Can a government agency conspire to fix prices? When it comes to the California Travel and Tourism Commission, the Ninth Circuit says the answer is "no." Shames v. California Travel and Tourism Commission [pdf].

The CTTC consists of a dozen commissioners appointed by the Governor, and two dozen selected by the tourism industry. In 2006, the passenger rental car industry proposed a bill by which the industry agreed to pay a high assessment fee — thereby considerably increasing the CTTC’s budget — in return for allowing the rental car industry to "unbundle" a tourism assessment fee and concession fee and itemize such fees separately from the base rental rate. According to plaintiffs’ complaint, the CTTC colluded with the industry to pass these charges through to retail customers.

The district court held that "state action immunity" barred the complaint, and the Ninth Circuit affirmed.

In California Retail Liquor Dealers Association v. Midcal Aluminum, the Supreme Court held that private actors were immune from antitrust liability when two factors were satisfied: (1) the challenged restraint was clearly articulated and affirmatively expressed as state policy; and (2) the policy was "actively supervised" by the state.

On appeal in Shames, the plaintiffs argued that the first factor required that specific anticompetitive acts be expressly authorized by state legislation. The Ninth Circuit disagreed, holding that the first factor was satisfied where the anticompetitive actions were reasonably foreseeable in view of a broader statutory authorization, a standard easily satisfied by the 2006 CTTC legislation.

Citing both the Supreme Court’s and its own precedent, the Court held that because there is little likelihood that a governmental agency would enter into a private price-fixing arrangement, there is no need for the state to actively supervise the agency’s conduct for state action immunity to apply. The Court found that although two-thirds of the CTTC’s commissioners are appointed by the tourism industry rather than by the government, the Commission was sufficiently similar to a government agency for the second factor to be inapplicable.