Governmental Interests Analysis

By the late 1970s, spent nuclear fuel had accumulated at reactor sites across the country, totaling some 8,000 metric tons with projections of 72,000 metric tons by the year 2000. Government studies indicated that several reactors could be forced to shut down in the near future due to insufficient storage capacity in on-site pools. California responded to these concerns and the absence of a permanent disposal method by amending its energy laws in 1976. In 1974 California had enacted the Warren-Alquist State Energy Resources Conservation and Development Act. The Act requires any utility seeking to construct an electric power generating plant, including a nuclear facility, to obtain certification from the State Energy Resources Conservation and Development Commission after a multi-stage review process. The Warren-Alquist Act was amended in 1976 to provide additional state regulation of new nuclear powerplant construction. This section directs the Commission to determine on a case-by-case basis that adequate storage capacity for spent fuel rods will exist when needed. Each utility must also maintain continuous on-site full core reserve storage capacity. Section 25524.2 established a moratorium on the certification of new nuclear plants. Certification is barred until the Commission finds that a demonstrated technology or means for the permanent disposal of high-level nuclear waste has been developed and approved by the United States. In 1978 petitioners Pacific Gas & Electric Co. and Southern California Edison Co. filed suit in the United States District Court for the Eastern District of California. They sought a declaratory judgment that the two sections and other provisions of the Warren-Alquist Act were pre-empted by the Atomic Energy Act of 1954. The District Court held that the petitioners had standing, that the challenges were ripe, and that both sections were invalid as pre-empted. The Court of Appeals for the Ninth Circuit affirmed standing and ripeness as to section 25524.2 but held the challenge to section 25524.1(b) unripe. On the merits, the court held that the nuclear moratorium provisions of § 25524.2 were not pre-empted because §§ 271 and 274(k) of the Atomic Energy Act constitute a congressional authorization for States to regulate nuclear powerplants for purposes other than protection against radiation hazards. The Supreme Court granted certiorari limited to the ripeness of the challenges to both sections and the pre-emption of section 25524.2.

In 1935 the National Society of Professional Engineers was organized to address the nontechnical aspects of engineering practice. This included promotion of the professional, social, and economic interests of its members. The Society has 69,000 members residing throughout the United States and in some foreign countries. Approximately 12,000 members are consulting engineers who offer services to governmental, industrial, and private clients. In July 1964 the Society adopted Section 11(c) of its Code of Ethics. This section prohibits engineers from soliciting or submitting engineering proposals on the basis of competitive bidding. The provision defines competitive bidding as the formal or informal submission or receipt of verbal or written estimates of cost or proposals in terms of dollars, man days of work, percentage of construction cost, or any other measure allowing a prospective client to compare engineering services on a price basis prior to selection of an engineer. The Society's Board of Ethical Review has uniformly interpreted the ethical rules as prohibiting submission of any form of price information to a prospective customer that would enable price comparison on engineering services. If a client requires such information, the firm must withdraw from consideration. This preserves the traditional method under which a client initially selects an engineer on the basis of background and reputation rather than price, after which the parties may negotiate a fee. Engineering fees amount to well over $2 billion each year. They constitute about 5 percent of total construction costs. In any given facility, 50 to 80 percent of the cost of construction results directly from engineering work. In 1972 the United States filed a civil antitrust complaint against the Society in the District Court. The complaint alleged that members had agreed to abide by canons prohibiting submission of competitive bids for engineering services. It claimed this suppressed price competition and deprived customers of the benefits of free and open competition. The complaint prayed for an injunction terminating the agreement. In its answer the Society admitted the essential facts alleged but asserted that the ethical standard was reasonable because competition among professional engineers was contrary to the public interest. Competitive pressure would lead engineers to design inefficient and unnecessarily expensive structures and methods of construction, endangering public health, safety, and welfare. The parties compiled a voluminous discovery and trial record. The District Court made detailed findings about the engineering profession, the Society, its members' participation in interstate commerce, the history of the ban on competitive bidding, and incidents in which the ban appears to have been violated or enforced. The court made no finding on whether or to what extent competition had led to inferior engineering work adversely affecting public health, safety, or welfare. The District Court concluded that the prohibition was on its face a violation of Section 1 of the Sherman Act. After the initial judgment was vacated for reconsideration in light of Goldfarb v. Virginia State Bar and re-entered, the Court of Appeals affirmed. The Supreme Court granted certiorari to decide whether the District Court should have considered the factual basis for the proffered justification before rejecting it.

Virginia law made it unprofessional conduct for a licensed pharmacist to publish, advertise, or promote any price for prescription drugs under Va. Code Ann. § 54-524.35(3). The Virginia State Board of Pharmacy regulated the profession to protect public health, safety, and welfare. It licensed pharmacists only after they showed good moral character, graduated from an approved school, completed up to twelve months of experience, and passed a Board examination. Licensed pharmacists remained subject to penalties or license revocation for negligence, fraud, or unprofessional conduct. Prescription drug prices varied sharply even within the same locality. In Richmond the cost of forty Achromycin tablets ranged from $2.59 to $6.00. In the Newport News-Hampton area the price of tetracycline ranged from $1.20 to $9.00. About ninety-five percent of prescriptions were filled with dosage forms prepared by manufacturers. Some pharmacies refused to quote prices over the telephone. An individual Virginia resident who suffered from diseases requiring daily prescription drugs, together with two nonprofit organizations whose members included many users of such drugs, brought suit against the Board and its members. The plaintiffs claimed the ban prevented them from learning where their limited resources could be spent most effectively. A prior challenge to the same statute brought by a drug retailer and one of its pharmacists had been rejected on due-process and equal-protection grounds. The three-judge District Court for the Eastern District of Virginia declared the quoted portion of the statute void and enjoined its enforcement. The Supreme Court noted probable jurisdiction of the Board's appeal.