CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SEVENTH CIRCUIT.
Powell, J., delivered the opinion for a unanimous Court.
JUSTICE POWELL delivered the opinion of the Court.
This case presents the question whether a municipality's anticompetitive activities are protected by the state action exemption to the federal antitrust laws established by Parker v. Brown, 317 U.S. 341 (1943), when the activities are authorized, but not compelled, by the State, and the State does not actively supervise the anticompetitive conduct.
Petitioners -- Town of Hallie, Town of Seymour, Town of Union, and Town of Washington (the Towns) -- are four Wisconsin unincorporated townships located adjacent to respondent, the City of Eau Claire (the City). Town of Hallie is located in Chippewa County, and the other three towns are located in Eau Claire County.*fn1 The Towns filed suit against the City in United States District Court for the Western District of Wisconsin seeking injunctive relief and alleging that the City violated the Sherman Act, 15 U. S. C. § 1 et seq., by acquiring a monopoly over the provision of sewage treatment services in Eau Claire and Chippewa Counties, and by tying
the provision of such services to the provision of sewage collection and transportation services.*fn2 Under the Federal Water Pollution Control Act, 33 U. S. C. § 1251 et seq., the City had obtained federal funds to help build a sewage treatment facility within the Eau Claire Service Area, that included the Towns; the facility is the only one in the market available to the Towns. The City has refused to supply sewage treatment services to the Towns. It does supply the services to individual landowners in areas of the Towns if a majority of the individuals in the area vote by referendum election to have their homes annexed by the City, see Wis. Stat. §§ 66.024(4), 144.07(1) (1982), and to use the City's sewage collection and transportation services.
Alleging that they are potential competitors of the City in the collection and transportation of sewage, the Towns contended in the District Court that the City used its monopoly over sewage treatment to gain an unlawful monopoly over the provision of sewage collection and transportation services, in violation of the Sherman Act. They also contended that the City's actions constituted an illegal tying arrangement and an unlawful refusal to deal with the Towns.
The District Court ruled for the City. It found that Wisconsin's statutes regulating the municipal provision of sewage service expressed a clear state policy to replace competition with regulation. The court also found that the State adequately supervised the municipality's conduct through the State's Department of Natural Resources, that was authorized to review municipal decisions concerning provision of sewage services and corresponding annexations of land. The court concluded that the City's allegedly anticompetitive conduct fell within the state action exemption to the federal antitrust laws, as set forth in Community Communications Page 38} Co. v. Boulder, 455 U.S. 40 (1982), and Parker v. Brown, supra. Accordingly, it dismissed the complaint.
The United States Court of Appeals for the Seventh Circuit affirmed. 700 F.2d 376 (1983). It ruled that the Wisconsin statutes authorized the City to provide sewage services and to refuse to provide such services to unincorporated areas. The court therefore assumed that the State had contemplated that anticompetitive effects might result, and concluded that the City's conduct was thus taken pursuant to state authorization within the meaning of Parker v. Brown, supra. The court also concluded that in a case such as this involving "a local government performing a traditional municipal function," 700 F.2d, at 384, active state supervision was unnecessary for Parker immunity to apply. Requiring such supervision as a prerequisite to immunity would also be unwise in this situation, the court believed, because it would erode traditional concepts of local autonomy and home rule that were clearly expressed in the State's statutes.
We granted certiorari, 467 U.S. 1240 (1984), and now affirm.
The starting point in any analysis involving the state action doctrine is the reasoning of Parker v. Brown. In Parker, relying on principles of federalism and state sovereignty, the Court refused to construe the Sherman Act as applying to the anticompetitive conduct of a State acting through its legislature. 317 U.S., at 350-351. 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. Id., at 351.
Municipalities, on the other hand, are not beyond the reach of the antitrust laws by virtue of their status because they are not themselves sovereign. Lafayette v. Louisiana Power & Light Co., 435 U.S. 389, 412 (1978) (opinion of ...