U.S. Supreme Court Reverses 'State Action' Decision, Confirming Narrow Scope Of Immunity

In FTC v. Phoebe Putney, the Supreme Court has unanimously reversed the Eleventh Circuit holding that a Georgia hospital authority's acquisition of a hospital was covered by state-action immunity, emphasizing that "state-action immunity is disfavored." The Supreme Court held that, as the State had not clearly articulated and affirmatively expressed a policy allowing the hospital authority to make acquisitions that substantially lessen competition, state-action immunity does not apply. The acquisition for which the hospital authority claimed immunity would have given it an 86 percent market share for acute-care hospital services provided to commercial health plans in the area around Albany, Georgia. In Justice Sotomayor's first antitrust opinion since joining the Supreme Court, the Court concluded that the state-action immunity defense fails under the clear-articulation standard because there is no evidence the State affirmatively contemplated that hospital authorities would use their power to anticompetitively consolidate hospital ownership. Under the state-action immunity doctrine, federal antitrust immunity may extend to non-state actors carrying out a state regulatory program intended to displace competition. Here, the Georgia legislature granted specially created "hospital authorities" only general corporate powers, including the power to acquire hospitals. These hospital authorities may not operate or construct any project for profit and could only set rates so as to cover operating expenses and create reasonable reserves. Approaching the clear-articulation standard practically, the Court has previously held that, if displacement of competition was "the inherent, logical, or ordinary result of the exercise of authority delegated by the state legislature," then the legislature has, in effect, clearly articulated a state policy to displace competition even if the State has not expressly authorized the anticompetitive conduct. In Phoebe Putney, the Court held that the Eleventh Circuit applied this forseeability standard too loosely. According to the Eleventh Circuit, anticompetitive conduct is foreseeable if it could have been "reasonably anticipated" by the state legislature. The Court rejected this interpretation and clarified that "the State must have foreseen and implicitly endorsed the anticompetitive effects as consistent with its policy goals." The Court identified two of its prior cases as examples where this formulation of the...