/*We continue with the dissenting opinions in the Omni case. */
Justice Stevens, with whom Justice White and Justice Marshall join, dissenting.
Section 1 of the Sherman Act provides in part: "Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal." 15 U. S. C. MDRV 1 (emphasis added). Although we have previously recognized that a completely literal interpretation of the word "every" cannot have been intended by Congress, {1} the Court today carries this recognition to an extreme by deciding that agreements between municipalities, or their officials, and private parties to use the zoning power to confer exclusive privileges in a particular line of commerce are beyond the reach of MDRV 1. History, tradition, and the facts of this case all demonstrate that the Court's attempt to create a "better" and less inclusive Sherman Act, cf. West Virginia University Hospitals, Inc. v. Casey, --- U. S. --- (1991) (slip op., at 17) is ill advised.
I
As a preface to a consideration of the "state action" and socalled "Noerr-Pennington" exemptions to the Sherman Act, it is appropriate to remind the Court that one of the classic common- law examples of a prohibited contract in restraint of trade involved an agreement between a public official and a private party. The public official -- the Queen of England -- had granted one of her subjects a monopoly in the making, importation, and sale of playing cards in order to generate revenues for the crown. A competitor challenged the grant in The Case of Monopolies, 11 Co. Rep. 84, 77 Eng. Rep. 1260 (Q.B. 1602), and prevailed. Chief Justice Popham explained on behalf of the bench:
"The Queen was . . . deceived in her grant; for the Queen . . . intended it to be for the weal public, and it will be employed for the private gain of the patentee, and for the prejudice of the weal public; moreover the Queen meant that the abuse should be taken away, which shall never be by this patent, but potius the abuse will be increased for the private benefit of the patentee, and therefore . . . this grant is void jure Regio." Id., at 87a; 77 Eng. Rep., at 1264.
In the case before us today, respondent alleges that the city of Columbia, South Carolina, has entered into a comparable agreement to give respondent a monopoly in the sale of billboard advertising. After a three-week trial, a jury composed of citizens of the vicinage found that, despite the city fathers' denials, there was indeed such an agreement, presumably motivated in part by past favors in the form of political advertising, in part by friendship, and in part by the expectation of a beneficial future relationship -- and in any case, not exclusively by a concern for the general public interest. {2}
Today the Court acknowledges the anticompetitive consequences of this and similar agreements but decides that they should be exempted from the coverage of the Sherman Act because it fears that enunciating a rule that allows the motivations of public officials to be probed may mean that innocent municipal officials may be harassed with baseless charges. The holding evidences an unfortunate lack of confidence in our judicial system and will foster the evils the Sherman Act was designed to eradicate.
/* The idea being that a jury and then Judge behind that can divine between the cases in which there is a form of "bribery" and where there is just a decision between competing public policy concerns. */
II
There is a distinction between economic regulation, on the one hand, and regulation designed to protect the public health, safety, and environment. In antitrust parlance a "regulated industry" is one in which decisions about prices and output are made not by individual firms, but rather by a public body or a collective process subject to governmental approval. Economic regulation of the motor carrier and airline industries was imposed by the Federal Government in the 1930s; the "deregulation" of those industries did not eliminate all the other types of regulation that continue to protect our safety and environmental concerns.
The antitrust laws reflect a basic national policy favoring free markets over regulated markets. {3} In essence, the Sherman Act prohibits private unsupervised regulation of the prices and output of goods in the marketplace. That prohibition is inapplicable to specific industries which Congress has exempted from the antitrust laws and subjected to regulatory supervision over price and output decisions. Moreover, the so-called "state action" exemption from the Sherman Act reflects the Court's understanding that Congress did not intend the statute to preempt a State's economic regulation of commerce within its own borders.
The contours of the state action exemption are relatively well- defined in our cases. Ever since our decision in Olsen v. Smith, 195 U. S. 332 (1904), which upheld a Texas statute fixing the rates charged by pilots operating in the Port of Galveston, it has been clear that a State's decision to displace competition with economic regulation is not prohibited by the Sherman Act. Parker v. Brown, 317 U. S. 341 (1943), the case most frequently identified with the state action exemption, involved a decision by California to substitute sales quotas and price control -- the purest form of economic regulation -- for competition in the market for California raisins.
In Olsen, the State itself had made the relevant pricing decision. In Parker, the regulation of the marketing of California's 1940 crop of raisins was administered by state officials. Thus, when a state agency, or the State itself, engages in economic regulation, the Sherman Act is inapplicable. Hoover v. Ronwin, 466 U. S. 558, 568-569 (1984); Bates v. State Bar of Arizona, 433 U. S. 350, 360 (1977).
Underlying the Court's recognition of this state action exemption has been respect for the fundamental principle of federalism. As we stated in Parker, 317 U. S., at 351, "In a dual system of government in which, under the Constitution, the states are sovereign, save only as Congress may constitutionally subtract from their authority, an unexpressed purpose to nullify a state's control over its officers and agents is not lightly to be attributed to Congress."
However, this Court recognized long ago that the deference due States within our federal system does not extend fully to conduct undertaken by municipalities. Rather, all sovereign authority "within the geographical limits of the United States" resides with "the Government of the United States, or [with] the States of the Union. There exist within the broad domain of sovereignty but these two. There may be cities, counties, and other organized bodies with limited legislative functions, but they are all derived from, or exist in, subordination to one or the other of these." United States v. Kagama, 118 U. S. 375, 379 (1886).
Unlike States, municipalities do not constitute bedrocks within our system of federalism. And also unlike States, municipalities are more apt to promote their narrow parochial interests "without regard to extraterritorial impact and regional efficiency." Lafayette v. Louisiana Power & Light Co., 435 U. S. 389, 404 (1978); see also The Federalist No. 10 (J. Madison) (describing the greater tendency of smaller societies to promote oppressive and narrow interests above the common good). "If municipalities were free to make economic choices counseled solely by their own parochial interests and without regard to their anticompetitive effects, a serious chink in the armor of antitrust protection would be introduced at odds with the comprehensive national policy Congress established." Lafayette v. Louisiana Power & Light Co., 435 U. S., at 408. Indeed, "[i]n light of the serious economic dislocation which could result if cities were free to place their own parochial interests above the Nation's economic goals reflected in the antitrust laws, . . . we are especially unwilling to presume that Congress intended to exclude
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