Antitrust – State Action Immunity – Federal Antitrust Liability

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The City of North Myrtle Beach, South Carolina enjoys state action immunity from federal antitrust liability.

We affirmed the district court’s judgment.

The City of North Myrtle Beach, South Carolina prohibits most commercial activities on its beaches. When Cherry Grove Beach Gear, LLC (CGBG) began to offer beach equipment delivery and setup services on the City’s beaches, the City updated its ordinances to clarify that only City officials were permitted to set up beach equipment professionally on public beaches. CGBG brought this action against the City claiming violations of the Sherman Antitrust Act, alleging the City unlawfully claimed a monopoly over beach equipment delivery and installation. The district court granted summary judgment for the City, concluding that the city enjoys state action immunity from federal antitrust liability. We agreed.

On appeal, Appellants contended the state statutes relied upon by the City and the district court are not sufficiently clear articulations of state policy to support state-action immunity. They also urged this Court to adopt a “market participant exception” to state-action immunity, arguing that the City is engaged in the market as a participant rather than a regulator. Both arguments were foreclosed by our decision in Western Star.

Two South Carolina statutes govern this analysis. S.C. Code § 5-7-30 grants municipalities general powers, including authority to “grant franchises and make charges for the use of public beaches.” Section 5-7-145 provides that a municipality may contract with a private company to provide beach safety services and may grant the exclusive right to rent beach equipment or sell items to the public on the beach. The district court correctly recognized that these statutes leave no doubt regarding the City’s prerogative to provide on-beach services, including exclusive setup and rentals, which necessarily displaces competition. Section 5-7-145 authorizes municipalities to provide lifeguard and safety services either through municipal employees or a contracted private company and explicitly permits granting exclusive franchises for equipment rental. Section 5-7-30 further confirms the City’s authority to grant franchises on public beaches.

Appellants did not dispute that § 5-7-145 authorizes the City to grant an exclusive franchise but argued that the statute permits only a private company to hold such a monopoly, not the City itself. This argument fails under Western Star, where we upheld state-action immunity even though the statute did not explicitly authorize a municipal monopoly. The statutory scheme here plainly anticipates that the City may act in an anticompetitive capacity by establishing an exclusive franchise, displacing unfettered market competition. Because the state has expressly contemplated such municipal action, the City qualifies for state-action immunity under federal antitrust law.

Appellants also invoked a supposed “market participant exception,” asserting state-action immunity should not apply when the City participates in the market rather than acting as a regulator. This Court has previously declined to recognize such an exception.

Affirmed.

Cherry Grove Beach Gear v. City of North Myrtle Beach (Lawyers’ Weekly No. 001-212-25, 10 pp.) (Roger Gregory, J.) Appealed from the U.S. District Court for the District of South Carolina, at Florence (Joseph Dawson, III, J.) ARGUED: Kenneth Ray Moss, II, WRIGHT, WORLEY, POPE, EKSTER & MOSS, North Myrtle Beach, South Carolina, for Appellants. Elbert Stockman Dorn, Sr., MAYNARD NEXSEN PC, Myrtle Beach, South Carolina, for Appellee. ON BRIEF: George N. Spirakis, WRIGHT, WORLEY, POPE, EKSTER & MOSS, North Myrtle Beach, South Carolina, for Appellants. Marguerite S. Willis, Kirsten E. Small, Greenville, South Carolina, Michael Parente, MAYNARD NEXSEN PC, Columbia, South Carolina, for Appellee. U.S. Court of Appeals for the Fourth Circuit