Supreme Court Rules Phoebe Putney’s Acquisition Is Not Immune Under The State-Action Doctrine

On February 19, 2013, the U.S. Supreme Court unanimously reversed the U.S. Court of Appeals for the Eleventh Circuit's decision in FTC v. Phoebe Putney Health System.1 The Eleventh Circuit had affirmed a district court ruling that Phoebe Putney Health System's acquisition of Palmyra Medical Center was immune from FTC antitrust scrutiny under Georgia law. In a decision penned by Justice Sonia Sotomayor, the Court, in its first application of the state-action doctrine to Section 7 of the Clayton Act, held that Georgia had not "clearly articulated and affirmatively expressed" a state policy of displacing the federal antitrust laws that would otherwise apply to Phoebe Putney's planned acquisition of Palmyra Hospital. As a result, the Supreme Court held that "state-action immunity" did not apply.2

Background

In 1941, Georgia enacted statutes to enable the State to take a more active role in Georgia's market for health care services, including allowing state and local authorities to create "hospital authorities." Hospital authorities are generally 5- to 9-member boards that are appointed by the governing body of the county or municipality and are empowered to exercise certain broad governmental functions.3

Also in 1941, the city of Albany and Dougherty County formed the Hospital Authority of Albany- Dougherty County, which then acquired Phoebe Putney Memorial Hospital. In 1971, Palmyra Medical Center (now operated by HCA, Inc.) was started in Dougherty County. In the six counties surrounding Albany, Phoebe Putney and Palmyra accounted for 86 percent of the market for acutecare hospital services provided to commercial hospital plans.4

In 2010, the Hospital Authority approved Phoebe Putney's acquisition of Palmyra.5 After reviewing the acquisition, the FTC issued an administrative complaint alleging that Phoebe Putney's purchase of Palmyra would substantially lessen competition.6 The FTC and the State of Georgia sued the Hospital Authority, Phoebe Putney, and Palmyra in district court to enjoin the transaction pending resolution of the administrative hearing.7 The U.S. District Court for the Middle District of Georgia denied the FTC's request for a preliminary injunction on the grounds that the acquisition was immune from antitrust liability under the state-action doctrine.8 On appeal, the Eleventh Circuit upheld the district court's decision.9

Supreme Court's Decision and Analysis

Under Parker v. Brown, state action that is anticompetitive is...