U.S. Supreme Court Rules In Favor of State Antitrust Power

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In a 7-2 vote, the U.S. Supreme Court ruled that states have the power to pursue litigation against energy companies relating to allegations of antitrust activities without the risk of preemption by the National Gas Act or the Federal Regulatory Energy Commission.

Monday, April 27, 2015 - The U.S. Supreme Court voted 7-2 in favor of a ruling originally made by the Ninth Circuit Courts of Appeals which stated that state laws involved in a natural gas antitrust MDL were not preempted by the National Gas Act (NGA) and were not subject to the Federal Regulatory Energy Commission (FERC). The ruling is a win for states that intended to pursue their own charges against energy companies that they claimed had conspired to artificially raise the price of natural gas.

A number of representatives from energy companies appeared before the court in the months leading up to the decision. Their arguments revolved around their assertion that the NGA was intended as a regulatory measure, but should also be employed to direct nationwide litigation in place of state laws when allegations of antitrust behavior are at hand. Instead of states being able to file antitrust claims against energy companies, the defendants claimed that those allegations would be picked up by the federal government under the NGA and heard by the FERC.

The main argument made by the plaintiffs was that although the NGA and FERC regulated the physical activities involved in the distribution of natural gas, their jurisdiction did not extend to states filing lawsuits regarding marketplace illegalities. They claimed that instead of litigating against the natural gas companies, their lawsuits wee intended to instead seek damages related to the illegal business models that existed alongside the natural gas industry.

The Court found that the actions of FERC were wholly outside of state regulations, which included the antitrust claims against the energy companies. In response to the defendants‘ claims that this was not he case since the allegations took aim at issues completely within FERC‘s juristidiction, the court ruled that jurisdiction did not change the fact that the NGA is not intended to usurp a state‘s power to file its own antitrust lawsuits.

The ruling is seen as a large victory for state power in regards to antitrust claims. The plaintiffs saw this as a big step in the right direction in policing antitrust activities, as states affected by large-scale price-fixing schemes can be more familiar and litigate in a swifter manner than is sometimes possible at the federal level.

The dissenting judges opined that the clear distinction made between federal and state power intended by the NGA was undermined by the ruling, and that it would muddy future complications that may arise between the two jurisdiction when dealing with similar questions in the future. Justice Antonin Scalia stated that the ability to regulate the physical natural gas products without the ability to participate in antitrust litigation hindered the effectiveness of the NGA as a whole.

One point the Court did make was in relation to a state‘s antitrust laws going at odds with the rate setting processes of the NGA or FERC, in which case they would be preempted by the federal system. The defense, however, did not use this course of argument during litigation. Though the federal government was not allowed to take over state‘s antitrust litigation under the ruling, FERC has created new measures to combat illegal manipulation of the natural gas markets as a result of the MDL proceedings.