Active Disposal, Inc. v. City of Darien, ___F.3d___, 2011 WL 855847 (7th Cir. Mar. 14, 2011).

In Active Disposal, Inc. v. City of Darien, the Seventh Circuit was confronted with a situation
involving exclusive contracts between Illinois municipalities and trash haulers. The plaintiffs,
made up of other trash haulers and businesses that wanted to hire non-exclusive trash haulers,
claimed that the municipalities’ exclusive contracts violated federal antitrust law. The
municipality-defendants contended that their exclusive contracts were permissible under the
state-action doctrine; they prevailed on their motion to dismiss in district court. The Seventh
Circuit affirmed the district court’s decision.

Although the court ultimately concluded that the exclusive contracts were exempt from antitrust
laws under the state-action doctrine, it found that the exclusive contracts impose restrictions on
competition by preventing other trash haulers from providing services in these markets. The
exclusive contracts also prevent consumers from using different, less expensive trash haulers.
The state-action doctrine allows these anti-competitive effects when the State authorizes the
municipalities’ actions. Thus, municipalities are protected from antitrust violations when state
policy displaces competition. The questions in this case were whether Illinois authorizes the
municipalities’ exclusive contracts and, if so, whether the state-action doctrine protects the
municipalities from federal antitrust law for the resulting anti-competitive effects.

In order to determine whether the municipalities were in fact shielded from federal antitrust law
under the state-action doctrine, the court applied a two-pronged analysis. First, the court
examined whether the Illinois statute at issue authorizes the challenged conduct. The court
answered affirmatively, finding that the statute gives municipalities the authority to contract for
waste collection and disposition. Next, the court analyzed whether anti-competitive effects are a
foreseeable consequence of the state’s authority to regulate. The court again answered
affirmatively, reasoning that a monopoly is created when the legislature allows these types of
contracts, which are likely to be exclusive, and that anti-competitive effects necessarily result.
Thus, the court found that the state intended antitrust immunity for the challenged conduct and
held that the state-action doctrine applied. Therefore, the plaintiffs’ challenge failed, and the
district court’s grant of the defendants’ motion to dismiss was affirmed.