Eminent domain and the antitrust state action doctrine

Speaking of the antitrust state action doctrine (see my previous posting here and my major blog post here), Scott Weese recently published an article called Eminent Need: Proposing a Market Participant Exception for Municipal Parker Immunity in the Cardozo Public Law, Policy & Ethics Journal. Here’s his abstract:

A township is using its eminent domain powers to become a monopsony in the real estate market for the designated area. The township’s monopsony power is then being exploited to create a price-fixing scheme that would violate antitrust laws, either as a per se violation under Section 1 of the Sherman Antitrust Act, or as a monopolizing or attempted monopolizing offense under Section 2. Under the Sherman Act, affected residents could force the township to appraise each property individually and pay the full market value; if the township refused, they would be subject to the treble damage penalty, erasing any possible advantage of abusing its monopsony power. As the law currently stands, however, a township is immune from suit under the Parker v. Brown decision and its progeny. This Article will use the real-life example of Mount Holly, New Jersey, and the story of one affected resident to illustrate the need for a market participant exception to Parker immunity, such that when a municipality is participating in the market for a good itself, as opposed to merely regulating that market, the Sherman Act should apply.

This paper doesn’t argue that eminent domain itself violates the Sherman Act; eminent domain is, after all, explicitly blessed by the Fifth Amendment as long as just compensation is paid. Rather, it argues against a practice where a municipality announces a fixed (and non-negotiable) price that it’ll pay for all houses in an area, which is below most of the residents’ reservation prices. Why don’t these residents refuse to sell and force the municipality to get a market value assessment? Because the author assumes that the residents are economically and legally unsophisticated. In this context, the author argues that the municipality’s practice is abuse of its monopsony power and should be held to violate the Sherman Act.

Of course, the municipality’s behavior is shielded by antitrust state-action immunity. So the last third of the paper is devoted to arguing that state-action immunity shouldn’t apply when the municipality is a market participant.

I’m not sure that the author is right here, or — if a market participant exception should be carved out — that this would really be an antitrust violation, but the paper is worth a read, if for no other reason than the Lord of the Rings references.