FLYING J, INC. V. VAN HOLLEN (September 3, 2010)
A Wisconsin statute requires a minimum markup on gasoline sold in the state. The statute itself provides the formula with which to calculate the markup. The statute also authorizes a state agency to sue violators, issue cease and desist orders, and seek injunctions. It also provides for a private cause of action. Despite receiving over 1500 complaints of violations between 2003 and 2008, the agency did not prosecute one case. Flying J, a Wisconsin gasoline retailer, brought suit to enjoin the state from enforcing the minimum markup provisions. It alleged that the statute was preempted by the Sherman Act. Judge Randa (E.D. Wis.) agreed and issued a permanent injunction. When the state defendants elected not to appeal, the Wisconsin Petroleum Marketers and Convenience Store Association moved to intervene. The Court, in an earlier opinion (intheiropinion), reversed the District Court's denial of the intervention motion and accepted the Association as the appellant.
In their opinion, Judges Posner, Ripple, and Kanne reversed, dissolved the injunction, and remanded. In order to be preempted by the Sherman Act, a statute must mandate or authorize illegal conduct or place "irresistible pressure" to violate the law. Flying J's argument that the statute allows gasoline retailers to collude on prices is not enough -- the statute does not on its face mandate or authorize that conduct. Furthermore, there was no evidence in the record of actual collusion. The Court thought the outcome controlled by the Supreme Court's decision in Fisher. Flying J also argued that the statute was preempted as a "hybrid" statute (in which a government enforces prices set at the discretion of private parties). The Court concluded that the statute is not a hybrid statute. In hybrid statute cases, private parties -- not the state -- set the prices. Here, the state sets the minimum price. The fact that the statute includes a private cause of action and a “meet competition” exception does not make it a hybrid.