Antitrust Exemptions And Immunities

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CHAPTER VI

ANTITRUST EXEMPTIONS

AND IMMUNITIES

Courts and legislatures have recognized a number of exemptions and

immunities that place certain types of otherwise anticompetitive conduct

outside the reach of the antitrust laws. Several of these exemptions are

specific to particular industries or organizations, though two apply

generally to certain types of conduct. Antitrust exemptions are generally

disfavored by regulatory agencies and are often strictly construed.1 This

chapter addresses exemptions with broad applicability and then discusses

certain narrower exemptions most relevant in the healthcare context.

A.Nonprofit Entities and Non-Commercial Conduct

Given the nonprofit status of many participants in the healthcare

industry, a common question is whether and to what degree the antitrust

laws apply to the conduct of nonprofit entities. The Supreme Court has

held that nonprofit associations are subject to the antitrust laws.2 This is

consistent with the Supreme Court’s position that “there is a heavy

presumption against implicit exemptions” to the antitrust laws.3 Indeed,

the Supreme Court has held that a nonprofit entity may have certain

advantages in implementing anticompetitive conduct, as “it would enjoy

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1. FTC v. Ticor Title Ins. Co., 504 U.S. 621, 636 (1992).

2. Am. Soc’y of Mech. Eng’rs, v. Hydrolevel Corp., 456 U.S. 556, 576 (1982)

(finding that “[i]t is beyond debate that nonprofit organizations can be held

liable under the antitrust laws,” and that a nonprofit entity may be liable

for anticompetitive conduct from which the entity “derive[d] benefit”); see

also NCAA v. Bd. of Regents of the Univ. of Okla., 468 U.S. 85 (1984)

(finding “there is no doubt” that nonprofit entities are subject to Section 1

of the Sherman Act).

3. Goldfarb v. Va. State Bar, 421 U.S. 773, 787-88 (1975); see also United

States v. Phila. Nat’l Bank, 374 U.S. 321, 350-51 (1963); California v. Fed.

Power Comm’n., 369 U.S. 482, 485 (1962).

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the screen of superficial disinterest while devoting itself to serving the

interests of its members without concern for doing more than breaking

even.”4

In the healthcare context, the status of market participants as nonprofit

entities has come up most frequently in hospital mergers. Several hospitals

have asserted that their nonprofit status either renders them immune from

the antitrust laws,5 or at least not incentivized to engage in anticompetitive

conduct.6 These arguments have not prevailed in court.7 Generally, courts

have declined to hold that, as a factual matter, a hospital’s nonprofit status

actually makes it less likely to engage in anticompetitive conduct.8

One case, United States v. Carilion Health System,9 held that nonprofit

hospitals are not subject to Section 7 of the Clayton Act. Section 7 of the

Clayton Act applies to acquisitions of the “stock or other share capital” or

“assets of another person.”10 The Section 7 assets provision only applies

to acquirers who are “subject to the jurisdiction of the Federal Trade

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4. Cal. Dental Ass’n v. FTC, 526 U.S. 756, 768 (1999).

5. See, e.g., United States v. Carilion Health Sys., 707 F. Supp. 840 (W.D.

Va. 1989), aff’d, 892 F.2d 1042 (4th Cir. 1989).

6. See, e.g., United States v. Long Island Jewish Med. Ctr., 983 F. Supp. 121

(E.D.N.Y. 1997); FTC v. Univ. Health, Inc., 938 F.2d 1206 (11th Cir.

1991).

7. Long Island Jewish Med. Ctr., 983 F. Supp. at 121; Univ. Health, Inc., 938

F.2d at 1206; Hosp. Corp. of Am. v. FTC, 807 F.2d 1381 (7th Cir. 1986);

United States v. Rockford Mem’l Corp., 898 F.2d 1278, 1285-86 (7th Cir.

1989); United States v. Mercy Health Servs., 902 F. Supp. 968 (N.D. Iowa

1995), vacated on other grounds, 107 F.3d 632 (8th Cir. 1997); FTC v.

ProMedica Health Sys., 2011 U.S. Dist. LEXIS 33434, at *22 (N.D. Ohio

Mar. 29, 2011); FTC v. OSF Healthcare Sys., 852 F. Supp. 2d 1069, 1081-

82 (N.D. Ill. 2012).

8. Long Island Jewish Med. Ctr., 983 F. Supp. at 121; Univ. Health, Inc., 938

F.2d at 1206; Hosp. Corp. of Am., 807 F.2d at 1381; Rockford Mem’l Corp.,

898 F.2d at 1285-86; Mercy Health Servs., 902 F. Supp. at 989; ProMedica,

2011 U.S. Dist. LEXIS 33434, at *22; OSF Healthcare Sys., 852 F. Supp.

2d at 1081-82.

9. Carilion Health Sys., 707 F. Supp. at 841.

10. Id. at 841 n.1 (citing Mem. Op. on Defendants’ Motion for Summary

Judgment at 2 n.1, United States v. Carilion Health Sys., 707 F. Supp. 840

(W.D. Va. 1989)).

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Commission.” The court in Carilion found that there was no acquisition

of stock or share capital, and that the asset acquisition provision did not

apply because nonprofit entities are not “subject to the jurisdiction of the

Federal Trade Commission.”11 The court offered no explanation of its

reasoning that nonprofit entities are not subject to the Federal Trade

Commission’s (FTC) jurisdiction, but the decision was affirmed by the

Fourth Circuit in an unpublished opinion.12

Carilion’s holding was criticized by Judge Posner in dicta in his

opinion in United States v. Rockford Mem’l Corp.13 Judge Posner found

that the language in Section 7 referring to acquirers “subject to the

jurisdiction of the Federal Trade Commission” simply was a reference to

Section 11 of the Clayton Act, which enumerates certain industries that

are subject to the jurisdiction of other agencies for purposes of the Clayton

Act, reserving to the FTC Clayton Act jurisdiction over all other non-

enumerated industries.14 The industries subject to the jurisdiction of

agencies other than the FTC are listed in Section 11 as common carriers,

wire and radio communication common carriers, air carriers, and banks

and trusts.15 In other words, since Section 11 excluded from FTC

jurisdiction common carriers, wire and radio communication common

carriers, air carriers, and banks and trusts, the FTC does not have Clayton

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11. Carilion Health Sys., 707 F. Supp. at 841 n.1.

12. United States v. Carilion Health Sys., 892 F.2d 1042 (4th Cir. 1989).

13. Rockford Mem’l Corp., 898 F.2d at 1280.

14. Id. Section 11 of the Clayton Act reads, in relevant part: “Authority to

enforce compliance with sections 13, 14, 18, and 19 of this title by the

persons respectively subject thereto is vested in the Surface Transportation

Board where applicable to common carriers subject to jurisdiction under

subtitle IV of title 49; in the Federal Communications Commission where

applicable to common carriers engaged in wire or radio communication or

radio transmission of energy; in the Secretary of Transportation where

applicable to air carriers and foreign air carriers subject to part A of subtitle

VII of title 49; in the Board of Governors of the Federal Reserve System

where applicable to banks, banking associations, and trust companies; and

in the Federal Trade Commission where applicable to all other character of

commerce . . .” 15 U.S.C. § 21.

15. Rockford Mem’l Corp., 898 F.2d at 1280.