Government Owns Right to Collect

A local government may oust the private sector and recapture the local waste collection market without violating the U.S. Constitution or the federal antitrust laws, says a Florida federal court. [Bennett Electric Co., et. al. v. Village of Miami Shores, No. 97-0727-CIV (S.D. Fla. May 6, 1998)]

The village council in Miami Shores, Fla., adopted an ordinance that simply said: "Every commercial establishment and residential unit shall utilize the waste collection services of the village." Nevertheless, most businesses and multi-family residences continued to deal with private waste collection firms, bypassing the village's system.

In mid-1995, the council ordered the public works department to strictly enforce the switch-over to municipal collection.

Bennett Electric Co. was already a village customer when it received a $3,200 invoice for village collection services for a one-year term beginning in October 1995. In response, it terminated municipal service and signed a one-year contract with a private hauler for a mere $737.

In April 1996, the public works department notified Bennett that private collectors' licenses would not be renewed and that village service would be mandatory beginning in June. Meantime, the annual fee for village waste services had climbed to $3,600.

Unable to renew its private hauling contract and obligated to both the hauler and the village for service from June through September, Bennett filed suit against the village in federal district court. The complaint alleged that forcing residents and businesses to deal exclusively with a municipally operated system violated the Commerce Clause and was an illegal monopoly under the federal antitrust laws.

U.S. District Judge Federico Moreno dismissed the lawsuit, stating that the village's takeover didn't illegally interfere with interstate commerce and that the village was immune from liability under the federal antitrust laws.

Interstate Commerce As a general rule, states and local governments cannot enact laws that significantly interfere with interstate commerce. (Here, the parties agreed that the ordinance regulates such commerce.) To decide the ordinance's validity, the court applied the standard two-part test.

First, does the ordinance overtly discriminate in favor of local business or investment? If so, the restriction is unenforceable unless the village can prove that it has no other way to achieve its legitimate local interests. States and municipalities rarely are able to surmount this burden of proof, according to reported cases.

However, if a court decides that an ordinance does not discriminate against interstate commerce, the court then must ask: Does the ordinance interfere with interstate commerce in a way that is clearly excessive compared with the local benefits?

The Judge found that the village's take-over of collection services and its exclusion of private haulers closely resembles situations where federal appeals courts have upheld the authority of local government to become the lone provider of collection services.

The court found that the village was performing a "traditional municipal function," not selling to a captive consumer base and not favoring or benefitting any private companies.

"Miami Shores' decision to provide waste collection services using its own trucks and employees ensures that local and out-of-state businesses and investments are treated equally," the judge said. "Therefore, the ordinance does not discriminate against interstate commerce."

Judge Moreno then compared the burden on interstate commerce to the putative local benefits. He found that because the ordinance excludes local and out-of-state private haulers equally, non-local firms do not bear greater burdens. Moreover, he continued, "The mere fact that Bennett's waste collection bills may increase when the municipality provides the services does not dictate a finding that the ordinance violates the Commerce Clause." In short, he concluded that municipalities "must enjoy some leeway" in ensuring safe and reliable waste disposal.

Monopoly Under U.S. Supreme Court rulings, when a municipality acts in accord with a "clearly articulated and affirmatively expressed" state policy to displace competition with monopoly service, the municipality's anticompetitive activities are exempt from federal antitrust liability.

The judge found that broad authority exists under Florida law for local governments to provide collection services even where anti-competitive effects would likely result. Thus, the village was immune from antitrust laws.

Postscript The plaintiffs appealed Judge Moreno's decision to the U.S. Court of Appeals for the 11th Circuit. A court-ordered mediation procedure produced a financial settlement for the plaintiffs, who then withdrew their appeal, leaving the decision intact.