Tuesday, January 19, 2016

CP-NS: Government advocacy is protected speech

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CP-NS: Government advocacy is protected speech

News item: Canadian Pacific (CP) is pursuing a hostile takeover of Norfolk Southern (NS). CP is asking the U.S. Justice Department to investigate whether NS and other U.S.-based major railroads—some of which oppose the takeover—are unlawfully conspiring for “the primary purpose of restraining trade.” CP says “fear of competition does not justify the collective action of competitors.” Yet the Supreme Court long ago ruled that “joint efforts to influence public officials, such as railroad regulators, do not violate the antitrust laws even though intended to eliminate competition.”

Let us begin by returning to 1954, when Marilyn Monroe was wed to the Great DiMaggio; Al Perlman became president of the New York Central Railroad; and railroads, even then, were strategizing against longer and heavier trucks poaching railroad traffic. Yep, special interest lobbying, arguably out of fear of competition, with railroads successfully defending their actions as permissible governmental advocacy.

It was 62 years ago when a then-subsidiary-assemblage of the Association of American Railroads, the Eastern Railroads’ Presidents’ Conference, hired the New York public relations firm of Carl Byoir and Associates to design and execute a grass-roots advertising and lobbying campaign to convince lawmakers to increase user charges imposed on heavy trucks so as to better match cost responsibility with pavement damage.

In response, the Pennsylvania Motor Truck Association and 37 Pennsylvania truckers filed suit in federal court against the Byoir agency, the Eastern Railroad Presidents’ Conference and 31 railroads, alleging a conspiracy in restraint of trade. Among the allegations was that the railroads had persuaded the governor of Pennsylvania to veto a bill that would have increased maximum weight limits for trucks using Pennsylvania highways.

In a scathing 200-page opinion, a federal district court found the defendant Byoir agency and railroads guilty of conspiring to “injure the truckers in their competitive position in the long-haul freight industry in the Northeastern United States.” The court rejected the defendants’ contention that the activities were directed solely to obtain legislation and, hence, were within free speech guarantees.

Ruled the federal district court:

“[It was the intention of the defendant railroads] to hurt the truckers in every way possible even though they had secured no legislation; it was their purpose to restrict the activities of the truckers in the long-haul industry to the greatest possible extent ...

“[To accomplish this, railroads would] seek out or create ‘independent’ organizations [front groups, such as Garden Clubs of New Jersey against Big Trucks] favorable to the railroads’ point of view and opposed to the truckers; use these groups to focus attention upon the trucks as destroyers of the highways ... and interest writers of important magazine articles [to attack] the truckers.”

The federal district court granted injunctive relief and assessed the defendants hundreds of thousands of dollars in damages payable to the Pennsylvania Motor Truck Association. As for the 37 individual trucking firms that were among the plaintiffs, the court ordered them paid six cents each in damages, which was increased by three-fold to nine cents under the treble damages remedy of the antitrust laws.

Had the decision held, it is quite probable that lobbying activities might be quite different today.

But the decision did not stand. The Supreme Court ruled unanimously in 1961 that antitrust law should not be construed to deprive citizens of their right to petition government.

Ruled the Court:

“In a representative democracy such as this, these branches of government act on behalf of the people and, to a very large extent, the whole concept of representation depends upon the ability of the people to make their wishes known to their representatives.

“To hold that the government retains the power to act in this representative capacity and yet hold, at the same time, that the people cannot freely inform the government of their wishes, would impute to the Sherman Act a purpose to regulate not business activities, but political activity, a purpose which would have no basis whatever in the legislative history of that act.

“It is neither unusual nor illegal for people to seek action on laws in the hope that they may bring about an advantage to themselves and a disadvantage to their competitors. The right to petition is one of the freedoms protected by the Bill of Rights, and we cannot, of course, lightly impute to Congress an intent to invade these freedoms.”

That 1961 decision (Eastern Railroad Presidents’ Conference v. Noerr Motor Freight, 365 U.S. 127), established that bona fide joint activities of competitors to influence public officials do not violate antitrust laws—that the Sherman Act was not intended to embrace political action, the right of free association, or the right to petition government for redress of grievances.

This decision was expanded in a second Supreme Court case in 1965 (United Mine Workers v. Pennington, 381 U.S. 657) to embrace bona fide joint activity aimed at public officials and intended to eliminate competition. Ruled the Court once again: “Joint efforts to influence public officials do not violate the antitrust laws even though intended to eliminate competition.”

These judicial edicts have come to be known as the Noerr-Pennington doctrine. CP says the Noerr-Pennington doctrine does not apply to this situation.

The Supreme Court did subsequently hold in 1972 that antitrust liability may attach, but only if a group’s activities prove to be a sham whose intent is to bar competitors from meaningful access to administrative agencies (California Motor Transport v. Trucking Unlimited, 404 U.S. 508).

Frank N. Wilner, past president of the Association of Transportation Law Professionals, is author of six books, including, Amtrak: Past, Present, Future; Understanding the Railway Labor Act; and, Railroad Mergers: History, Analysis, Insight. He earned undergraduate and graduate degrees in economics and labor relations from Virginia Tech. He has been assistant vice president, policy, for the Association of American Railroads; a White House appointed chief of staff at the Surface Transportation Board; and director of public relations for the United Transportation Union.
Frank N. Wilner, Contributing Editor

Frank N. Wilner is author of six books, including, Amtrak: Past, Present, Future; Understanding the Railway Labor Act; and, Railroad Mergers: History, Analysis, Insight. He earned undergraduate and graduate degrees in economics and labor relations from Virginia Tech. He has been assistant vice president, policy, for the Association of American Railroads; a White House appointed chief of staff at the Surface Transportation Board; and director of public relations for the United Transportation Union. He is a past president of the Association of Transportation Law Professionals. Wilner drafted the railroad section of the Heritage Foundation’s Mandate for Change (Volumes I and II), which were policy blueprints for the two Reagan Administrations; and was a guest columnist for the Cato Institute’s Regulation magazine.

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