The American Antitrust Institute (AAI) applauds the Supreme Court’s ruling today in Oneok v. Learjet upholding the application of state antitrust laws to market manipulation by natural gas companies. The AAI developed the legal theory on which the Supreme Court’s decision rested.
The Court held that the Natural Gas Act and regulation by the Federal Energy Regulatory Commission (FERC) does not “field” preempt state antitrust claims by retail natural gas purchasers seeking to recover damages for price fixing arising out of the manipulation of natural gas price indices during the Western energy crisis of 2000-2002.
The rationale for the Court’s decision was first raised in an amicus brief filed by AAI in the Ninth Circuit Court of Appeals, which found no preemption on different grounds.
“This is a tremendous victory for state antitrust law and a sensible accommodation between regulation and antitrust,” said the AAI Vice President and General Counsel Richard Brunell. In a 7-2 decision written by Justice Breyer, the Court recognized that “States have a long history of providing common-law and statutory remedies against monopolies and unfair business practices,” and that such remedies could co-exist with FERC prohibition “of the very kind of anticompetitive conduct that the state actions attack.”
In response to the market manipulation at issue, FERC had adopted rules expressly making the manipulation unlawful and requiring natural gas companies to adopt procedures to make it less likely to occur in the future.
The Court rejected the “exclusive spheres” dichotomy urged by the defendants, the Solicitor General, and the dissenting justices under which conduct that is subject to regulation by FERC is “exclusive” of all state regulation, including antitrust. Rather, the Court held that because state antitrust laws were not directed at natural gas companies in particular, but govern background marketplace conditions generally, such laws were not preempted merely because they affect conduct or rates subject to FERC regulation.
The Court held that state antitrust laws might still be preempted if their application conflicted with the goals of the Natural Gas Act or FERC's rate setting process, but noted that the defendants had not made such an argument.
In dissent, Justice Scalia, joined by Chief Justice Roberts, argued that allowing state antitrust suits would force natural gas companies to conform their behavior “to the discordant regulations of 50 States,” notwithstanding that the hard-core price fixing alleged by the complaints is uniformly condemned by federal and state antitrust law.