## Facts

- Hertz announced borough-based surcharges for New York City residents renting cars, with different add-on amounts by borough.
- The surcharges applied to city residents renting from Hertz outlets in a broader regional area; non-city residents renting in the same boroughs would not pay increased rates.
- Hertz justified the surcharges as reflecting higher liability exposure associated with certain rentals, citing vicarious-owner liability under N.Y. Veh. & Traf. Law § 388 and high damage awards.
- Hertz exempted certain renter categories (e.g., corporate accounts and other groups Hertz deemed lower risk).
- New York City enacted Local Law No. 21 of 1992, prohibiting licensed rental-car companies from charging different rates based solely on the renter’s residence and barring discriminatory charges in consumer transactions.
- Hertz sued for declaratory and injunctive relief, alleging (i) the ordinance violated Sherman Act § 1 and (ii) the ordinance was preempted by New York State’s rental-car regulatory scheme, including N.Y. Gen. Bus. Law § 396-z.
- The district court dismissed for failure to state a claim under Rule 12(b)(6), and Hertz appealed.

## Issues

1. Whether a municipality’s enactment of an ordinance restricting rental-car pricing constitutes concerted action or an unlawful restraint of trade under Sherman Act § 1.
2. Whether the ordinance is insulated from Sherman Act liability because it reflects governmental regulation rather than private collusion (including state-action-type considerations).
3. Whether New York State law regulating rental-car practices preempted the City’s ordinance prohibiting residence-based pricing.

## Decision

- The Second Circuit affirmed the dismissal of Hertz’s complaint.
- The court held Hertz failed to state a Sherman Act § 1 claim because the City’s unilateral legislative act was governmental regulation, not a contract, combination, or conspiracy among separate economic actors.
- The court held the ordinance was not preempted by New York State law; the state statutory scheme did not expressly or impliedly bar the City from adopting additional consumer-protection limits on discriminatory pricing.

## Legal Principles

- Sherman Act § 1 targets concerted action among separate economic actors; a municipality’s unilateral ordinance, adopted as regulation, is not itself an agreement or conspiracy.
- Anticompetitive effects that flow from compliance with public law do not convert legislation into a private combination in restraint of trade.
- In evaluating local-law preemption under New York law, courts look for express preemption, clear legislative intent to occupy the field, or a direct conflict making dual compliance impossible.
- State consumer-protection regulation may set baseline requirements without foreclosing complementary local consumer-protection measures absent clear preemptive intent.

## Conclusion

The court upheld New York City’s ban on residence-based rental-car surcharges, concluding that the ordinance could not be attacked as a Sherman Act § 1 conspiracy and that New York’s state rental-car statutes did not preempt the City’s additional consumer-protection restriction.


Hertz Corp. v. City of New York, 1 F.3d 121 (2d Cir. 1993)