Supreme Court Limits Availability of State Action Immunity from Federal Antitrust Liability

The Supreme Court decision in FTC v. Phoebe Putney Health System, Inc., makes clear that state action immunity from federal antitrust laws is disfavored, and local governmental, quasi-public and private entities can only qualify for the immunity under certain specific conditions.

In a unanimous decision issued on February 19, 2013, the Supreme Court of the United States limited availability of state action immunity from federal antitrust laws for local governmental entities. In FTC v. Phoebe Putney Health System, Inc., the Supreme Court ruled that local governmental authorities are not immune from federal antitrust laws when engaging in anticompetitive conduct, notwithstanding a grant of general powers by a state. If the state did not "clearly articulate and affirmatively express" a policy to displace competition, then state action immunity will not apply to shield the conduct from antitrust liability. To qualify for state action immunity, the local governmental entity's conduct must instead be the "inherent, logical, or ordinary" result of exercising a state's delegated authority. Moreover, the Supreme Court cautioned that even if a state authorizes some forms of anticompetitive conduct, such authorization does not establish that the state has affirmatively blessed other forms of anticompetitive conduct. The Supreme Court's ruling means that local governmental and quasi-public entities must re-examine their enabling legislation to determine whether and to what extent state legislation shields their conduct from federal antitrust liability. Similarly, private entities should carefully review any legislation that forms the basis for their claim of state action immunity.

The Phoebe Putney decision involved the Federal Trade Commission's (FTC's) challenge of a Georgia governmental hospital authority's purchase of a competing hospital. Georgia's Hospital Authorities Law authorizes political subdivisions (i.e., counties and municipalities) to create special-purpose public entities called hospital authorities, and grants them 27 powers upon creation. Included in this general grant of powers is the power to "acquire by purchase, lease, or otherwise and to operate projects."

In 1941, pursuant to this law, the city of Albany and the county of Dougherty created the Hospital Authority of Albany-Dougherty County (Authority), and the Authority subsequently acquired Phoebe Putney Memorial Hospital (Memorial). In 1990, the Authority created two nonprofit...