[Federal Register Volume 68, Number 154 (Monday, August 11, 2003)]
[Notices]
[Pages 47568-47571]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-20370]


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FEDERAL TRADE COMMISSION

[File No. 021 0115]


Iowa Movers and Warehousemen's Association; Analysis To Aid 
Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed Consent Agreement.

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SUMMARY: The consent agreement in this matter settles alleged 
violations of federal law prohibiting unfair or deceptive acts or 
practices or unfair methods of competition. The attached Analysis to 
Aid Public Comment describes both the allegations in the draft 
complaint that accompanies the consent agreement and the terms of the 
consent order--embodied in the consent agreement--that would settle 
these allegations.

DATES: Comments must be received on or before September 1, 2003.

ADDRESSES: Comments filed in paper form should be directed to: FTC/
Office of the Secretary, Room 159-H, 600 Pennsylvania Avenue, NW., 
Washington, DC 20580. Comments filed in electronic form should be 
directed to: [email protected], as prescribed in the 
Supplementary Information section.

FOR FURTHER INFORMATION CONTACT: Dana Abrahamsen, FTC, Bureau of 
Competition, 600 Pennsylvania Avenue, NW., Washington, DC 20580, (202) 
326-2906.

SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), and Sec.  2.34 of 
the Commission's rules of practice, 16 CFR 2.34, notice is hereby given 
that the above-captioned consent agreement containing a consent order 
to cease and desist, having been filed with and accepted, subject to 
final approval, by the Commission, has been placed on the public record 
for a period of thirty (30) days. The following Analysis to Aid Public 
Comment describes the terms of the consent agreement, and the 
allegations in the complaint. An electronic copy of the full text of 
the consent agreement package can be obtained from the FTC Home Page 
(for August 1, 2003), on the World Wide Web, at ``http://www.ftc.gov/os/2003/08/index.htm.'' A paper copy can be obtained from the FTC 
Public Reference Room, Room 130-H, 600 Pennsylvania Avenue, NW., 
Washington, DC 20580, either in person or by calling (202) 326-2222.
    Public comments are invited, and may be filed with the Commission 
in either paper or electronic form. Comments filed in paper form should 
be directed to: FTC/Office of the Secretary, Room 159-H, 600 
Pennsylvania Avenue, NW., Washington, DC 20580. If a comment contains 
nonpublic information, it must be filed in paper form, and the first 
page of the document must be clearly labeled ``confidential.'' Comments 
that do not contain any nonpublic information may instead be filed in 
electronic form (in ASCII format, WordPerfect, or Microsoft Word) as 
part of or as an attachment to email messages directed to the following 
email box: [email protected]. Such comments will be considered 
by the Commission and will be available for inspection and copying at 
its principal office in accordance with Sec.  4.9(b)(6)(ii) of the 
Commission's rules of practice, 16 CFR 4.9(b)(6)(ii)).

Analysis of Proposed Consent Order to Aid Public Comment

    The Federal Trade Commission has accepted for public comment an 
Agreement Containing Consent Order with Iowa Movers and Warehousemen's 
Association (``IMWA'' or ``Respondent''). The Agreement is for 
settlement purposes only and does not constitute an admission by IMWA 
that the law has been violated as alleged in the Complaint or that the 
facts alleged in the Complaint, other than jurisdictional facts, are 
true.

I. The Commission's Complaint

    The proposed Complaint alleges that Respondent Iowa Movers and 
Warehousemen's Association, a corporation, has violated and is now 
violating Section 5 of the Federal Trade Commission Act. Specifically, 
the proposed Complaint alleges that Respondent has agreed to engage, 
and has engaged, in a combination and conspiracy, an agreement, 
concerted action or unfair and unlawful acts, policies and practices, 
the purpose or effect of which is to unlawfully hinder, restrain, 
restrict, suppress or eliminate competition among household goods 
movers in the household goods moving industry.
    Respondent is an association organized for and serving its members, 
which are approximately 70 household goods movers that conduct business 
within the State of Iowa. In 2002 IMWA became a division of the Iowa 
Motor Truck Association, but it retains its own identity. One of the 
primary functions of IMWA is preparing, and filing with the Iowa 
Department of Transportation's Office of Motor Carrier Services, 
tariffs and supplements on behalf of its members. These tariffs and 
supplements contain rates and charges for the intrastate and local 
transportation of household goods and for related services.
    The proposed Complaint alleges that Respondent is engaged in 
initiating, preparing, developing, disseminating, and taking other 
actions to establish and maintain collective rates, which have the 
purpose or effect of fixing, establishing or stabilizing rates for the 
transportation of household goods in the State of Iowa. The Respondent 
files uniform rates and the tariffs contain rules that limit the extent 
to which movers can discount from those rates when charging consumers 
for moving services.

[[Page 47569]]

    The proposed Complaint further alleges that Respondent organizes 
and conducts meetings that provide a forum for discussion or agreement 
between competing carriers concerning or affecting rates and charges 
for the intrastate transportation of household goods.
    The proposed Complaint further alleges that Respondent's conduct is 
anticompetitive because it has the effect of raising, fixing, and 
stabilizing the prices of household goods moves. The acts of Respondent 
also have the effect of depriving consumers of the benefits of 
competition.

II. Terms of the Proposed Consent Order

    The proposed Order would provide relief for the alleged 
anticompetitive effects of the conduct principally by means of a cease 
and desist order barring Respondent from continuing its practice of 
filing tariffs containing collective intrastate rates.
    Paragraph II of the proposed Order bars Respondent from filing a 
tariff that contains collective intrastate rates. This provision will 
terminate Respondent's current practice of filing tariffs that contain 
intrastate rates that are the product of an agreement among movers in 
the State of Iowa. This paragraph also prohibits Respondent from 
engaging in activities such as exchanges of information that would 
facilitate member movers in agreeing on the rates contained in their 
intrastate tariffs. For example, the order bars Respondent from 
providing to other carriers certain non-public information.\1\ It also 
bars Respondent from maintaining a tariff committee or agreeing with 
movers to institute any automatic intrastate rate increases.
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    \1\ A State statute requires that carriers make their tariffs 
available to the public. Iowa Code section 325D.13.
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    Paragraph III of the proposed Order requires Respondent to cancel 
all tariffs that it has filed that contain intrastate collective rates. 
This provision will ensure that the collective intrastate rates now on 
file in the State of Iowa will no longer be in force, allowing for 
competitive rates in future individual mover tariffs. Paragraph III of 
the proposed Order also requires Respondent to cancel any provisions in 
its governing documents that permit it to engage in activities barred 
by the Order.
    Paragraph IV of the proposed Order requires Respondent to send to 
its members a letter explaining the terms of the Order. This will make 
clear to members that they can no longer engage in collective rate-
making activities.
    Paragraphs V and VI of the proposed Order require Respondent to 
inform the Commission of any change in Respondent that could affect 
compliance with the Order and to file compliance reports with the 
Commission for a number of years. Paragraph VII of the proposed Order 
states that the Order will terminate in 20 years.

III. Opportunity for Modification of the Order

    Respondent can seek to modify the proposed Order to permit it to 
engage in collective rate-making if it can demonstrate that the ``state 
action'' defense would apply to its conduct.\2\ The state action 
doctrine dates back to the Supreme Court's 1943 opinion in Parker v. 
Brown, which held that, in light of the States' status as sovereigns, 
and given basic principles of federalism, Congress would not have 
intended the Sherman Act to apply to the activities of States 
themselves.\3\ The defense also has been interpreted in limited 
circumstances to shield from antitrust scrutiny private firms' 
activities that are conducted pursuant to state authority. States may 
not, however, simply authorize private parties to violate the antitrust 
laws.\4\ Instead, a State must substitute its own control for that of 
the market.
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    \2\ 16 CFR 2.51. Because the State of Iowa recently enacted 
legislation expanding the state's authority to review tariff 
filings, Respondent may seek to modify the Order in this instance. 
(Senate File 97, signed into law on March 28, 2003.) We note that a 
change in the statute alone is insufficient to assure active state 
supervision. As explained below, actual supervision, rather than 
mere statutory authority to supervise, is required. We discuss the 
state action defense below in some detail. See also Indiana 
Household Movers and Warehousemen, Inc., File No. 021-0115 (Mar. 18, 
2003) (proposed consent order) available at <http://www.ftc.gov/os/2003/03/indianahouseholdmoversanalysis.pdf.
    \3\ 317 U.S. 341 (1943).
    \4\ Parker v. Brown, 317 U.S. at 351 (``[A] state does not give 
immunity to those who violate the Sherman Act by authorizing them to 
violate it, or declaring that their action is lawful.'').
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    Thus, the state action defense would be available to Respondent 
only if it could demonstrate that its conduct satisfied the strict two-
pronged standard the Supreme Court set out in California Retail Liquor 
Dealers Ass'n v. Midcal Aluminum, Inc.: ``the challenged restraint must 
be `one clearly articulated and affirmatively expressed as state 
policy''' and ``the policy must be `actively supervised' by the state 
itself.''\5\
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    \5\ 445 U.S. 97, 105 (1980) (``Midcal'') (quoting City of 
Lafayette v. Louisiana Power & Light, 435 U.S. 389, 410 (1978)). The 
``restraint'' in this instance is the collective rate-setting. This 
articulation of the state action doctrine was reaffirmed by the 
Supreme Court in FTC v. Ticor Title Insurance Co. (``Ticor''), 504 
U.S. 621, 633 (1992), where the Court noted that the gravity of the 
antitrust violation of price fixing requires exceptionally clear 
evidence of the State's decision to supplant competition.
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    Under the first prong of Midcal's two-part test, Respondent would 
be required to show that the State of Iowa had ``clearly articulated 
and affirmatively expressed as state policy'' the desire to replace 
competition with a regulatory scheme. With regard to this prong, it 
appears that under Iowa law tariffs must be ``just, reasonable, and 
nondiscriminating.''\6\ Respondent would meet its burden only if it 
could show that this or some other provision of Iowa law constitutes a 
clear expression of state policy to displace competition and allow for 
collective rate-making among competitors.
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    \6\ Iowa Code section 325A.7. In addition, an Iowa 
administrative rule specifically allows carriers of household goods 
to file their tariffs through an agent or another motor carrier, 
suggesting administrative approval of collective rate filings. Iowa 
Administrative Code 761-524.15(325A).
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    Under the second prong of the Midcal test, Respondent would be 
required to demonstrate ``active supervision'' by state officials. The 
Supreme Court has made clear that the active supervision standard is a 
rigorous one. It is not enough that the State grants general authority 
for certain business conduct or that it approves private agreements 
with little review. As the Court held in Midcal, ``The national policy 
in favor of competition cannot be thwarted by casting such a gauzy 
cloak of state involvement over what is essentially a private price-
fixing arrangement.''\7\ Rather, active supervision is designed to 
ensure that a private party's anticompetitive action is shielded from 
antitrust liability only when ``the State has effectively made [the 
challenged] conduct its own.''\8\
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    \7\ Midcal, 445 U.S. at 105-06.
    \8\ Patrick v. Burget, 486 U.S. 94, 106 (1988).
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    In order for state supervision to be adequate for state action 
purposes, state officials must engage in a ``pointed re-examination'' 
of the private conduct.\9\ In this regard, the State must ``have and 
exercise ultimate authority'' over the challenged anticompetitive 
conduct.\10\ To do so, state officials must exercise ``sufficient 
independent judgment and control so that the details of the rates or 
prices have been established as a product of deliberate state 
intervention, not simply by agreement among private parties.''\11\ One 
asserting the state action defense must demonstrate that the state 
agency has ascertained the relevant

[[Page 47570]]

facts, examined the substantive merits of the private action, assessed 
whether that private action comports with the underlying statutory 
criteria established by the state legislature, and squarely ruled on 
the merits of the private action in a way sufficient to establish the 
challenged conduct as a product of deliberate state intervention rather 
than private choice.
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    \9\ Midcal, 445 U.S. at 106. Accord, Ticor, 504 U.S. at 634-35; 
Patrick v. Burget, 486 U.S. at 100-01.
    \10\ Patrick v. Burget, 486 U.S. at 101 (emphases added).
    \11\ Ticor, 504 U.S. at 634-35.
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IV. General Characteristics of Active Supervision

    At its core, the active supervision requirement serves to identify 
those responsible for public policy decisions. The clear articulation 
requirement ensures that, if a State is to displace national 
competition norms, it must replace them with specific state regulatory 
standards; a State may not simply authorize private parties to 
disregard federal laws,\12\ but must genuinely substitute an 
alternative state policy. The active supervision requirement, in turn, 
ensures that responsibility for the ultimate conduct can properly be 
laid on the State itself, and not merely on the private actors. As the 
Court explained in Ticor:

    \12\ Parker , 317 U.S. at 351.
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States must accept political responsibility for actions they intend 
to undertake * * * Federalism serves to assign political 
responsibility, not to obscure it * * * For States which do choose 
to displace the free market with regulation, our insistence on real 
compliance with both parts of the Midcal test will serve to make 
clear that the State is responsible for the price fixing it has 
sanctioned and undertaken to control.\13\

    \13\ 504 U.S. at 636.
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    Through the active supervision requirement, the Court furthers the 
fundamental principle of accountability that underlies federalism by 
ensuring that, if allowing anticompetitive conduct proves to be 
unpopular with a State's citizens, the state legislators will not be 
``insulated from the electoral ramifications of their decisions.''\14\
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    \14\ See New York v. United States, 505 U.S. 144, 168-69 (1992).
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    In short, clear articulation requires that a State enunciate an 
affirmative intent to displace competition and to replace it with a 
stated criterion. Active supervision requires the State to examine 
individual private conduct, pursuant to that regulatory regime, to 
ensure that it comports with that stated criterion. Only then can the 
underlying conduct accurately be deemed that of the State itself, and 
political responsibility for the conduct fairly be placed with the 
State.
    Accordingly, under the Supreme Court's precedents, to provide 
meaningful active supervision, a State must (1) obtain sufficient 
information to determine the actual character of the private conduct at 
issue, (2) measure that conduct against the legislature's stated policy 
criteria, and (3) come to a clear decision that the private conduct 
satisfies those criteria, so as to make the final decision that of the 
State itself.

V. Standard for Active Supervision

    There is no single procedural or substantive standard that the 
Supreme Court has held a State must adopt in order to meet the active 
supervision standard. Satisfying the Supreme Court's general standard 
for active supervision, described above, is and will remain the 
ultimate test for that element of the state action defense.
    Nevertheless, in light of the foregoing principles, the Commission 
in this Analysis identifies the specific elements of an active 
supervision regime that it will consider in determining whether the 
active supervision prong of state action is met in future cases (as 
well as in any future action brought by Respondent to modify the terms 
of this proposed Order). They are three: (1) The development of an 
adequate factual record, including notice and opportunity to be heard; 
(2) a written decision on the merits; and (3) a specific assessment--
both qualitative and quantitative--of how the private action comports 
with the substantive standards established by the state legislature. 
All three elements further the central purpose of the active 
supervision prong by ensuring that responsibility for the private 
conduct is fairly attributed to the State. Each will be discussed 
below.
A. Development of an Adequate Factual Record, Including Notice and 
Opportunity to Be Heard
    To meet the test for active state supervision, in this case 
Respondent would need to show that the State had in place an 
administrative body charged with the necessary review of filed tariffs 
and capable of developing an adequate factual record to do so.\15\ In 
Ticor, the Court quoted language from earlier lower court cases setting 
out a list of organizational and procedural characteristics relevant as 
the ``beginning point'' of an effective state program:
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    \15\ At the time of any request for a modification, Respondent 
will be required to produce evidence of what the state reviewing 
agency is likely to do in response to collective rate-making. We 
recognize that this involves some prediction and uncertainty, 
particularly when the Respondent requests an order modification on 
the basis of a state review program that might be authorized but not 
yet operating, as the Respondent will still be under order. In such 
cases it may be appropriate for the Respondent to show what the 
state program is designed, directed, or organized to do. If a 
particular state agency is already conducting reviews in some 
related area, evidence of its approach to these tasks will be 
particularly relevant.

    [T]he state's program is in place, is staffed and funded, grants 
to the state officials ample power and the duty to regulate pursuant 
to declared standards of state policy, is enforceable in the state's 
courts, and demonstrates some basic level of activity directed 
towards seeing that the private actors carry out the state's policy 
and not simply their own policy * * * \16\
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    \16\ Ticor, 504 U.S. at 637 (citations omitted).
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    Moreover, that body would need to be capable of compiling, and 
actually compile, an adequate factual record to assess the nature 
and impact of the private conduct in question. The precise factual 
record that would be required would depend on the substantive norm 
that the State has provided; the critical question is whether the 
record has sufficient facts for the reviewing body sensibly to 
determine that the State's substantive regulatory requirements have 
been achieved. In the typical case in which the State has 
articulated a criterion of consumer impact, obtaining reliable, 
timely, and complete economic data would be central to the 
regulatory board's ability to determine if the State's chosen 
criterion has been satisfied.\17\ Timeliness in particular is an 
ongoing concern; if the private conduct is to remain in place for an 
extended period of time, then periodic state reviews of that private 
conduct using current economic data are important to ensure that the 
restraint remains that of the State, and not of the private actors.
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    \17\ As the Ticor Court held, ``state officials [must] have 
undertaken the necessary steps to determine the specifics of the 
price-fixing or ratesetting scheme.'' Id. at 638.
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    Additionally, in assembling an adequate factual record, the 
procedural value of notice and opportunity to comment is well 
established. These procedural elements, which have evolved in 
various contexts through common law, through state and federal 
constitutional law, and through Administrative Procedure Act 
rulemakings,\18\ are powerful engines for ensuring that relevant 
facts--especially those facts that might tend to contradict the 
proponent's contentions--are brought to the state decision-maker's 
attention.
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    \18\ The Administrative Procedure Act defines a rule, in part, 
as ``the whole or a part of an agency statement of general or 
particular applicability and future effect designed to implement, 
interpret, or prescribe law or policy.'' 5 U.S.C. 551(4). Actions 
``concerned with the approval of ``tariffs'' or rate schedules filed 
by public utilities and common carriers'' are typical examples of 
rulemaking proceedings. E. Gellhorn & R. Levin, Administrative Law & 
Process 300 (1997).
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B. A Written Decision

    A second important element the Commission will look to in 
determining whether there has been active supervision is whether the 
state board renders its decision in writing. Though not essential, 
the existence of a written decision is normally the clearest 
indication that the board (1) genuinely has assessed whether the 
private conduct satisfies the legislature's stated

[[Page 47571]]

standards and (2) has directly taken responsibility for that 
determination. Through a written decision, whether rejecting or (the 
more critical context) approving particular private conduct that 
would otherwise violate the federal antitrust laws, the state board 
would provide analysis and reasoning, and supporting evidence, that 
the private conduct furthers the legislature's objectives.\19\
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    \19\ A record preserved by other means, such as audio or video 
recording technology, might also suffice, provided that it 
demonstrated that the board had (1) genuinely assessed the private 
conduct and (2) taken direct responsibility. Such an audio or video 
recording, however, will be an adequate substitute for a written 
opinion only when it provides a sufficiently transparent and 
decipherable view of the decision-making proceeding to facilitate 
meaningful public review and comment.
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C. Qualitative and Quantitative Compliance with State Policy Objectives

    In determining active supervision, the substance of the State's 
decision is critical. Its fundamental purpose must be to determine 
that the private conduct meets the state legislature's stated 
criteria. Federal antitrust law does not seek to impose federal 
substantive standards on state decision-making, but it does require 
that the States--in displacing federal law--meet their own stated 
standards. As the Ticor Court explained:

    Our decisions make clear that the purpose of the active 
supervision inquiry is not to determine whether the State has met 
some normative standard, such as efficiency, in its regulatory 
practices. Its purpose is to determine whether the State has 
exercised sufficient independent judgment and control so that the 
details of the rates or prices have been established as a product of 
deliberate state intervention, not simply by agreement among private 
parties. Much as in causation inquiries, the analysis asks whether 
the State has played a substantial role in determining the specifics 
of the economic policy. The question is not how well state 
regulation works but whether the anticompetitive scheme is the 
State's own.\20\

    \20\ Ticor, 504 U.S. at 634-35.
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    Thus, a decision by a state board that assesses both qualitatively 
and quantitatively whether the ``details of the rates or prices'' 
satisfy the state criteria ensures that it is the State, and not the 
private parties, that determines the substantive policy. There should 
be evidence of the steps the State took in analyzing the rates filed 
and the criteria it used in evaluating those rates. There should also 
be evidence showing whether the State independently verified the 
accuracy of financial data submitted and whether it relied on accurate 
and representative samples of data. There should be evidence that the 
State has a thorough understanding of the consequences of the private 
parties' proposed action. Tariffs, for instance, can be complex, and 
there should be evidence that the State not only has analyzed the 
actual rates charged but also has analyzed the complex rules that may 
directly or indirectly impact the rates contained in the tariff.
    If the State has chosen to include in its statute a requirement 
that the regulatory body evaluate the impact of particular conduct on 
``competition,'' ``consumer welfare,'' or some similar criterion, 
then--to meet the standard for active supervision--there should be 
evidence that the State has closely and carefully examined the likely 
impact of the conduct on consumers. Because the central purpose of the 
federal antitrust laws is also to protect competition and consumer 
welfare,\21\ conduct that would run counter to those federal laws 
should not be lightly assumed to be consistent with parallel state 
goals. Especially when, as here, the underlying private conduct alleged 
is price fixing--which, as the Ticor Court noted, is possibly the most 
``pernicious'' antitrust offense \22\--a careful consideration of the 
specific monetary impact on consumers is critical to any assessment of 
an overall impact on consumer welfare. To the maximum extent 
practicable, that consideration should include an express quantitative 
assessment, based on reliable economic data, of the specific likely 
impact upon consumers.
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    \21\ Indeed, consideration of consumer impact is at the heart of 
``[a] national policy'' that preserves ``the free market and * * * a 
system of free enterprise without price fixing or cartels.'' Id. at 
632.
    \22\ Id. at 639 (``No antitrust offense is more pernicious than 
price fixing.'').
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    It bears emphasizing that States need not choose to enact criteria 
such as promoting ``competition'' or ``consumer welfare''--the central 
end of federal antitrust law. A State could instead enact some other 
criterion. Then, the State's decision would need to assess whether that 
objective had been met.
    On the other hand, if a State does not disavow (either expressly or 
through the promulgation of wholly contrary regulatory criteria) that 
consumer welfare is state regulatory policy, it must address consumer 
welfare in its regulatory analysis. In claiming the state action 
defense, a respondent would need to demonstrate that the state board, 
in evaluating arguably anticompetitive conduct, had carefully 
considered and expressly quantified the likely impact of that conduct 
on consumers as a central element of deciding whether to approve that 
conduct.\23\
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    \23\ This requirement is based on the principle that the 
national policy favoring competition ``is an essential part of the 
economic and legal system within which the separate States 
administer their own laws.'' Id. at 632.
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    In the present case, Iowa has chosen to give consideration to, 
among other state interests, the interests of consumers. A state 
statute prohibits movers from charging ``more for the transportation of 
persons or property than a fair and just rate or charge.'' \24\ Thus, 
to establish active supervision, Respondent would be obligated to show 
that the State, prior to approving the rates at issue, performed an 
analysis and quantification of whether the rates to consumers would be 
higher than a ``fair and just rate.''
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    \24\ Iowa Code section 325D.13.
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VI. Opportunity for Public Comment

    The standards of active supervision remain those laid out by the 
Supreme Court in Midcal and its progeny. Those standards have been 
explained in detail above to further illustrate how they would apply 
should Respondent seek to modify this proposed Order. Applying these 
standards, the Commission believes, will further the principles of 
federalism and accountability enunciated by the Supreme Court, will 
help clarify for States and private parties the reach of federal 
antitrust law, and will ultimately redound to the benefit of consumers.
    The proposed Order has been placed on the public record for 30 days 
in order to receive comments from interested persons. Comments received 
during this period will become part of the public record. After 30 
days, the Commission will again review the Agreement and comments 
received, and will decide whether it should withdraw from the Agreement 
or make final the Order contained in the Agreement.
    By accepting the proposed Order subject to final approval, the 
Commission anticipates that the competitive issues described in the 
proposed Complaint will be resolved. The purpose of this analysis is to 
invite and facilitate public comment concerning the proposed Order. It 
is not intended to constitute an official interpretation of the 
Agreement and proposed Order or to modify their terms in any way.

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 03-20370 Filed 8-8-03; 8:45 am]
BILLING CODE 6750-01-P