Summary
In this antitrust tying case, the Eleventh Circuit held that the City of LaGrange, Georgia, was not entitled to state-action immunity under the Parker doctrine for conditioning water service on the installation of natural gas appliances in unincorporated areas. Applying the "inherent, logical, or ordinary result" test from *FTC v. Phoebe Putney Health System, Inc.*, the court found that Georgia's grant of authority to operate water systems did not clearly contemplate anticompetitive tying in an unrelated market like natural gas. The denial of state-action immunity was held immediately appealable under the collateral order doctrine. The case underscores the narrow scope of municipal antitrust immunity after *Phoebe Putney*, particularly when a municipality leverages a monopoly in one utility to gain advantage in a separate, unregulated market.
Topics
Practice areas
Questions Presented
- Whether the City of LaGrange is entitled to state-action immunity from federal antitrust liability for its ordinance tying water service to the installation of natural gas appliances.
Holdings
- The City of LaGrange is not entitled to state-action immunity because the challenged tying arrangement is not the 'inherent, logical, or ordinary result' of the state statutory scheme authorizing water service, as required by FTC v. Phoebe Putney Health Sys., Inc., 568 U.S. 216 (2013).
Key quotations
“For all new construction outside of the corporate limits of the city, . . . water service as set forth in this chapter shall be available only to those customers who install at least one (1) natural gas furnace, one (1) natural gas water heater, and at least one (1) additional natural gas outlet sufficient for potential future use for a clothes dryer, range, grill, pool heater or outdoor lighting fixture.” (Page 3)
“we think it is safe to say that the tying of an unrelated service in a different market to the provision of water service falls outside the statutes’ grant of immunity.” (Page 18)
Factual background
The City of LaGrange, Georgia owns and operates water and natural gas utilities. It has a monopoly on water service in unincorporated Troup County through explicit market-dividing agreements. In 2004, LaGrange enacted an ordinance conditioning water service for new customers outside city limits on the installation of at least one natural gas furnace, one natural gas water heater, and one additional gas outlet. Diverse Power, an electric utility competing for retail energy customers in the same area, sued alleging that this tying arrangement violates antitrust laws. The developer of a subdivision confirmed that but for the ordinance, it would have used electric rather than gas appliances.
Procedural history
Diverse Power filed suit on March 3, 2017, alleging violations of the Sherman and Clayton Antitrust Acts based on LaGrange's ordinance tying water service to natural gas installation. LaGrange moved to dismiss under Rule 12(b)(6) on several grounds, including state-action immunity. The District Court denied the motion on February 21, 2018. LaGrange timely appealed under the collateral order doctrine.
Remand instructions
Remand for further proceedings consistent with the opinion.