In this case we must decide whether a state is liable for alleged violations of sections 1 and 2 of the Sherman Act.1 We hold that it is not and affirm the district court's order dismissing the Shell Oil Company's counterclaim against the State of New Mexico.

New Mexico, on behalf of itself and all other public bodies in New Mexico similarly situated, sued Shell and five other asphalt suppliers for alleged antitrust violations. Shell counterclaimed, alleging that New Mexico and some of its political subdivisions conspired as consumers of asphalt to fix prices and eliminate competition among themselves, in violation of sections 1 and 2 of the Sherman Act (15 U.S.C. 1, 2). The district court dismissed Shell's counterclaim, holding that the Sherman Act is not applicable to the conduct of a state. That court certified the case for interlocutory appeal under 28 U.S.C. 1292 (b), and we granted leave to take an interlocutory appeal.

The issue on appeal is whether sections 1 and 2 of the Sherman Act apply to the conduct of a state2 and whether sections 4 and 16 of the Clayton Act (15 U.S.C. 15, 26) afford Shell the remedies it seeks.3 Since sections 4 and 16 of the Clayton Act provide remedies only for violations of the antitrust laws, and since the only alleged violations are of sections 1 and 2 of the Sherman Act, our primary inquiry is whether sections 1 and 2 apply to the conduct of a state.

By its very terms, section 2 applies only to 'persons,' and while section 1 invalidates 'every contract, combination . . . or conspiracy, in restraint of trade,' the remedial portion of section 1 is directed only to 'persons.' Thus, the Supreme Court has stated that the '(Sherman) Act is applicable to 'persons' including corporations.' Parker v. Brown, 317 U.S. 341, 63 S. Ct. 307, 87 L. Ed. 315 (1943). Of course, this merely shifts the inquiry to one concerning the meaning of 'person' as that term is used in the Sherman Act.

Section 8 of the Sherman Act (15 U.S.C. 7) defines 'person' as used in the Act as follows:4

The word 'person', or 'persons', wherever used in sections 1 to 7 of this title shall be deemed to include corporations and associations existing under or authorized by the laws of either the United States, the laws of any of the Territories, the laws of any State, or the laws of any foreign country.

Since the term is explicitly defined for use throughout the statute and the definition does not include states, there is at least a strong implication that states were not intended to be subject to the Act. See Georgia v. Evans, 316 U.S. 159, 163, 62 S. Ct. 972, 86 L. Ed. 1346 (1942) (Roberts, J., dissenting). This methodology seems precluded, however, by the majority approach in Evans. There the Court considered whether a state was a 'person' who could sue for treble damages under section 7 of the Sherman Act, the forerunner of 15 U.S.C. 15. Notwithstanding the fact that states were not mentioned in the definition of 'person' under section 8 of the Sherman Act, the Court held that a state was a 'person' under section 8 and could sue for treble damages under section 7. The Court stated that the definition of 'person' must be interpreted in light of the 'purpose, the subject matter, the context, the legislative history, and the executive interpretation of the statute,' 316 U.S. at 161, 62 S.Ct. at 974, implicitly eschewing a literal or mechanical methodology.

Although the language of Evans supports an inference that sections 1 and 2 of the Sherman Act apply to states (by including states within the definition of 'person'), its rationale refutes such a broad interpretation. The policies relied upon the define 'person' referred only to the ability of a state to sue for treble damages; no mention was made of states as defendants. It is, therefore, difficult to conclude that the Court intended actually to define 'person' to include states everywhere in the Act. While it is normally desirable that a term be given a uniform meaning throughout an act, especially a term defined in a definitional section, the functional methodology of the Evans Court indicates a more flexible approach. At least it is difficult to conclude that a meaning seemingly broader than the facial meaning of the statutory definition applies throughout the statute when the justification for adopting that meaning refers only to a specific context in which the term is used.

This conclusion is supported by the language of Parker v. Brown, supra, 317 U.S. at 351, 63 S. Ct. at 313, decided less than a year after Evans, where the Court stated that the Sherman Act gives 'no hint that it was intended to restrain state action.' If the state were a 'person' as that term is used everywhere in the Act certainly the Court would have found a 'hint' that the Act restrained states since it clearly restrains 'persons.' Thus, we conclude that Evans does not apply beyond its factual context; it dealt only with the question whether a state can sue for treble damages under 15 U.S.C. 15.

Parker v. Brown did more than negate the language in Evans indicating that a state is a 'person' as that term is used everywhere in the Act. The Parker Court expressly declared that states are not subject to the Sherman Act:

The Sherman Act makes no mention of the state as such, and gives no hint that it was intended to restrain state action or official action directed by a state. The Act is applicable to 'persons' including corporations (7), and it authorizes suits under it by persons and corporations (15). A state may maintain a suit for damages under it, Georgia v. Evans, 316 U.S. 159 (62 S. Ct. 972, 86 L. Ed. 1346), but the United States may not, United States v. Cooper Corp., 312 U.S. 600 (61 S. Ct. 742, 85 L. Ed. 1071)-- conclusions derived not from the literal meaning of the words 'person' and 'corporation' but from the purpose, the subject matter, the context and the legislative history of the statute.

There is no suggestion of a purpose to restrain state action in the Act's legislative history. The sponsor of the bill which was ultimately enacted as the Sherman Act declared that it prevented only 'business combinations.' 21 Cong.Rec. 2562, 2457; see also at 2459, 2461. That its purpose was to suppress combinations to restrain competition and attempts to monopolize by individuals and corporations, abundantly appears from its legislative history. See Apex Hosiery Co. v. Leader, 310 U.S. 469, 492-493 (60 S. Ct. 982, 84 L. Ed. 1311) and n. 15; United States v. Addyston Pipe & Steel Co., C.C., 85 F. 271, affirmed 175 U.S. 211 (20 S. Ct. 96, 44 L. Ed. 136); Standard Oil Co. v. United States, 221 U.S. 1, 54-58 (31 S. Ct. 502, 55 L. Ed. 619).

317 U.S. at 351, 63 S. Ct. at 313.

Unlike the Evans language that was negated by Parker, there is no subsequent Supreme Court holding or language to undermine the conclusion that the Parker Court meant what it said. To the contrary, there are significant justifications for concluding independently that states were not intended to be covered by the Sherman Act. First, sections 1 and 2 of the Sherman Act provide for criminal sanctions, a remedy Congress would not lightly apply to states. We are reluctant to impute such an intention without a clear indication from Congress. And there is no indication that Congress intended the civil remedy provision of section 7 of the Sherman Act to have greater scope in terms of regulated conduct than section 1 or 2.5 Second, even concerning the civil remedy of treble damages provided by section 7 of the Sherman Act, the Eleventh Amendment would cause serious difficulties for such a suit against a state. Without a clear indication from Congress, we are reluctant to impute to Congress an intent that would raise such substantial constitutional problems.6

The fact that the two principal remedies of the Sherman Act as originally enacted are of dubious propriety if applied to states,7 the absence of any mention of state action in either the Act or the legislative history, and the language of Parker v. Brown quoted above lead us to conclude that sections 1 and 2 of the Sherman Act do not apply to the activities of a state.8

We have yet to confront Shell's argument, however, based on recent cases, that Parker does not confer absolute immunity from antitrust liability upon the states. Shell's position essentially is that only where a state's legislature affirmatively decides that competition 'is not the summum bonum in a particular field and deliberately attempts to provide an alternate form of public regulation,' George R. Whitten, Jr., Inc. v. Paddock Pool Builders, Inc., 424 F.2d 25, 30 (1st Cir. 1970), is the state immune from antitrust liability. Shell relies upon the language and factual situation of Parker and a number of cases interpreting Parker, primarily Hecht v. Pro-Football, Inc., 144 U.S.App.D.C. 56, 444 F.2d 931 (1971), cert. denied 404 U.S. 1047, 92 S. Ct. 701, 30 L. Ed. 2d 736 (1972).

In Parker, the California legislature authorized state officials to regulate the marketing of California agricultural products to restrict competition and prevent economic waste. The legislature authorized the creation of a commission, composed of the State Director of Agriculture and others appointed by the governor, to oversee the program. Upon application by ten producers, the commission was authorized to appoint a committee from within the industry to formulate a plan. The commission could then adopt the plan, after public hearings, if 'the program was reasonably calculated to carry out the objectives of the Act.' After one such program was adopted for the raisin industry, Parker sued Brown, State Director of Agriculture, to enjoin enforcement of the program, alleging that it violated the Sherman Act.

After stating, in the language already quoted, that the Sherman Act does not apply to the states, the Parker Court emphasized the legislature's involvement in the plan before concluding that the plan was not violative of the Sherman Act.9 Thus, Shell argues that the state's immunity extends only to similar situations where the legislature has mandated an alternative to competition as the summum bonum for an industry.10

A number of post-Parker cases seemingly enhance Shell's position by focusing on the legislative involvement in Parker.11 They are best represented by the First Circuit in George R. Whitten, Jr., Inc. v. Paddock Pool Builders, Inc., supra, 424 F.2d at 30:12

The (Parker) Court's emphasis on the extent of the state's involvement precludes the facile conclusion that action by any public official automatically confers exemption. As one commentator has observed, the assertion that an act is 'valid governmental action * * * suggests inquiry rather than ends it. * * * Generally, the underlying issue in determining the applicability of such an exemption is the degree of governmental involvement in, and supervision over, the allegedly wrongful private activity.' Comment, Alabama Power Company v. Alabama Electric Cooperative, Inc., 55 Va.L.Rev. 325, 345-346 (1969). Our reading of Parker convinces us that valid government action confers antitrust immunity only when government determines that competition is not the summum bonum in a particular field and deliberately attempts to provide an alternate form of public regulation.

In terms of such deliberate governmental occupation of a field normally left to the free winds of competition, this case falls at the opposite end of the spectrum from Parker. At the Parker end of the spectrum lie cases like Trucking Unlimited v. California Motor Transport Co., 1967 Trade Cas., P72,298 (N.D.Cal. 1967), a case involving certification of common carriers, where the deliberate choice of a regulatory agency intervened between the private anti-competitive activity and the resulting restraint on trade, or cases like E. W. Wiggins Airways, Inc. v. Massachusetts Port Authority, 362 F.2d 52 (1st Cir. 1966), cert. denied, 385 U.S. 947, 87 S. Ct. 320, 17 L. Ed. 2d 226 (1967), a suit involving an airport service franchise, where a state agency exercised broad authority to manage a monopoly in the public interest. Even at this end of the spectrum, no exemption will be found if state encouragement of price stability falls short of the delegation and approval in Parker. See Schenley Indus., Inc. v. New Jersey Wine & Spirit Wholesalers Ass'n, 272 F. Supp. 872 (D.N.J. 1967); cf. United States v. South-Eastern Underwriters Ass'n, 322 U.S. 533, 561-562, 64 S. Ct. 1162, 88 L. Ed. 1440 (1944).

The middle of the spectrum is occupied by cases in which the state has chosen to regulate a field, but state policy is neutral or silent with respect to restraints of trade. Since there is no conflict in such cases between state regulatory action and the policy of unfettered competition, the courts have found no difficulty in denying antitrust immunity. Northern Securities Co. v. United States, 193 U.S. 197, 347-350, 24 S. Ct. 436, 48 L. Ed. 679 (1904), cited in Parker v. Brown, supra, at 317 U.S. 351, 63 S. Ct. 307, (87 L. Ed. 315); Travelers Insurance Co. v. Blue Cross of Western Pennsylvania, 298 F. Supp. 1109 (W.D.Pa.1969); cf. Asheville Tobacco Board of Trade, Inc. v. FTC, 263 F.2d 502 (4th Cir. 1959).

But these cases involved suits against allegedly private defendants who defended on the basis that the state has authorized their anti-competitive conduct. The alleged authorization is normally either a putative regulatory scheme13 or a state created corporation intended to manage a monopoly in the public interest.14

In either situation, it is necessary to determine whether the anti-competitive result actually is a goal of the state entitled to the state's immunity rather than a private group masquerading under the banner of 'state action.' Such a determination necessarily involves an inquiry into legislative motives, and courts are understandably reluctant to apply the state's immunity to private parties without a clear indication by the state's legislature that the anti-competitive results have its sanction.

But there is no indication from those cases that the legislature must declare its intent to supplant competition in an industry when there is no question that the conduct is committed by the state. Since the suit here is directly against the state, there can be no such question, and the Whitten analysis is inapplicable.15 The 'legislative mandate' test is useful, indeed possibly necessary, when there is doubt if the defendant or the regulatory scheme is really an instrument of the state. But when there is no doubt that the defendant is the state, the 'legislative mandate' analysis is unnecessary.

This conclusion comports with the reliance in Parker upon a 'legislative mandate'. After declaring that the Sherman Act is inapplicable to states, the Court seemingly truned to the question whether the plan was really the act of the state, noting that 'a state does not give immunity to those who violate the Sherman Act by authorizing them to violate it, or by declaring that their action is lawful.' From what follows in the Court's opinion, it appears that the Court was responding to the obvious point that since the Commission was comprised of industry leaders and the plan was formulated by industry representatives, the plan was nothing more than a private agreement disguised as state action. It was apparently to this obvious objection that the Court responded when it relied upon the legislative regulatory policy and the fact that the commissioners were gubernatorial appointees. Thus, the Court was merely relying on the legislative mandate to conclude that the plan was the product of the state; it did not conclude that state action is immune from antitrust liability only when directed by the legislature as part of an anti-competitive regulatory scheme.16

We have yet to consider in detail Hecht v. Pro-Football, Inc., supra. There, the District of Columbia Armory Board, a public body which operates Robert F. Kennedy Stadium, entered into a lease with a football team, the Washington Redskins, that prohibited the Armory Board from leasing the stadium to any other professional football team. The district court dismissed an antitrust suit against the parties to the lease, holding that the lease was a governmental act and, as such, exempt from the antitrust laws under Eastern R.R. Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127, 81 S. Ct. 523, 5 L. Ed. 2d 464 (1961). The District of Columbia Circuit reversed and remanded.

The court disagreed with the conclusion that all governmental action is exempt from the antitrust laws:

The rationale of the trial court and the theory of the appellees in sustaining its decision set forth as 'the execution of the * * * lease * * * constituted valid governmental action which is immune from application of the antitrust laws.' In support of this appellees state, 'The key, undisputed fact is that the Armory Board is a governmental agency.' And we are cautioned not to 'overlook the fact that, in leasing the Stadium, the Armory Board acted pursuant to an Act of Congress.' In conclusion, after review of the pertinent authorities appellees deduce the 'rule that where direct governmental action, as distinct from private conduct, has caused the alleged injury to a plaintiff, the provisions of the federal antitrust laws are inapplicable * * *' and 'the action of the Armory Board in entering into the Stadium lease with the Redskins was a governmental act which is immune from application of the antitrust laws.'

After a study of the rationale back of the decided cases in this area of antitrust law, we consider that the issue, the facts considered most relevant by appellees, and the rule derived by appellees is a much too talismanic approach where scrupulous distinctions are called for. As was said earlier this year by Judge Goldberg in Woods Exploration & Producing Co. Inc. v. Aluminum Co. of America, (438 F.2d 1286), 'the instant case involve(s) state participation. That proposition, however, only begins the analysis, for it is not every governmental act that points a path to an antitrust shelter. We reject 'the facile conclusion that action by any public official automatically confers exemption.' George R. Whitten, Jr., Inc. v. Paddock Pool Builders, Inc., * * * 1 Cir. 1970, 424 F.2d 25, 30.' Like Circuit Judge Coffin in Paddock Pool, supra, 'we are particularly reluctant to rely on verbal formulae to solve problems of antitrust liability.'

444 F.2d at 934-935.

The significant point of Hecht is that the court, for the first time, drew the 'scrupulous distinctions' not to determine whether the Board was actually a private party, but rather to determine whether an admittedly governmental body fell within the scope of antitrust laws. The case is distinguishable on the ground that the governmental body was a federal rather than state entity.17 However, the court did not limit its reasoning to cases involving federal action, and it relied heavily on cases, such as Parker, involving state action. The implication of the court's language and approach is that states are not always immune18 from antitrust liability.

Our conclusion that a state (once found indeed to be a state) is not covered by sections 1 and 2 of the Sherman Act is inconsistent with the rationale of Hecht. We can do no more than say that, for the reasons already discussed, we disagree with the implication of Hecht that a state may sometimes be liable.

A final point raised by Shell must be considered. It argues that states engage in numerous 'business activities' that are similar to the conduct of private parties. The state acting as a consumer, as in this case, is a common example. Shell argues that when states act like private businesses or as consumers they should be treated as such under the antitrust laws. This may be true, but it is a matter for Congress to decide. The basis (grounded in federalism) for our conclusion that Congress did not intend the Sherman Act to apply to the states does not vary in strength depending on the specific activity in which the state engages. Therefore, we have no basis for concluding that Congress intended sections 1 and 2 of the Sherman Act to apply to some activities of the state but not to others.

We conclude that a state cannot be sued for alleged violations of sections 1 and 2 of the Sherman Act.19 The order of the district court dismissing Shell's counterclaim is affirmed, and the case is remanded for further proceedings.