Cantor v. Detroit Edison Company – Oral Argument – January 14, 1976

Media for Cantor v. Detroit Edison Company

Audio Transcription for Opinion Announcement – July 06, 1976 in Cantor v. Detroit Edison Company

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Warren E. Burger:

We will hear arguments next in Laurence Cantor against the Detroit Edison Company.

Mr. Weinstein, you may proceed when you are ready.

Burton I. Weinstein:

Mr. Chief Justice and may it please the Court.

This case is here on a writ of certiorari, granted by this Court on October 6, 1975, from the US Court of Appeals for the Six Circuit.

This is a private, treble damage action, seeking an injunction by Laurence Cantor.

Mr. Cantor is a retail druggist in the Detroit area, who sells light bulbs or lamps, the two terms can be used interchangeably, both through the briefs and argument here in competition with Detroit Edison.

Potter Stewart:

When we read and hear about lamps, we are talking actually about light bulbs?

Burton I. Weinstein:

That is correct.

The technical term for light bulbs is lamps and they have been use interchangeably —

Potter Stewart:

Lamps have other meaning, you know?

Burton I. Weinstein:

It is not a floor lamp, Your Honor, no.

Edison is an investor owned private electric utility.

It serves a large area of South Eastern Michigan and secures its monopoly as an electric utility via a franchise granted to it by the municipalities in which it serves.

The gist of this action is that Edison via its monopoly power has unlawfully extended this monopoly by means of an illegal tie-in, that is to say every residential customer of Detroit Edison must, when he purchases electrical energy, pay a price included and charged for electrical service to Detroit Edison for lamps or light bulbs.

It does not make a difference —

Harry A. Blackmun:

It does not have the choice of not accepting not additional service?

Burton I. Weinstein:

He does not have that choice at all.

Harry A. Blackmun:

He has to take it?

Burton I. Weinstein:

No, that is — the fact that makes it a tie-in, in fact, that is different than commercial customers who do not have that program at all.

The Edison is unique as a matter of fact Mr. Justice Blackmun, in the country, they are the only Electric Utility Company that continues to have this program in its present format.

Edison’s program —

Warren E. Burger:

It has been for great many years, has it not, in most utilities?

Burton I. Weinstein:

Yes, Your Honor.

In fact Thomas Edison in 1886 helped device the program before regulation even begin and the —

Warren E. Burger:

But it is not been used in recent years very widely, has it?

Burton I. Weinstein:

No, Your Honor.

In fact, in the 30’s, many regulatory agencies, many Courts including the Supreme Court of the state of Illinois in the Consumer Stores case said that this was a monopolistic practice, it was unreasonable.

Wisconsin did this and this is one of the major contentions that Detroit Edison is the only one doing this now, after everyone else is decided is either unreasonable or monopolistic and if people do not take advantage of the program and they subsidize others.

What really happens here and you have to know physically the facts, a customer of Edison walks in with some burned out lamps in a shopping bag and he goes over to one of the distribution centers where these bulbs are given to them.

There is a list of bulbs called “approved” bulbs and I like to use quotes are on the word approved because the only approval that exists here for this list of bulbs is Detroit Edison’s list of bulbs which they have changed from time to time.

Burton I. Weinstein:

He walks in with these bulbs, he picks up a few bulbs that he needs and hands in the burned out lamps.

William J. Brennan, Jr.:

I gather the manufacturer is not quite (Inaudible)?

Burton I. Weinstein:

No, Your Honor.

Edison makes a point to the fact that they are able to purchase great quantities of bulbs because they can (a) deal direct with the manufacturer’s large quantity discounts and there is a vice in that, Your Honor, because within the very service centers, they sell regular light bulbs and if you look at page 276 of the appendix, this is a point of purchase, retail advertisement and it shows, this is probably stuck in a bin in their stores and it says these lamps available for free exchange —

(Inaudible)

William J. Brennan, Jr.:

I am sorry 275, excuse me.

Potter Stewart:

275A?

Burton I. Weinstein:

Yes, Your Honor.

These lamps are available for free exchange, then it lists an entire new list of bulbs that are not part of the program.

Edison sells these bulbs at a regular price and you can assume that if they are able to get such a great deal from the manufacturers because they buy a such large quantities of this bulbs that the bulbs that are sold at the regular price, they make a much greater profit on than any of other bulb seller in Detroit Edison.

The program is carried on in 35 distribution centers within the service area.

There are 50 agents selected by Edison at their own whim and caprice throughout the service area, who also are able to give these bulbs away and they call it a free light bulb program.

The fact of the matter, it is not free, the fact to the matter it is not an exchange.

The program is highly promoted in Detroit.

Detroit Edison is the best loved utility in the country.

They have got this great free program and if the customers knew of what the program was really about, I would begin to wonder myself whether they would still love Detroit Edison.

Edison it self justifies this program by keeping the sockets filled.

They want the lamps are lights to be used.

They also — this also brings them increased revenue, the more the lights are used.

If your light burns out, you do not bother about getting in until you got over to the store buy some, but if you got a whole supply of bulbs in your house, you just screw another bulb in the place, it does not cost you anything supposedly, you have got more electricity, more light.

Today is —

Warren E. Burger:

I think it shows — the utility shows that it was passing on to the customer, the benefit or substantial part of the benefit, if it is bulk sale purchase advantage, they might deserve it to be well of, would you not say?

Burton I. Weinstein:

Not necessarily, Your Honor, because especially when you take in to consideration that these are longer life bulbs and now that is a great PR term, longer life bulbs.

Harry A. Blackmun:

It is this I want to know about, these bulbs last longer than the ones you and I might buy from Mr. Cantor?

Burton I. Weinstein:

Yes, they do last longer, but they are more in efficient.

Edison in its brief, I believe it is on page 7, admits that these bulbs are 8% less efficient because they are longer life and they sort of, at last part of their life, they keep on giving you less electricity. So if you and this really an insidious device.

If you want to read a book and you need a 60 watt bulb read that book and if it is in the last hundred hours of the longer life bulb, you might need two of those bulbs.

So you got more electricity going.

You are burning up more electricity and you are increasing Detroit Edison’s revenues.

Potter Stewart:

Is there any other issue in this case besides the Parker against Brown issue?

Burton I. Weinstein:

I do not believe there is any other issue in this case whatsoever.

The customer satisfaction issue has been raised here for the first time.

I do not believe it is an issue because in the Trial Court, a stipulation was entered into, after Edison filed an answer and there was a lot of discovery.

We stipulated that the only issue for summary judgment would be whether or not this program received justification to be shielded or exempt from our Anti-Trust laws because of the doctrine of Parker versus Brown.

And we submit that the Michigan Public Service Commission (MPSC) which is the regulatory agency in Michigan, neither had the authority to approve this program within the doctrine espoused by Parker versus Brown and also if the authority here is granted just for the sake of this argument, we do not believe Edison’s program was regulated in the manner in which to grant them an exemption from our Anti-Trust laws which this Congresses said is the — which this Court said is the Magna Carta of economic freedom in this country.

I would like to go into this Michigan analysis of what Michigan has done with the authority question because that is the best way to analyze whether not there is authority here.

Remember I said that the way to determine — we feel there is two questions.

Did the Michigan Public Service Commission have the authority to regulate and assume for the sake of argument that they did have the authority, did they regulate?

William H. Rehnquist:

You mean did they have the authority to regulate under Michigan state Law?

Burton I. Weinstein:

That is correct, Your Honor.

You see the Michigan Public Service Commission is stringently limited in its authority here.

William H. Rehnquist:

Well, but presumably the Michigan Public Service Company has decided that had that authority, Judge Fiekens who is a Michigan lawyer, sitting on the bench in Detroit, ruled against you in the Sixth Circuit which handles a lot of Michigan cases, likewise ruled against you.

You would not ask this Court to super impose a judgment of Michigan law against them, would you?

Burton I. Weinstein:

Mr. Justice Rehnquist, on the contrary, the Michigan Public Service Commission, in a case we have submitted in a type written brief due to the delay here, in 1937, it is McCray versus Detroit Gas I believe and it is cited in our type written brief, but the cite to it is 24-POR-225.

In that case, the prosecuting attorney for Wayne County in 1937, asked the Michigan regulatory agency there, a successor to the regulatory agency which exists today, they asked them to investigate monopolistic practices and schemes engaged in by Detroit Edison and the Michigan Public Service Commission or at that time it was called “The Michigan Public Utilities Commission,” stated and I am quoting from the order of the MPSC there, “that it is without jurisdiction to investigate the acts, practices, devices and schemes under which the present rates were established in order to consider and report how such evils maybe remedied.”

William H. Rehnquist:

Well, maybe I misunderstood you.

Your point than, is not that the Michigan Public Service Commission did not have the authority to approve Detroit Edison’s plan, but that it has no authority to investigate the monopolistic implications of it?

Burton I. Weinstein:

That is also true.

It is unlike some Federal Statute —

William H. Rehnquist:

You say that is also true, but is your part of your contention that the Michigan Public Service Commission had no authority to approve Detroit Edison’s light bulb plan?

Burton I. Weinstein:

That is exactly right.

In other case that describes this, Your Honor, is the Huron Portland Cement case and in that particular case, Huron Portland Cement asked the Michigan Public Service Commission to force a utility render service to them and as justification for that, they cited and I think it is important to look at the statute, it is in our appendix at page 5, it is Section 460.6 and in 460.6, it appears to be and I say appears to be, a grant of complete power, but then in the Huron Portland Cement case which a Michigan Supreme Court case, the Michigan Supreme Court said, that this is just a mere grant of jurisdiction over utilities in order to determine what the Michigan Public Service Commission can do, what authority it has, you must look to the other statutes.

And the statute that they refer you to for electric utilities in the Huron Portland Cement case is called “the transmission of electricity act” which is also part of our appendix and it is at page 9.

Those two Sections are at the bottom of the appendix and they are 460, now when I say 460, I mean the chapter in which they talk about utilities generally.

552 —

William H. Rehnquist:

Could you summarize at all the contention you are trying to make here?

Burton I. Weinstein:

The contention I am trying to make is that the Michigan Public Service Commission talks about just the meat and potatoes of rates, the cost to the consumer.

They have a two-fold duty.

They have a duty to see that the rate is reasonable.

They have got another duty to see that the investor in the company gets a fair rate of return.

Burton I. Weinstein:

They have nothing further to do.

They talk about conditions of services and those services refer basically to the transmission of this electric service.

In fact, Detroit Edison knows very well what it means by service.

It describes the term service in it is rate book which was attached to the defendant’s response in our motion — in their motion for summary judgment.

And in four different places, they talked about character of service and each time they talk about it, they talk about it as alternating current service, primary high voltage service.

So, they are only talking when they discuss service here, the question of whether or not the rate was fair and that is the cost of electrical service.

Remember, you know it is difficult for me to able to express because the lamp or the light as such seems to be an integral part of this thing that we call light appear, but it really it is another commodity.

It is a product like a refrigerator.

If that is not tied-in to the sale of refrigerators, it would be a more obvious situation here, but we do not have that.

We have a little innocuous thing called the lamp or light bulb.

This light bulb being a product is beyond the jurisdiction of Detroit — of the Michigan Public Service Commission to regulate that.

The constitution in Michigan, I understand this goes back to years ago, when the farmers in the Upper Peninsula were complaining about the setting of range breaks down in lancing and they wanted to retain jurisdiction over the rate making process and the constitution says that the municipalities will reserve to themselves jurisdiction over the streets and alleys and that the Michigan Public Service Commission does not grant the monopoly.

William H. Rehnquist:

So you say then that the Commission was not authorized to approve Detroit Edison’s plan?

Burton I. Weinstein:

Absolutely not —

William H. Rehnquist:

But then it seems, you got these real hurdles to overcome in that you have the district judge is a Michigan lawyer in the sixth circuit, as well as the Public Service Commission saying they did have that power.

You are asking us to super impose our judgment of Michigan law on that?

Burton I. Weinstein:

No, Your Honor, I am asking you to follow the Michigan law.

We feel very strongly that the Michigan Public Service Commission did not do anything in this program because they did not have a job to do.

They knew their job.

This is no attack on the regulatory agency here at all.

Michigan Public Service Commission knew they could regulate light bulbs.

They did not do so and that is a second point of my argument that there is no evidence whatsoever in the record, indicating any regulation by the Michigan Public Service Commission to bring it within the ambit of a shield from the Anti-Trust laws.

If you examine the record and it is extensive here, there are many, many things that they did not regulate.

Now, I admitted to this Court that I am sort of back-dooring the situation.

I have a difficult case before me I admit that because I cannot prove the lack of existence of something.

I can only show you what —

Harry A. Blackmun:

Mr. Weinstein, even if, I gather you arguing that even if you are wrong —

Burton I. Weinstein:

I am sorry, I could not hear you.

Harry A. Blackmun:

You are arguing that even if you are wrong and we have to accept what this Michigan judges have said was the Michigan law and namely that the Commission did have authority to approve this practice, you are nevertheless arguing that this does not construe a state command, are not you?

Burton I. Weinstein:

That is correct, Your Honor.

Harry A. Blackmun:

Why do you not get to that?

Burton I. Weinstein:

The Parker versus Brown case —

Byron R. White:

That is the only here —

Burton I. Weinstein:

That is the only issue —

Byron R. White:

You might as well argue it?

Burton I. Weinstein:

Alright, I have been — I believe that without authority to regulate the program, without an interest in the state, there is no statute in Michigan mentioning approved lamp sales —

William J. Brennan, Jr.:

(Voice Overlap) argument.

Why you do not accept the premise for the purpose of argument that the Commission could approve this practice?

Burton I. Weinstein:

Very well, Your Honor.

For the sake of this argument I will concede that point that they did have authority —

William J. Brennan, Jr.:

You do not have to concede it, but just arguendo —

Burton I. Weinstein:

Okay, assume it arguendo, there is nothing in the evidence to show that they did regulate this program and the only way I can show you, how they did not regulate this program is to show you what they have not regulated and what they — and what Detroit Edison has not chosen to reveal to the Michigan Public Service Commission.

Remember, this is a motion for summary judgment and the fact should be looked at in the best of light to the person opposing that motion for summary judgment.

And the most revealing fact again is that there is no evidence.

If there was evidence of considered judgment in the kind of regulation that would exempt an anti-trust the activity, Detroit Edison would certainly be the first one to bring it to this Court’s attention —

Byron R. White:

Now let us assume for the moment again for the sake of argument that the Public Service Commission did approve, had the power to approve and did approve exactly what the company did.

Now, does it mean that it is exempt for the Anti-Trust laws?

Burton I. Weinstein:

I do not believe so, Your Honor, because there has been no state (Voice Overlap)

Byron R. White:

I thought that you have argued in your brief that if did not make any difference whether it had the power to approve or not?

Burton I. Weinstein:

It does not make any difference.

Byron R. White:

Or whether they actually approved or not?

Burton I. Weinstein:

No, it does not.

Byron R. White:

It did not order the company to do this?

Burton I. Weinstein:

That is correct.

Byron R. White:

The state statute did not order them to do it?

Burton I. Weinstein:

That is exactly correct.

Byron R. White:

Well, why do not you argue that?

Burton I. Weinstein:

Well, I have been trying — I thought I was going to prove —

Byron R. White:

You are running out of time.

Lewis F. Powell, Jr.:

Before you leave that — before you get to that part of your argument –[Laughter]

Lewis F. Powell, Jr.:

May I ask this question?

Assume that the legislature of Mississippi had adapted the statute directing electric utilities in the state to include this service as a part of that service to the public, what would be your response to that sort of legislation be?

Burton I. Weinstein:

If there was that type of legislation by the state legislature, evidencing a state wide interest in the sale of light bulb, it was akin to the state wide interest in agricultural commodities under Parker versus Brown then I would say to you there could be, there would be state action Mr. Justice Powell.

Lewis F. Powell, Jr.:

Suppose the legislation went a bit further and directed the utilities to provide electric refrigerators, electric stoves, electric dishwashers and other designated appliances, would that trouble you any?

Burton I. Weinstein:

They would trouble me because it would be more difficult to foist those types of commodities on the consumer.

Remember the consumer has no choice here.

He has got to take those light bulbs.

A light bulb is a commodity like salt, we all need it.

Lewis F. Powell, Jr.:

But if this case stands on whether not the state has directed something, why do you draw a distinction between lamps and refrigerators?

Burton I. Weinstein:

I do not believe, I understand the question.

Lewis F. Powell, Jr.:

Well, if the issue in this case is whether under Parker, this case before us today must stand on whether or not the state has directed the utility to do this.

If that is an issue, what different would it make whether the state directed that utility provide lamp bulbs or electric refrigerators?

Burton I. Weinstein:

I believe that there are a number of cases that this Court has addressed to itself to a position, both in the Continental Ore case where there is an assertion made by union carbide that their subsidiary was directed to preclude the Continental from the vanadium market and this Court said that, that was not state action because certainly the Canadian government went to prove this thing.

Also in the Schwegmann case there was a situation where in the fair price area, fair traded prices, there was a Louisiana statute that was enacted saying that non-signers shall be bound and this Court by Justice Douglas said that flies in the face of the Anti-Trust laws and I believe that lamps fly in the face of the Anti-Trust laws.

I believe refrigerators most certainly fly in the face of the Anti-Trust laws here as well.

The tie-in contract is so venal, the program itself is so venal in that it is only purpose is to increase the revenues.

Byron R. White:

Would the state law requiring all companies to charge the same prices for milk be exemption in Anti-Trust law?

Burton I. Weinstein:

In late early 30’s in the Nebula case in New York, there was that situation, but in that situation, there was ruinous competition in milk.

Byron R. White:

Well, I know, but it nevertheless is a state policy to have uniform prices in a certain industry.

Now, do you think that the companies following that state law are subject to Anti-Trust laws?

Burton I. Weinstein:

I believe that in my case, since Detroit Edison is the only private utility that does this program, there is no state interest.

Byron R. White:

I know, but I am positing a situation where the state has ordered the companies to charge the same prices.

Here you say the state has never ordered Edison to do this.

Burton I. Weinstein:

I understand the question a little bit better now.

You are talking about prices.

Now, if the state is interested in the rate, we have no quarrel here with the rate that Detroit Edison charges here.

We only have a quarrel with the method by which they tie the lamps into the sale of electricity.

The program has not been regulated.

They have advertised this program as free.

They have never submitted anything to Detroit — to the Michigan Public Service Commission seeking approval.

Burton I. Weinstein:

In 1954, Detroit Edison on its own, again, without going back to the regulatory agency, stopped home delivery.

There has been no regulation of the other bulbs that they sell when I address myself to page 275 of the appendix.

There is nothing here to indicate that the Michigan Public Service Commission investigated the competitive effect, the anti competitive effect of this program.

There is a survey made by an independent company in the appendix at page 290 and that tells you what the program is really all about on page 292 and what they have really tried to do here.

And since they have — we believe that the free and they did not understand the program themselves.

Lamp renewal policy helps raise the wattage on lamps used, thus giving better lighting service to the public and resulting in lighting revenues to the Detroit Edison company, considerably above the average.

Now, this program has a lot of aspects to it to, the longer life aspect to it of the bulbs, also means that revenues of the Detroit Edison go up.

Another aspect of the program and all of these facts which are more fully set out in the facts in our brief have never been subjected to the regulation of the Michigan Public Service Commission.

It similar to — if this was a gas company involved here that the gas utility company says you have to run all your furnaces at 75 degrees, forget about energy conservation, forget about those things, in order to get our gas you got to run it at 75 degrees.

That is the same thing as using these longer life bulbs.

They want to keep the sockets full.

Warren E. Burger:

Mr. Weinstein, the Solicitor General’s time is approaching.

Burton I. Weinstein:

Thank you, Your Honor.

I would like to reserve that time.

I just want to conclude by saying that there were two questions, I thought I would address myself to in the beginning and those two questions are did this authority — did the Michigan Public Service Commission have the authority to regulate and the answer to that question we believe hardly is no.

Even if it did have authority, it did not do so and without authority, there was no compulsion by the state.

There was no acting by the state.

This entire program was begun, created and initiated by Detroit Edison.

They have done this by themselves and they should have to suffer for the risks involved in doing this.

They certainly did not have their heads in the sands in the 1930’s when other companies knew that this program was unreasonable and monopolistic, thank you.

I have one request Your Honor.

Due to the fact that we received the two briefs from the amicus on January 5th, we would like to have the leave of Court to file a response to the amicus briefs.

Warren E. Burger:

You may within — how soon can you do it, a week?

Burton I. Weinstein:

A week I think would be fine.

Potter Stewart:

You are ahead of me, I have not received them yet, January 5th?

Burton I. Weinstein:

Yes, Your Honor.

Mr. Solicitor General.

Robert H. Bork:

Mr. Chief Justice and may it please the Court.

The United states is here as amicus curiae in support of the petitioner because any rule announced in this case will heavily affect the government’s enforcement policy.

This relatively new field of Anti-Trust enforcement and it is that way because there has been modern proliferation of regulatory agencies, licensing agencies and so forth at the state and local levels which offer ever increasing opportunity for quite sophisticated businesses to get Anti-competitive policies immunized in some way by regulation or appear to be immunized in some way by the regulation.

Robert H. Bork:

And we think it is quite important to the Federal Anti-Trust policy that any immunity that it is granted be one that arises because there is a deliberate and affirmative regulatory policy of a state to command the activity which is questioned.

And we think here that if the position or the doctrine espoused by Detroit Edison becomes the law, then the immunity of Parker against Brown will be expanded and will in fact shield anti competitive conduct that no state particularly wants and certainly that no state requires.

Now, I should make it clear that I express no opinion on the legality of the underlying conduct here.

I do not know whether this is an illegal tie-in or not.

I do not think the record permits us to tell.

There is much play on both sides, by the petitioner and by the respondent, about whether or not this program is good for consumers, I frankly do not know and I do not think the question is before this Court at this time and so I intend not to address that.

Further more, I think the Noerr case which appears in the brief frequently is not involved here.

At least it is the government’s position that any company may petition the state for any rule at once.

We have no objection in any way to any request made by a company of the state.

Potter Stewart:

Or companies can get together to do so under Noerr?

Robert H. Bork:

That is true Justice Stewart.

Potter Stewart:

The Noerr case?

Robert H. Bork:

That is true and we have no objection to anything that Detroit Edison may have asked the state to do or not to do.

That is certainly entirely up to them.

The question here is simply whether a Federal Court may even examine respondent’s practice in the light cast by the Anti-Trust laws and we think the answer to that is yes.

We think the immunity doctrine was derived from Parker against Brown simply does not cover the situation.

The status of the immunity depends upon two questions; one petitioner’s counsel has just discussed in part, which is the question of whether indeed there is a state agency acting with authority to act, the ultra virus question so to speak.

I shall not discuss that.

I should like to discuss the question of whether the conduct here was compelled by any affirmative policy of the state.

I think not.

The record here shows that so far as we can tell on the motion for some summary judgment, the State of Michigan did not compel or direct Detroit Edison to charge for light bulbs in its rates for electricity.

By that I mean that this.

There is no state statute requiring the practice or mentioning the practice.

There exists no order or regulation of the Michigan Public Service Commission that mentions the price.

John Paul Stevens:

Mr. Solicitor General, do you take the position that the defendant could abandon the policy without the approval of the state?

Robert H. Bork:

I think it is quite clear that it could, Mr. Justice Stevens.

They could abandon?

Robert H. Bork:

Could abandon it in one of two ways.

Warren E. Burger:

Do they have to adjust their rates?

Robert H. Bork:

They may have to do that, but I think they would have to go back with a new tariff and they might have to go back with a new tariff with the lower rate because of the decreased cost.

Robert H. Bork:

I am not even sure of that because it is typical in regulation that cost may decrease for some reason and the company does not immediately go in and adjust its rates, as regulatory like there and the —

Warren E. Burger:

But surely it would be jurisdiction on the part of the state Commission to —

Robert H. Bork:

To require lower rates, I think it would be and here I am told indeed that at one time this company had home delivery and the man actually came to your house and installed the light bulbs and when they dropped home delivery from much less expensive form of dispensation of these bulbs, no mention of that fact was made to the Michigan Public Service Commission.

No tariff change was instituted.

So I think they could drop it.

At a the minimum, they could certainly go back and say we have dropped it and we offer you a new tariff without that cost element and I think there is no question —

Potter Stewart:

There is something in a Court with ordinary Public utility and regulation practice, they presumably in due course have to make a new filing, one day at least?

Robert H. Bork:

Well, if they wanted to change a rate, they might (Voice Overlap)

Potter Stewart:

If they no longer offered free light bulbs, I would suppose, they have to make a new filing, but I really do not know what that has to —

Robert H. Bork:

I do not, Mr. Justice Stewart.

But I think it is important here that the Detroit — the Michigan Public Service Commission which regulates across the state has never taken explicit notice of this practice, has never even inquired into it.

This is a motion for summary judgment in which Detroit Edison forced to be compelled and I think it is up to them to show an affirmative policy across the state and so far as we can tell from this record, Detroit Edison has not shown that other public utilities are required to —

Byron R. White:

Mr. Solicitor General, neither Court below decided that Parker against Brown applied here because there was an affirmative policy, did it?

Did it not just say that the approval of the —

Robert H. Bork:

Of the tariff?

Byron R. White:

Of the tariff was enough?

Robert H. Bork:

That is right but I am —

Byron R. White:

Let us assume that we decided that was wrong.

We would not go on and say examine this Michigan Law and decide there was not any affirmative policy, would we?

Robert H. Bork:

No, no, but I am saying that insofar if someone wishes to say that I am compelled or required or directed by state law to do this as it was possible to say in Parker against Brown, one would look at least to some compulsions somewhere in the law.

Byron R. White:

But that was not a standard that the Court of Appeals used or did the District Court either?

Robert H. Bork:

No, I take it that they were using something that closely —

Byron R. White:

They were saying that the approval of the tariff was enough?

Robert H. Bork:

Yes, that is true Mr. Justice White.

I think it is not for this reason that I am —

Byron R. White:

No one want to know — and I take it neither the Courts below had said that the state law requires this, so that there is an affirmative policy —

Robert H. Bork:

No, but that is my point.

I wish to make about that and that is that apparently this Commission will approve tariffs without light bulb programs included.

As far as we know it is never disapprove a tariff because of the light bulb program was not included and it seems to me that the follow from that, that this practice is not in any way required by any agency of the state.

The state’s policy insofar as can be said to have a policy is entirely permissive.

Robert H. Bork:

The initiative about whether or not there is a bulb program, included in the tariff is left to the utilities and they should have and indeed the utility has the power to decide that question.

William H. Rehnquist:

Well, in Parker against Brown the initiative came from the growers too?

Robert H. Bork:

Well, in Parker against Brown Mr. Justice Rehnquist, the state had enacted an elaborate policy, particularly with respect to the pro-rate program.

William H. Rehnquist:

But it had to be initiated by law?

Robert H. Bork:

Had to be triggered, it had to be triggered by some producers who wished it.

However, once they triggered it by going into the state law, that state law became compulsory as to all growers and so forth who did not want the program.

So they were compelled by state law and Criminal Vandalism law.

And what I am saying here is that so for this record shows, the Michigan Public Service Commission says in effect, you tell us which way you would rather go, light bulb program or no light bulb program, and we will compel you either way you wish to.

That is not a state affirmative policy.

In fact, there is no even showing of compulsion.

They are just included in the rate.

That is why this case reminds when I think of Schwegmann rather than Parker against Brown.

At most here, you have a state policy and I do not think it is policy, I think it is inadvertence, at most here, you have a state policy which is, if you elect to have a light bulb program, alright.

That is what the state said about the fair trade acts and that was not sufficient state action in Schwegmann to stand up against the Sherman Act attack.

Potter Stewart:

You know, like the citation of Schwegmann.

Robert H. Bork:

It is a privilege —

Potter Stewart:

I do not think it is in the brief.

Robert H. Bork:

It is in the brief, yes.

Potter Stewart:

Is it, is it —

Robert H. Bork:

It is not in our brief sir, but it is 341 U.S.

384.

Potter Stewart:

Thank you.

Robert H. Bork:

In fact, I think there is actually less state action here than there was in Schwegmann because at least there the state had an explicit affirmative policy of letting the private party elect whether or not to use fair trade.

Here so far as we can tell, we are nothing more than state inadvertence or indifference or oversight.

There is no explicit policy by letting them and be like this.

Now, I would refer to the Goldfarb case 421 U.S. at page 790 where this Court explains why the Supreme Court of Virginia in that case at least mentioned advised free schedules, but that was all and that was held not to be state action which would immunize the agreed upon fees in that case.

Here there is no mention of this program in any state policy.

Harry A. Blackmun:

Mr. Solicitor General, has the Department of Justice ever argued Federal preemption in this area?

Robert H. Bork:

I think, Federal preemption, we may have argued in some cases Mr. Justice Blackmun, but we are not claiming Federal preemption here.

Harry A. Blackmun:

I know you are not and I wondered why in a way?

Robert H. Bork:

Well, because I think we do feel that Parker against Brown is rightly decided.

We do feel the Sherman Act was not intended to take away the power to regulate industry from states.

So we have no desire argue preemption in that sense.

I would refer this Court also to the opinion in Jackson against Metropolitan Edison with which there has been much play in this case and it seems to me that, that case is dispositive in favor of a lack of immunity here.

Now, I know that Jackson against Metropolitan Edison involved the Fourteenth Amendment, but I think if there was no state action under the Fourteenth Amendment in that case there can be no state action for Parker purposes in this case.

And I would — I think at the minimum, the state action concept under the Fourteenth Amendment is as broad as the state action concept for Parker purposes and indeed I would take one step further and say that is probably broader and you can see that by transposing the facts of the Schwegmann case.

There the Court said that a private party might force retailers to maintain prices and provided the procedures if they elected.

If one, in a parallel fashion, supposed the statute in which a state said a private party may force retailers to keep off a racial group from the premises of the retailer and provided procedures, I have no doubt that that would be state action for purposes of the Fourteenth Amendment.

So that I think the Fourteenth Amendment state action concept is broader than the state action concept here.

If that is true or if it is coterminous than Jackson against Metropolitan Edison, I think is dispositive of this case in favor of the petitioner.

Potter Stewart:

One might not want to push the analogy too close.

It is not much more than the analogy in other words?

Robert H. Bork:

Jackson?

Potter Stewart:

Yes.

Robert H. Bork:

Well, I think it is —

Potter Stewart:

Like the question is a different question?

Robert H. Bork:

It is a different question, but as I ask myself and how does the state action concept differ?

I think it essentially involves in affirmative state policy or involvement under the Fourteenth Amendment.

It involves affirmative state policy under Parker, but I think it is somewhat perhaps — I do not think it is necessary for this Court to decide which is broader, but it seems to me that it can hardly be argued plausibly that the anti-trust concept of state action is broader than the Fourteenth Amendment concept and unless that is true than I think Jackson against Metropolitan Edison really disposes of this case by analogy if you wish to have said that way.

Byron R. White:

A fortiori it might not be the other one?

Robert H. Bork:

I do not think of — I do not see I could not in any other way.

I do not —

William H. Rehnquist:

let us assume that Parker against Brown is the limit of the governmental immunity?

Robert H. Bork:

Well, if you go further than that Mr. Justice Rehnquist and say that Parker against Brown requires or allows not only affirmative state policy, but any time the state gets into the area and involves itself heavily then you have done two things.

One is you said the state has a power of implied repealer over the Federal Anti-Trust laws.

I do not think that is correct and the other thing is that you are creating these elaborate administrative mechanisms into which any party can insert his program in quiet sanctuary even though the state was not thinking about it.

Byron R. White:

And you have 50 of them.

Robert H. Bork:

And you have 50 of them, not to mention, localities and this is becoming a serious anti-trust problem and I think applying the rule as we ask does two things.

It forwards Federal Anti-Trust policy.

It also to begins to put some pressure on agencies to focus and to make visible decisions, visible to the electric, to elected officials about what it is they wish to require a state policy.

Robert H. Bork:

I think it is desirable at both ends.

John Paul Stevens:

Mr. Solicitor General, may I just ask just one question on your point that the Jackson case would be dispositive.

I suppose one could distinguish one thought, this was a command and the other was merely a permission, that it is different state programs?

Robert H. Bork:

If one thought this were command, I think that is quite true Mr. Justice Stevens.

If this is a command, however, then I fear that almost any regulatory —

John Paul Stevens:

I understand.

Robert H. Bork:

— touching of the subject will turn out to be a command.

Warren E. Burger:

Mr. Reycraft you may begin whenever you are ready.

George D. Reycraft:

Mr. Chief Justice and may it please the Court.

With the exception of the treble damages which the petitioner seeks here, all the relief that he seeks otherwise is available to him from the Michigan Public Service Commission.

He conceded during his oral argue to be for Judge Fiekens that it may will be theoretically, at least the Michigan Public Service Commission can tell Detroit Edison to avoid including the cost of light bulbs in its rate pay, based for purposes of determining its rates.

When Judge Fiekens asked him whether they have tried to invoke the procedures at Michigan Public Service Commission, he admitted that it was a crucial question as to whether or not the lamp exchange program came within the jurisdiction, but he conceded that he have not approached the Commission at all.

It seems to us that Judge Fiekens was reasonably — was correct in his opinion when he said that certainly the anti-trust court should not step in when the Commission has not even and approached by the plaintiff.

Now, the petitioner and the Department of Justice both seem to us to be operating under what we believe are misconceptions of both fact and law and the way the regulatory process works in the State of Michigan.

The Commission’s most recent order to Detroit Edison, involving the lamp supply program is in case (U) 45 7D which is dated February 3, 1975.

The opinion and or of the Commission begins with the language, “therefore it is ordered that,” it goes on to say in sub-paragraph D, “in conformance with Commission Order number D3096 filing procedures, the Detroit Edison Company shall promptly file with the Commission, rate schedules substantially same as those attached hereto as exhibit A.”

The exhibit A which is referred to in the order, includes the lamp supply program.

It contains the following language.

Incandescent lamps will be furnished without extra charge (1) to residences connected for the first time to the company’s lines and such quantities maybe needed for all permanent fixtures, (2) as replacements of approved burned out lamps in proportion to the use of energy for lighting purposes under the applicable rate.

The Commission then went on to say “the Commission specifically reserves jurisdiction of the matters herein contained and the authority to issue to such further order or orders as the facts and circumstances require.”

Byron R. White:

Mr. Solicitor General, your argument is that they were ordered and required to do it by the state?

George D. Reycraft:

Yes sir, that is correct.

Byron R. White:

Do you think that that is the standard that the Parker against Brown —

George D. Reycraft:

Parker v. Brown says that when am agency of the state issues a command to a private entity within the scope of its authority that the conduct there follows is (Voice Overlap)

Byron R. White:

And do you think the rules should be broader than that and cover just mere authorization?

George D. Reycraft:

I do not, Your Honor.

I do not think that is necessary for us at least to go that far in this case.

Byron R. White:

Alright, but then now — so you agree that the test is what the Solicitor General said it is?

George D. Reycraft:

The test, I would rather say that the test is what Parker v. Brown said it is —

Byron R. White:

Exactly, but you think he read Parker against Brown right or not?

George D. Reycraft:

As I understood what he said, I think that he missed — that he over read Parker v. Brown in that, he appears to be imposing a broader test upon what the scope of the legislative command —

Byron R. White:

But mere authorization would not do it?

George D. Reycraft:

Mere authorization, we are not arguing that mere authorization would do it in this case.

Byron R. White:

Now, what standard do you think the Court of Appeals acted on?

George D. Reycraft:

The Court Of Appeals adapted Judge Fiekens’ opinion which had before it all of these orders that I am referring to which commanded —

Byron R. White:

Well, that maybe true, but what standard that the Court of Appeals used in affirming the —

George D. Reycraft:

Well, what it said was that the District Court had correctly applied of the principles of Parker v. Brown and thereby affirmed it —

Byron R. White:

Alright.

Did it not refer to authorization or not?

George D. Reycraft:

I believe that did say that it was authorized, but it did refer to Parker v. Brown which of course is narrow within their authorization.

Byron R. White:

Now, how about the District Judge?

George D. Reycraft:

The District Judge, I believe correctly described Parker v. Brown.

I do not — cannot quote it verbatim, but I believe he correctly cited Parker v. Brown.

Byron R. White:

So, you do not and I take it you do not think there is any problem here of either Court below applying the wrong reading of Parker against Brown and saying that mere authorization is enough?

George D. Reycraft:

I do not think so Mr. Justice White, no.

Byron R. White:

Mr. Reycraft because what the District Court said was when a state agency acts affirmatively in approving rates and practices of the utility, there is no anti-trust liability.

Do you think that is correct statement of the law?

George D. Reycraft:

I think acting affirmatively and I would take it that the Court implies that, that is a command of the state and then —

Byron R. White:

That is not what it said, that is not what the Court said?

George D. Reycraft:

It did not say, use the word command, no sir.

William J. Brennan, Jr.:

And it is not what the Court of Appeals said?

It said, including that the affirmative action of the Commission in approving (Inaudible) arrived from distribution of the light bulb and its continuing supervision (Inaudible) brings the challenged practice (Inaudible)

George D. Reycraft:

That is what he said Mr. Justice Brennan, yes.

William J. Brennan, Jr.:

It did not say anything about (Inaudible)

George D. Reycraft:

Well but if the fact —

William J. Brennan, Jr.:

The action, the affirmative action is approved —

George D. Reycraft:

The action, however, which is referred to is in fact a command and all those commands were before the District Court and were in the record which the Court Of Appeals considered.

Warren E. Burger:

Could the company have ordered these rates without further action of the Commission?

George D. Reycraft:

No, it could not Mr. Chief Justice.

It could not have altered its rates.

George D. Reycraft:

It must get the approval of the Commission to increase or decrease it rates.

Warren E. Burger:

Well, then do you say that the rate structure was a command, even though they did not use the word command?

George D. Reycraft:

The rate structure is indeed the command of the state.

Byron R. White:

Was the company required to file the tariff, including the incandescent light bulb?

George D. Reycraft:

No, the company could have filed the tariff which did not include light bulb, but as long as the tariff —

Byron R. White:

It is not ordered to file a tariff as light bulbs (Inaudible)

George D. Reycraft:

It was not ordered to file a tariff, it is conduct is and the analogy is to that in Parker v. Brown where the producer has voluntarily petitioned the advisory pro-rate committee for a particular program.

It was not commanded to file a tariff.

Obviously, it seems to me public utility —

Byron R. White:

Is there some law in Michigan that require the Public Service Commission to (Inaudible)

George D. Reycraft:

The law is 460.6 which is of course is a broad granted jurisdiction to the Public Service Commission to completely regulate Public Utilities within the state, including Electric Lightning Companies and the all the services that they provide with it.

There is of course no specific reference to light bulbs in the statute, but there is reference to electric lighting in it and that is the standard, that is the authority under which the Public Service Commission was operating.

Thurgood Marshall:

Mr. Reycraft, was the Solicitor General correct that years ago they stopped going to the homes and deliver the bulbs and did not change the tariff?

George D. Reycraft:

I am not — I do not know whether that is correct or not Mr. Justice Marshall.

I believe that the practice may have been discontinued at the end of an effective tariff.

In other words, when Detroit Edison went in to file the new tariff, I believe to that particular home delivery service may have been excluded, but that occur back in the 1930’s and I cannot say, I cannot represent to this Court that it was terminated before or only after the new tariff became effective, but that is my belief.

Byron R. White:

(Inaudible) industry, you can fix prices in the industry or you need not to fix prices industry, but if you want to, go ahead just file a piece of paper up here with our Commissioner of Prices and if he says okay, go ahead, is that alright?

George D. Reycraft:

No sir, that is not alright.

That does not provide Anti-Trust immunity within Parker v. Brown.

Byron R. White:

But the — even if the law said that if you want to fix prices in the industry, just file a piece of paper and if you file a piece of paper then you will be ordered to do it.

George D. Reycraft:

Well, I would think that —

Byron R. White:

Then you are under an order, once you have all agreed to this under an order then you are ordered to do it, although you do not have to decide in the first place, the law does not require you to fix prices.

Here is an option that to fix prices or not?

George D. Reycraft:

Well, if it is optional as I understand the Court’s decision Parker v. Brown then the conduct is not excluded from Anti-Trust laws.

I would like to refer to another of decision of the Commission in 1964 where in case number 7091, the Michigan Public Service Commission specifically reviewed the lamp exchange program.

At the time it was unavailable to large commercial customers and Detroit Edison wanted to reduce its cost, so it could reduce its rates and it did go into the Commission and it asked for permission to eliminate the lamp supply program to large commercial customers.

The Public Service Commission did permit that and said that “lamp replacements of approved burnt out incandescent lamps will continue to be furnished under its general service rate which applied to small business” and it also require it to continue to furnish lamps under the exchange program to residential customers.

So not only did they consider the lamp supply program in 1964, but it exercise the discriminatory judgment as to which parts the program would continue and which parts it would be eliminated.

And in 1964, it is said, “it is further ordered that Detroit Edison shall promptly file rate sheets to be effective on service or rendered after December 1, 1964” and that included the residential lamp program.

And at that time they reserved jurisdiction of the matter and the authority issued further orders and the order says maybe required and the order is signed by each of the commissioners and under date of November 12, 1964.

George D. Reycraft:

There are have been 18 orders of the Michigan Public Service Commission and its predecessors to Detroit Edison since 1916.

The Michigan Public Service Commission and its predecessors, well, state regulation of the utilities begin in Michigan in 1909 and till 1916, Detroit Edison has been at all times under an affirmative order to continue the lamp supply program.

Now, the petitioner complains that there has not been any trust type hearing which I understand is the nature what he thinks would be appropriate in the Michigan Public Service Commission.

Well, the reason for that, it seems to be that no one has ever asked for such a hearing.

We do not know of any complaints which have made been made to the Michigan Public Service Commission about the lamp supply program.

I would not say that someone may not have written letter, there may not have been complaints, but we do not know about it.

There has been a case filed in the State Court in Michigan which the petitioner refers to on its brief, it is the Rio (ph) case.

It was filed in 1973 and it seeks an injunction against the continuation of the lamp program.

We have not mentioned it in our brief for which I apologize, but I learned over the recess that the Court of Appeals — that the Circuit Court in Michigan has decided that case and they dismissed it in 1974.

That is an unreported opinion and I did not know about it and I would like permission to furnish a copy to the Court.

It decided the case, dismissed the case on the ground that it lacked jurisdiction of the subject matter because the Michigan Public Service Commission had jurisdiction over the lamp supply program and that the petitioner or the plaintiff in that case had failed to exhaust his administrative remedies before coming into even the State Circuit Court.

We think that these are state law questions that the jurisdiction of the Michigan Public Service Commission should, in the first place, if the petitioner thinks that they do not have jurisdiction, he should argue it to the Commission.

If he disagrees with the conclusion that they reached, he has available appeal procedures to the Circuit Courts in Michigan and if he disagrees the lamp, he can go to the Michigan Supreme Court, but he has not done any those things.

He simply gone into the anti Trust Court and tried to get the Federal Courts to decide what are, I would conceded at least a realistic and a significant questions of state laws as to extent of jurisdiction to the Public Service Commission.

He conceded before —

John Paul Stevens:

Does the Parker against Brown issue which I understand to be the basis of the decision in the District Court turn it all on whether or not the plaintiff has exhausted his state administrative remedies?

George D. Reycraft:

I do not believe that it does Mr. Justice Stevens.

John Paul Stevens:

And really it is not before us, is it not?

George D. Reycraft:

It is not except to the extent that I do not know that jurisdiction was argued in Parker v. Brown, but here petitioner is arguing that the Michigan Public Service Commission did not have jurisdiction to order the lamp supply program in effect that it would be continued.

So when he says that, he is bringing into this case a state law question which I do not know was raised in Parker v. Brown.

So, I think that it is unreasonable to expect that the Michigan Public Service Commission would on its own initiative start an anti Trust type hearing on a light bulb exchange program which has been in effect of Detroit Edison and its predecessors since 1885 and it is been under orders of the Commission since 1916.

I would like to go into the facts a little bit while I know that the Court does not want to get in too much details of the fact.

It seems to me they demonstrate the reasonableness of the Commission continuing to order the Lamp Exchange Program and the reasonableness of it is not initiating nay anti-trust Type hearing before the Michigan Public Service Commission.

John Paul Stevens:

Mr. Reycraft, does the reasonableness of the program relate to whether there is a violation of law, but would it relate to the question whether Parker against Brown applies?

George D. Reycraft:

I think it relates to the question whether the Michigan Public Service Commission’s procedures were adequate and whether it conducted an adequate inquiry into Detroit Edison’s of a lamp exchange program.

For example, the Public Service Commission has had the rate hearings just about every year for the past five years, they had it in 1970, 1971, 1972, 1974 and 1975.

The lamp rate here involves 65 days of hearings and over 7500 page of transcript about lamp —

John Paul Stevens:

About how many of those pages were devoted to the lamp supply program?

George D. Reycraft:

No indeed, there are devoted to all phases of Detroit Edison —

John Paul Stevens:

Were any of those pages devoted to the lamp supply program?

George D. Reycraft:

Yes sir, those pages are included in the appendix to our brief.

They were not — I would not say that they get to the level of an anti-trust trial fortunately, but there is a — there are references to the lamp supply program in that hearing and they are included in the appendix to our brief.

But I think the important point, Mr. Justice Stevens is that these are thorough hearings, the rate hearings which the Public Service Commission conducts.

Their typical practice is to send four or five men into the company for a period of four or five weeks.

They review every cost item and every expense on the company’s books.

They exclude some and include others.

The cost of the lamp supply program is specifically included in an account as it is required to be under the Michigan Law.

The Michigan administrative code requires these costs to be included in customer installation expense which is where they are included.

This is also consistent with the treatment which the Federal Power Commission requires and has required since 1937.

So that there is not any mystery about the fact that there has been a lamp supply program which Detroit Edison has had in effect since 1885.

Now, my friend on the other side has said that the lamp supply program has made Detroit Edison a best loved utility in the country and if that is the result of lamp program which I understood as what he was saying, it seems to me that certainly demonstrates the wide spread use and knowledge of the existence of the lamp supply program.

We had a survey conducted some years ago which indicated that 94% of our customers used the lamp supply program.

We — there are about million and a half house holds in the Detroit Edison’s service area which get service from the Detroit.

Now, if 94% of them used the lamp supply program, it is hardly any secret and we have not kept it a secret and in fact, the exhibit which the petitioner’s counsel referred to in the appendix which shows the availability of the different size of light bulbs, demonstrates that this program is well publicized.

William H. Rehnquist:

Mr. Reycraft, are you arguing that the plaintiff before he can prosecute in the Federal Anti-Trust sued has to exhaust procedures before a state agency?

George D. Reycraft:

That is an alternative ground Mr. Justice Rehnquist and which I think that this case can and it should be disposed of.

Where there is an available state procedure.

I think he should be required to exhaust it.

William H. Rehnquist:

But there is no authority at least from this Court for that proposition, is it?

George D. Reycraft:

No, I would not agree with that.

I think the closest authority is there is the Richie case where the Court referred an anti-trust plaintiff to the commodity exchange authority before the Court decided the anti-trust law.

William H. Rehnquist:

But there you are dealing with two acts of Congress really?

George D. Reycraft:

Yes, Your Honor, that is right.

Byron R. White:

And also you are dealing with an instance where the authority or the agency extended to deciding the kind of an issue that was up in the Anti-Trust Court?

George D. Reycraft:

I Agree.

There was a Federal issue —

Byron R. White:

And here the state proceeding is a rate making proceeding?

George D. Reycraft:

Well, yes.

Byron R. White:

And as you said the hearing certainly did not proceed as though it was a — had any anti-competitive including in it?

George D. Reycraft:

Well, I think my basic point is that the petitioner is arguing that the command which indeed the Michigan Public Service Commission did issue was outside the scope were their authority.

George D. Reycraft:

I mean, the ultra virus, as the Solicitor General referred to it and I think determination of that question is preliminary, is a state question and I think that if the — if that is the basis of his argument that this is anti-trust law.

Byron R. White:

Both Courts below accepted the order as valid, they did not, within the law?

George D. Reycraft:

They did and I think correctly.

I had started to talk about some of the facts to show the reasonableness of the exercise about a Public Service Commission of their jurisdiction.

This include the facts that the cost of the light bulbs were passed through to the consumer without any profit or any mark up on the part of the company, that is required by the Michigan Public Service Commission.

Now, if petitioner argues that part of the customer service offices are part of Detroit Edison’s rate base, and that therefore there maybe some element of those facilities in Detroit’s profits.

The fact is, that these customers service offices perform a wide variety of services and they would have to be continued even if the lamp exchange program was discontinued.

Detroit Edison’s profits are allowed as a percentage of its rate base.

The current percentage allowed is 8.7% and that is not applied in any way to the cost of the light bulbs.

These are costs passed through as a cost of service and are included in the customer’s rate base.

There is 50 of these customers service centers and 35 agents who distribute the bulbs.

Harry A. Blackmun:

That sounds like an argument to me that it does not cost any thing because it is there is anyway?

George D. Reycraft:

Well, we paid in 1972 about 2 million 360 for the offices.

The offices do not cost very much as far to the extent to which they are allocated or devoted to the lamp supply program.

They would have to be there in any event for such things as customers coming in to talk about their bills, whether they have the proper charge, whether some special installation is required for their electric light hook up.

Harry A. Blackmun:

I have heard that kind of argument at home?

George D. Reycraft:

Sir?

Yes, well, in Detroit you could send somebody down to the customer service center and have the argument there.

William H. Rehnquist:

But your rates could be entirely reasonable and that would not be a defense to an anti-trust (Inaudible)

George D. Reycraft:

My argument Mr. Justice Rehnquist is as to the reasonableness of the procedures of the Michigan Public Service Commission.

The petitioner has complained that there was no anti-trust type hearing before the Michigan Public Service Commission and the fact that the program is a program which is beneficial to the public, the fact that it does not return a profit to Detroit Edison, the fact that the cost of the bulbs is far below what the consumer could get the bulbs for on the open market, all explain to my satisfaction at least, why the Michigan Public Service Commission did not hold and extended anti-trust type trial which is what the petitioner seems to be asking here.

In 1972 for example, there are 18 —

John Paul Stevens:

Suppose Mr. Reycraft your analysis of the facts is correct and of course summary judgment, I guess we have to take your opponent’s version, whether it is a dispute, if your analysis is correct, you have demonstrated that giving the customers an option they would still take the free light bulbs?

George D. Reycraft:

That may, will be.

That maybe —

John Paul Stevens:

So that we were really just fighting about whether it should be optional or mandatory?

George D. Reycraft:

Well, I think what were — I am not sure about that.

I think that if the program became optional, I am not sure that Detroit Edison would apply to continue the program and its tariffs and I am not sure whether it became optional.

It would be sufficiently economical.

So —

John Paul Stevens:

Would not there be the same number of people who would take the light bulbs, if it is such a bargain?

George D. Reycraft:

I do not — obviously that is a matter in the future and I do not know.

John Paul Stevens:

If your premises are correct, you would think the conclusion would follow though?

George D. Reycraft:

I think it is very likely true, yes, very likely true.

John Paul Stevens:

May I ask one another procedural question while interrupted you?

Was there a class determination in this case?

George D. Reycraft:

No, Your Honor, there was no motion for a class determination and no class determination has been made and I might say at this point that the petitioner has testified in this case that he sold over I believe it was two or three years period, light bulbs with a retail gross value of about a $135.00.

He also testified that his cost with those bulbs was about $90.00.

His specific price for bulb for a hundred watt bulb was $00.21 and he sold them to $00.32.

So, I literally lost my point.

The average cost of the bulbs for the customers in Detroit area in 1972 was a $1.80 through the Detroit Edison program which of course is included in the rate base.

Another reason why we are able to furnish light bulbs at this cost is because Detroit Edison gets competitive bids from the light bulb manufactures.

There are three principle manufacturers, General Electric Westing House in Sylvania.

Detroit Edison puts together specifications and asks for bids and it buys from the manufacturer which submits the best bid and these savings as I testified are passed on to consumer.

In addition a bulb that it is able to get because it is able to ask for competitive of bids has a longer life than the generally available commercial bulb.

The average bulb — the average life of a hundred watt bulb is 1,350 hours whereas the generally available commercial bulb has only 750 hours of light.

Byron R. White:

Mr. Reycraft, how many utilities are there in Michigan, do you know?

George D. Reycraft:

No, there are at least three in Michigan who do have lamp supply programs, however, and I want to take it —

Byron R. White:

Are there good many others that they do not?

George D. Reycraft:

I do not believe there are many others throughout the country Mr. Justice White.

There have been —

Byron R. White:

I know, but in Michigan are there good many others who do not have the program?

George D. Reycraft:

I think there are at least some who do not have the program, yes sir.

Byron R. White:

And the —

George D. Reycraft:

I can not tell you that —

Byron R. White:

They are free not to have it under Michigan Law?

George D. Reycraft:

Well, they are free not to have it only because their tariff — the tariff is —

Byron R. White:

I know, but they are the ones who decided what kind of a tariff to file?

George D. Reycraft:

Yes, in the first instance of course it is voluntary action on the part of the utility.

Byron R. White:

And the — do you know of any instance where the Commission has ordered a utility to have a lamp program against its will?

George D. Reycraft:

No, I do not.

Byron R. White:

And that the statute does not say so?

George D. Reycraft:

No, the statute does not say that electric utility shall have lamp supply program, no, it does not.

The Michigan Public Service Commission is a agency of course created by the State of Michigan and unlike the Advisory Pro-rate Commission in Parker v. Brown, it does not consist of a group of private self interested persons who are acting in a quasi governmental capacity.

Each of the commissioners is appointed for a term of six years by the governor with the advice and consent of the senate.

They are prohibited from having any pecuniary interest in any regulating utility during the time that they are on the Commission.

They pervasively regulate rates in Michigan.

Utility can increase its rates directly or increase its rate indirectly by reducing service and that would include eliminating a light bulb without specific permission of the Michigan Public Service Commission.

So before raising rates are or reducing service, they need the approval of the Commission.

And as I have said the procedures are extensive, 65 days of hearings in the last rate case and over 7,500 pages of testimony.

This Court most recently considered Parker v. Brown issue in Goldfarb versus Virginia State Bar and repeated the holding that when private conduct is required by the state acting in its capacity as sovereign, the conduct does not subject to the Federal Anti-Trust laws.

They are unlike the Michigan Public Service Commission.

The Virginia State Bar was only a state agency for very limited purposes and certainly it was not under any command from the Virginia State Supreme Court to have fixed minimum prices for attorneys offering their services.

Thurgood Marshall:

Mr. Reycraft, getting back to Michigan, if the Detroit Edison are going to need decide to stop dealing in light bulbs, did so and filed an amended tariff, cutting its rates, is there any question in your mind that it would be approved?

George D. Reycraft:

There is a question in my mind Mr. Justice Marshall, I do not know the answer to the question.

Thurgood Marshall:

Well, what would your question be?

George D. Reycraft:

The question in my mind would be that if the choice is between continuing the lamp supply program at all or continuing on its present basis because of it is more economical in that sense.

I do not know what —

Thurgood Marshall:

I said they would could the rates, they could then decide the rate one way or the other, but that is all they would do, is it not?

George D. Reycraft:

The Michigan Public Service Commission could say to Detroit Edison, we are going to require you —

Thurgood Marshall:

Could they say you must continue to furnish the light bulbs?

George D. Reycraft:

They can say that, yes sir.

Thurgood Marshall:

How?

George D. Reycraft:

They can say —

Thurgood Marshall:

What authority?

George D. Reycraft:

By their general authority in 460.6 —

Thurgood Marshall:

Well, have they ever told anybody in Michigan that they had to do it?

George D. Reycraft:

No sir.

Thurgood Marshall:

So, they have never done it before, why should they do it now?

George D. Reycraft:

Well, let me explain my answer a bit.

George D. Reycraft:

They have —

Thurgood Marshall:

They could have told —

George D. Reycraft:

They have told Detroit Edison Company, 18 consecutive times since 1916 that they must continue the lamp supply program.

Thurgood Marshall:

I thought they said that you may continue.

George D. Reycraft:

No sir, they said you are ordered.

Your give up order —

Thurgood Marshall:

They can say they ordered them to continue the light bulbs —

George D. Reycraft:

I am sorry I did not hear.

Thurgood Marshall:

Wanted them to continue —

George D. Reycraft:

Yes sir —

Thurgood Marshall:

— to give light bulb?

George D. Reycraft:

Yes sir.

Thurgood Marshall:

When did they say that?

George D. Reycraft:

They said it 18 consecutive times —

Thurgood Marshall:

They said ordered?

George D. Reycraft:

Yes, they said you are ordered.

They said that, I have quoted the language a little earlier, they said, “it is hereby ordered that the Detroit Edison Company shall promptly file rate sheets substantially the same as the sheets attached hereto as exhibit A to be effective on service rendered on and after December 1, 1964” and exhibit A includes the lamp exchange program.

Thurgood Marshall:

And how much more?

George D. Reycraft:

Sir?

Thurgood Marshall:

And how much more?

The light bulb is about a hundred other items.

George D. Reycraft:

Well, it is not a hundred, it —

Thurgood Marshall:

It is just one of a whole group of items?

George D. Reycraft:

It is a paragraph which describes a lamp —

Thurgood Marshall:

But you say it is perfectly honestly that Detroit Edison could not stop furnishing these light bulbs?

George D. Reycraft:

Not under our existing tariff Mr. Justice Marshall.

If we went back to the Commission —

Thurgood Marshall:

And then they furnish another tariff which takes into consideration and cuts the rates that much that the Commission would not approve it?

George D. Reycraft:

The Commission does have the power to order Detroit Edison to continue the lamp supply program as it exists, to make it optional or to discontinue it all together.

What they would do if the issue were presented to them in that way, I can not honestly say that I know.

George D. Reycraft:

I think that kind of a proceeding in a rate proceeding generally requires notice throughout Detroit Edison’s service area, so that their wide rights of intervention and the appearance of witnesses in the rate proceeding, so that consumers could come in and say we want it this way, we want it that way and I do not know Mr. Justice Marshall honestly how would that come out, but the present case, in any trust case it is simply a private fight between —

Thurgood Marshall:

Your real trouble is that agreeing to and ordering are the same thing?

George D. Reycraft:

Well, if I understand —

Thurgood Marshall:

Or approving and ordering are the same thing?

George D. Reycraft:

These orders that the Michigan Public Service Commission used the precise language order.

They use it on a number occasions and that to my —

Thurgood Marshall:

They stayed out of a form book, did they not?

George D. Reycraft:

Well sir, to my simple mind whether it is out of a form book or not, it is an order and if I do not comply with it, I am in trouble whether it is a Court or the Michigan Public Service Commission.

Thurgood Marshall:

I think if you ask somebody to order you to do something, you would oblige, you would agree with it?

George D. Reycraft:

Well, that of course is what happened in Parker v. Brown.

The resin producers asked the Pro-rate Commission to order them to compel price fixing effect and withdraw a substantial amount of —

Thurgood Marshall:

(Inaudible)

George D. Reycraft:

No, we are asking and we have asked —

Thurgood Marshall:

(Inaudible)

George D. Reycraft:

Yes, we did that, yes.

Yes we did that and we have done it since 1916 on 18 separate occasions, yes sir.

Now, it seems to me that the Michigan Public Service Commission could easily, if it is brought to its attention, taking into account anti-trust policy.

Michigan has an Anti-Trust law, so the Anti-Trust laws in competition or the state policy of Michigan just as there the national policy of the United states under Federal Anti-Trust laws.

So that as in gulf states’ utilities, the public utility can be the first line of defense against anti competitive practices which may later turn out to be anti-trust violations, so that the petitioner has a form before the Michigan Public Service Commission.

There is a procedure under which you can been intervene.

You could appear as a witness and there is a separate complaint procedure which he could use, if he really wants the determination as to whether this light bulb program should continue rather than to have a nice lawsuit, there would be a big class action which at some time might produce treble damages.

He is not interested in any of the lamp supply program.

What he is interested in his treble damages and reasonable attorney’s fees.

So we submit that the Public Service Commission did clearly issued numerous commands to Detroit Edison.

They did result from voluntary applications on the part of Detroit Edison just as was the case in Parker v. Brown.

We submit that that conduct is within Parker v. Brown and that the Sixth Circuit and the District Court were correct in their determination.

Warren E. Burger:

Mr. Trienens.

Howard J. Trienens:

Mr. Chief Justice and may it please the Court.

I represent a group of Michigan utilities who locally could not care less about light bulbs.

They some of the electric companies that do not have this provision, others are gas and telephone Companies.

Howard J. Trienens:

Our concern is not what this particular tariff or the provisions, merits, public interest anti-competitive or otherwise features of it.

Our interest is in the position taken by the petitioners and the Solicitor General which would make life absolutely impossible for a utility to operate and would be grossly unjust.

Now, let me use as an illustration the point that just been discussed by Mr. Justice White and Mr. Justice Marshall.

I do not think it makes the slightest difference, whether utility proposes this tariff, whether the chairman of the Commission drafts it or the speaker of the house drafts it.

The point is no matter who submitted this tariff if the utility has not had the option.

If Detroit Edison files a tariff with this lamp provision in it, the Commission can take it out.

If the utility files a tariff with the provision out, the Michigan can put it back in.

The authority for that is under the pervasive regulatory statute which is common in the public utility regulatory matters wherein addition to fixing rates the Commission made by order also establish such rules and conditions of service as shall be just and reasonable.

You are absolutely right Mr. Justice Marshall.

There are hundreds of these conditions and service and these tariffs just bristle with problems.

Who puts the meter where and who takes the pipe how far in and who pays how much to get a cable put in a subdivision.

These are just full of problems and any bristle with anti-trust problems and this is just one of them.

My point is that under this pervasive regulation, it does not matter who wrote the first draft.

The important thing is that the Michigan Commission is the one who decides it.

Now, it is more toward the mat and this is critical and that something I hope I can emphasize enough.

The standards are different.

Under Parker v. Brown you cannot just say, let us forget the competition, there has to be a state that competition is displaced, eliminated or subordinated and that is not enough.

You also have to substitute machinery by the state.

The state imposes its views of what the proper decision is under the other standard and the utility feel we call the Public Interest Standard.

Now, in Michigan, the Michigan Supreme Court said in a case affirmed here in 1951, that the right to exclude competition where the general public convenience and necessities so require has been delegated by the legislature to the Michigan Public Service Commission.

The standard is not the same as the standard under the Anti-Trust laws.

Byron R. White:

You are arguing (Inaudible)

Howard J. Trienens:

I am arguing this case because the question here is really one of standards.

The question here is the —

Byron R. White:

(Inaudible)

Howard J. Trienens:

I am arguing about this case because the whole point of Solicitor General’s argument.

I am arguing as the amicus on exactly the same plaint.

(Inaudible)

Howard J. Trienens:

No sir, I am saying they do not have to and that that is irrelevant because the statute has said and as Mr. Justice Frankfurter has said in connection of the Federal statute, referring these public utilities surely it cannot be said that competition is off itself a national policy in areas like public utilities.

Now, that is shown not only, that is, I am reading from FCC v. RCA Communications 346 U.S. 92, but that is also made abundantly plain by the legislative intent shown by Congress in that —

Warren E. Burger:

(Inaudible) referring to there, is he not?

Howard J. Trienens:

He is referring there to two overseas cables as to whether there is no doubt that competition was favored by allowing another cable to come in and he said there is more to it than that and that competition is not the national policy the be all and end all when you are dealing with these regulatory matters where it is pervasively regulated under a Public Interest Standard.

Now, that is the critical distinction here because there has been a different standard and a machinery for enforcing that standard substituted for competition.

Substituted for competition and that is what this public utility regulation is all about and the Solicitor General speaks of a trend.

He says there is be a trend here where, as he would put it, some people are starting to use mechanism of the states to frustrate national policy.

Now, as I have read, the national policy is not, and I emphasize not, to impose competition as part of the Standard Regulating Public Utilities, it is simply not.

And the Federal Power Act, the Federal Communications Act, the Natural Gas Act, all use a public inter standard and most importantly here leave to the states, leave to the states as to this local distribution matters like Detroit Edison, the question of their regulations under their public interest standard.

Now, if you go to the Federal Anti-Trust Court and that is what these all about, whether you are going to have a hearing on whether these light bulbs last long and whether they are good or bad or indifferent, you are going to have a hearing in Anti-Trust Court, that is what these people want and may be that the petitioner wants treble damage.

What the Solicitor General wants is to take over into Anti-Trust Courts, the imposition of Federal Anti-Trust Standards and he says he does not preempt, but he preempts in practical effect by imposing Federal Anti-Trust Standards through the Federal Courts on the states.

Now —

Thurgood Marshall:

Mr. Trienens, the Commission in Michigan tells the (Inaudible) Gas Company in the Michigan that you must furnish light bulbs with your gas — with your electricity?

Howard J. Trienens:

They may do that.

Thurgood Marshall:

Well, suppose they say you must also furnish electric stoves?

Howard J. Trienens:

I think they could do that too —

Thurgood Marshall:

Where would it stop? Could they go to make it automobile?

Howard J. Trienens:

I tell you where it would stop.

I will tell you where it would stop.

It would not stop in my view because the Federal Anti-Trust Courts started trying all these tariff matters.

If they took over too much, beyond the Traditional Public Utility Regulation and the Commission did that which I doubt and the state Court affirmed it which I doubt, this Court still sits to review that.

If there is a commerce clause problem or due process problem or they are going too far, this Court says you do not make every tariff issue with Anti-Trust Case in order to deal with that kind of speculative problem that is not before us, Your Honor.

William H. Rehnquist:

Mr. Trienens.

Howard J. Trienens:

Yes sir.

William H. Rehnquist:

In my hometown at Phoenix, there are two utilities, both serving the same general area and there is, as I understand a conscious policy of division of territory which is approved by the Arizona Corporation Commission.

Now, do you understand under the Solicitor General’s theory that because the two utilities agree that they should be ordered to do that by the Utility Commission that, that territory allocation would be actionable?

Howard J. Trienens:

I think that under the — I think the answer is yes, that while he would say they do not preempt that he has suggested to you this morning that there will be some Anti-Trust Court review of each and every decision of that kind to find out whether they have stated the state policy precisely enough.

Now, that is a fine business for the Federal Courts to be in, to see whether these agencies of each state, their findings precisely enough, whether the order has been final — formal enough, whether the findings are adequate.

That is not striking as the business of the Federal Courts either on the territorial allocation or on any one of the hundreds of items of conditions on rates, all of which could be in Anti-Trust case.

If you really wanted to — excuse me?

John Paul Stevens:

let me make sure I just understand your theory.

It sounds to me like you are asking for a complete exemption from the Anti-Trust Laws for any industry that is subjected to state regulation that follows the different standard and competition.

Howard J. Trienens:

Yes sir.

Yes sir I am —

John Paul Stevens:

Then what you do with —

Potter Stewart:

Otter Tail?

Howard J. Trienens:

Otter Tail was a case, Your Honor, where the Court found in a very closely divided vote four to three and I can see the problem why that is a close case, that the Federal Power Act on intrastate was not pervasive regulation, that is what both opinions said, I accept that finding, and therefore, I do not hear challenge Otter Tail.

If you have pervasive —

Potter Stewart:

What do you do with South Eastern Underwriters?

Howard J. Trienens:

South Eastern Underwriters said that the question there was not the regulation of the individual Insurance Company’s rates, but rather the Insurance Companies agreeing among themselves in a rate bureau to fix rates and that no — the Court distinguished Parker v. Brown on the ground that there was no state regulation of those combinations.

There was no —

John Paul Stevens:

Do you think that McGovern Amendment was unnecessary?

Howard J. Trienens:

I think it scared them the death and they were not taking any chances.

I would — if they go to a hearing, now I say this on a public interest standard, if they go to a hearing, I do not know how it is going to come out any more than any of the counsel here do, but the Public Service Commission, Michigan would have the hearing.

People in Detroit who do not want light bulbs to come to that hearing, the Commission would decide it.

They would either knock this provision out or change it as they did in (Inaudible), so you could have two kinds of rates; one with and one without or any other alternative.

The point is it would be decided under the Public Interest Standard in Michigan and not under the be all and end all sole aim which is the Anti-Trust Laws.

Now, I am not here arguing that these utilities in Michigan are engaged in a state action any more than the resin growers in Parker v. Brown were in state action.

What I am saying is and what Parker v. Brown means is that where the state defines an area, defines and area where it does not believe that the state Interest is served, the Public Interest is served by having competition be the sole standard and that is not enough.

Where they also substitute regulatory machinery which is pervasive then that does displace the Anti-Trust Laws, not because of some implied immunity, but because that is not what the Anti-Trust Laws meant, that is not what they have meant since Olsen v. Smith in 1904, that is what they have never meant and what the Solicitor General is suggesting in adding to this business to the Federal Court is a radical departure, if it has merit, I say does not economically, but if it has merit that is a matter for Congress.

There is a raging dispute over Congress about deregulation and if there is deregulation, the Anti-Trust Laws come in.

Now, you can argue that in service transportation, you can argue in electricity, all I am saying it is a legislative matter in Parker v. Brown and which simply construes and applies the Sherman Act, should not be given this vast extension.

This is a matter that will be left for Congress.

Now, there is a fairness question here too and that is what I like to — yes sir.

Byron R. White:

What about the question I asked Mr. Reycraft, if the state said — had a general statute that said if industries would like to substitute price fixing for competition, they may and anybody wants to fix prices comes in and applies to Price Commissioner and gets permission?

Howard J. Trienens:

I say that is a Schwegmann and it is not permitted.

I say under Parker v. Brown it is much closer to that than this case because under Parker v. Brown whether there was going to be any displacement in the competition depended on the initiative of the petitioning resin growers.

Here, it does not depend on any initiative of Michigan Consolidated Gas or on Detroit Edison.

They are regulated, their rates are fixed —

Byron R. White:

Well, I know, but the decisions have whether or not to furnish light bulbs is their decision?

Howard J. Trienens:

No, is the Commission’s decision.

Byron R. White:

Well, they do not get — they have never ordered anybody to furnish light bulbs?

Howard J. Trienens:

But why should they?

Byron R. White:

I did not ask you that —

Howard J. Trienens:

Well, I am sorry, Your Honor.

What I mean is that they have got lots to do.

They have got hundreds of these tariff provisions.

Here is one that is been in for years —

Byron R. White:

Well, I know, but whose decision was it in the first place to put in the tariff?

Howard J. Trienens:

Well, previously it was there when the Commission was invented.

Byron R. White:

Who started it?

Howard J. Trienens:

The Detroit Edison or Edison.

Byron R. White:

I know and then could they take it out if they wanted to?

Howard J. Trienens:

Could who take it out, Detroit Edison?

Byron R. White:

Detroit Edison.

Howard J. Trienens:

Detroit Edison could file a tariff which in effect asks for relief from the outstanding order and ask the Commission to relieve them of doing that with the corresponding rate adjustment.

The question of whether they got —

Byron R. White:

Many other utilities do not furnish light bulbs?

Howard J. Trienens:

That is correct, that is correct and some other have another alternative where they are ordered to keep furnishing and if the customer wants them, but not furnishing if the customer does not.

There is also —

Byron R. White:

What kind of a state policy is that with respect to it?

Howard J. Trienens:

The state policy is that the Electric Companies are pervasively regulated and all the terms and conditions of the rates, what service is provided and how far it goes and who maintains what is to be decided by the Michigan Commission in the public interest with competition not being the be alls and end alls or would be under the Anti-Trust Laws.

Byron R. White:

Or even the factor does not have to be in your view?

Howard J. Trienens:

It does not have to be factor.

A state can eliminate or subordinated as they wish.

William H. Rehnquist:

Then you state in effect that all of the Michigan utilities, the ones that furnish light bulbs and those that do not, are subjected to the same pervasive regulatory?

Howard J. Trienens:

Yes sir, yes sir.

All of them on face of the statute and my closing comment was simply that —

Byron R. White:

And you would say the same thing I suppose if all the Michigan utilities are on the side agree upon themselves to furnish light bulbs?

Howard J. Trienens:

And they submitted to Commission and the Commission found it was in the public interest and the Commission let them do it.

Byron R. White:

Well.

They did not submit the Commission the agreement?

Howard J. Trienens:

Well, now there is the question of Mr. Justice Stevens was asking about —

Byron R. White:

Well how about your answer?

Howard J. Trienens:

The answer, I do not believe they do.

I do not believe they can get together and conspire to do.

I think they have to make their own judgment on what they think is in a public interest, make their draft to the regulations, submit it to the Commission and whether the Commission lets it go into effect or not, it is for the Commission to decide in the public interest.

If I may make just one comment, Your Honor.

Looking at it from the point of view of the utility itself, to subject the utility to two duplicate and inconsistent standards, one that competition is so lame, the other the public interest where it is not, is impossible position to put a utility whether the Commission drafts these orders or whether utility counsel proposes them, he cannot do it when he got to masters and if it just is basically unfair and it is not intended by the Sherman Act.

Thank you.

Warren E. Burger:

Mr. Weinstein, you have about five minutes left.

Burton I. Weinstein:

I hope I do not use all of it, Your Honor.

The existence of a state remedy is no bar to a Federal remedy here because there is no reason to require us to go back to the Michigan Public Service Commission.

In fact in the briefs, I do not believe they have given any substantial reason why we can go back there.

Simply there is no command here by the state.

The NPSC will command whatever the company asks and that is even show them —

John Paul Stevens:

Could I ask just one question?

Does the record show that there are other Michigan Public Utilities that do not have lamp programs or that have optional program?

Burton I. Weinstein:

The record does not show that.

The Michigan Public Service Commission will do what the utility wants.

The company would at most just have to file a new tariff and lower the rates and it could drop the light bulb, drop the light bulb program.

(Inaudible)

Burton I. Weinstein:

Thank you very much.

Warren E. Burger:

Thank you gentlemen.

The case is submitted.