience and diminished efficiency
in electrical service to the public, any 2 or
more electric suppliers may contract, subject to
the approval of the Illinois Commerce Commission,
as to the respective areas in which each supplier
is to provide service.
Ill.Rev.Stat. ch. 111 2/3, ¶ 402 (1985). To further this
intent, the legislature stated: "Any 2 or more electric
suppliers may contract together defining and delineating, as
between themselves, one or more service areas in which each
such contracting supplier shall be entitled to furnish service.
Such contracts are subject to the approval of the Commission."
Id. ¶ 406.