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

In Active Disposal, Inc. v. City of Darien, the Seventh Circuit was confronted with a situationinvolving exclusive contracts between Illinois municipalities and trash haulers. The plaintiffs,

made up of other trash haulers and businesses that wanted to hire non-exclusive trash haulers,

claimed that the municipalities exclusive contracts violated federal antitrust law. Themunicipality-defendants contended that their exclusive contracts were permissible under thestate-action doctrine; they prevailed on their motion to dismiss in district court. The Seventh

Circuit affirmed the district courts decision.

Although the court ultimately concluded that the exclusive contracts were exempt from antitrustlaws under the state-action doctrine, it found that the exclusive contracts impose restrictions on

competition by preventing other trash haulers from providing services in these markets. Theexclusive contracts also prevent consumers from using different, less expensive trash haulers.

The state-action doctrine allows these anti-competitive effects when the State authorizes themunicipalities actions. Thus, municipalities are protected from antitrust violations when state

policy displaces competition. The questions in this case were whether Illinois authorizes themunicipalities exclusive contracts and, if so, whether the state-action doctrine protects the

municipalities from federal antitrust law for the resulting anti-competitive effects.

In order to determine whether the municipalities were in fact shielded from federal antitrust lawunder the state-action doctrine, the court applied a two-pronged analysis. First, the court

examined whether the Illinois statute at issue authorizes the challenged conduct. The courtanswered affirmatively, finding that the statute gives municipalities the authority to contract for

waste collection and disposition. Next, the court analyzed whether anti-competitive effects are aforeseeable consequence of the states authority to regulate. The court again answered

affirmatively, reasoning that a monopoly is created when the legislature allows these types ofcontracts, which are likely to be exclusive, and that anti-competitive effects necessarily result.

Thus, the court found that the state intended antitrust immunity for the challenged conduct andheld that the state-action doctrine applied. Therefore, the plaintiffs challenge failed, and the

district courts grant of the defendants motion to dismiss was affirmed.