Antitrust – City of Myrtle Beach defeats antitrust claim

Where the South Carolina code granted the City of Myrtle Beach an exclusive franchise to sell beach equipment on the City’s beaches, the City prevailed in an antitrust suit brought by a company that was prevented from providing beach equipment delivery and setup services on the City’s beaches.

Background

The City of North Myrtle Beach, South Carolina prohibits most commercial activities on its beaches. When Cherry Grove Beach Gear LLC, or 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 that the City had 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.

Analysis

Under the state action immunity doctrine, federal antitrust laws do “not apply to anticompetitive restraints imposed by the States ‘as an act of government.’” However, cities “are not themselves sovereign,” and therefore state action immunity takes hold only when cities act “pursuant to state policy to displace competition with regulation or monopoly public service.”

For state action immunity to attach, the state legislature must have anticipated significant municipal involvement in an industry. A “broad authority to regulate” a particular industry demonstrates sufficient intent to displace the antitrust laws.

This court’s decision in Western Star Hospital Authority, Inc. v. City of Richmond, 986 F.3d 354 (4th Cir. 2021), makes clear that the City is entitled to state action immunity. As the district court correctly pointed out, S.C. Code §§ 5-7-30 and 5-7-145 “leave no doubt as to the City’s prerogative to exclusively provide on-beach setup and rentals to support lifeguard services and displace competition.”

The South Carolina Code authorizes the City to provide “lifeguard and other safety related services on and along the public beaches” with either “municipal employees or by service agreement with a private beach safety company.” The statute clarifies that the “services” which the municipality may provide or contract out include “the exclusive right . . . to rent . . . beach equipment . . . on the beach.” This provision licenses the City to grant an exclusive franchise to sell beach equipment on the beach. Section 5-7-30 confirms that the City has the authority to grant franchises for operations on public beaches.

CGBG does not dispute that § 5-7-145 authorizes the City to displace competition by granting an exclusive franchise for beach equipment installation. Instead, CGBG argues that the statute does not permit the City to effectively grant itself the exclusive franchise, and the monopoly must instead belong to a private company.

This argument fails in light of Western Star. In that case, as in this one, the state legislature had explicitly granted a substate governmental agency the right to play a role in ambulance services and to implement anticompetitive regulations, but it did not explicitly grant the right to monopolize the market. However, the statute plainly anticipated that the City of Richmond could regulate in such a way that “necessarily supplant[ed] unrestrained market competition,” and therefore the state policy was sufficiently articulated for the defendants to claim state action immunity.

Because the state statute anticipates the City playing an anticompetitive role in the market for on-beach equipment rentals, the City qualifies for state-action immunity from federal antitrust law. The South Carolina legislature authorized the City to impose a monopoly on beach equipment installation, so the City’s monopoly does not constitute unexpected anticompetitive behavior. Indeed, it is the “very purpose” of § 5-7-145 to “displace unfettered business freedom.”

CGBG also claims that Supreme Court precedent establishes an exception to state action immunity when “the State acts not in a regulatory capacity but as a commercial participant in the relevant market.” Since the City has anointed itself the sole participant in the market for setting up beach equipment, CGBG argues that state action immunity should not apply. However, “[t]he Supreme Court has never recognized such an exception; in fact, it has suggested only that it might possibly exist.”

Affirmed.

Cherry Grove Beach Gear LLC v. City of North Myrtle Beach, Case No. 24-2161, Dec. 23, 2025. 4th Cir. (Gregory), from DSC at Florence (Dawson III). Kenneth Ray Moss II for Appellants. Elbert Stockman Dorn Sr. for Appellee. VLW 025-2-450. 10 pp.