Antitrust Immunities and Defenses

As both the electric and gas industries have moved from a regulated
to a partially deregulated environment, firms in these industries have had
to adjust their business activities to take into account federal and state
antitrust laws. This adjustment requires consideration of the potential
sources of antitrust liability and the defenses and immunities that are
available to rebut antitrust claims.
Firms operating in regulated industries are accustomed to less
restrictions under the Sherman and Clayton Acts because of the existence
of certain immunities. The same behavior that might be protected or even
encouraged when done in a regulated environment, however, could lead
to antitrust exposure when pursued in an unregulated environment. As
deregulation progresses at different paces in different areas of the
country, the nature and scope of remaining immunity could differ. This
chapter provides the current state of the law with regard to antitrust
A. State Action Immunity
The state action doctrine exempts certain conduct from the antitrust
laws because of a decision by a state to displace competition with
regulation. The doctrine originated in Parker v. Brown,
a 1943 Supreme
Court case involving California’s regulation of agricultural products. The
Court articulated the current test for application of the doctrine in
California Retail Liquor Dealers Association v. Midcal Aluminum, Inc.
There, it established a two-prong test for determining when the doctrine
applies to acts carried out by private parties under state authorization: the
state must (1) clearly articulate its intention of displacing competition
and (2) actively supervise the conduct in question.
In two recent decisions, the Supreme Court addressed the two prongs
of the Midcal test. In the first, FTC v. Phoebe Putney Health System,
Court clarified the requirements to satisfy the clear articulation prong. In
. Parker v. Brown, 317 U.S. 341 (1943).
. 445 U.S. 97 (1980).
. Id. at 105-06.
. FTC v. Phoebe Putney Health Sys., 133 S. Ct. 1003 (2013).
194 Energy Antitrust Handbook
the second, North Carolina State Board of Dental Examiners v. FTC,
the Court clarified the circumstances under which active supervision is
1. Clearly Articulated Policy
The first prong of the Midcal test is satisfied if “the State as
sovereign clearly intends to displace competition in a particular field
with a regulatory structure.”
The state policy need not explicitly
authorize specific anticompetitive conduct for this first prong to be
satisfied. But the anticompetitive conduct must be a “foreseeable result”
from the regulation.
Actual displacement is unnecessaryintent will sufficebut a state
must do more than allow an entity to participate in a market to shield that
entity from antitrust enforcement. In other words, “‘simple permission to
play in a market’ does not ‘foreseeably entail permission to roughhouse
in that market unlawfully.’”
Rather, as explained in Phoebe Putney, the “foreseeable result” must
be a logical or ordinary outcome of t he state policy to satisfy the clear
articulation prong of the Midcal test.
In Phoebe Putney, the Court was
asked t o decide whether an anticompetitive merger to monopoly was a
foreseeable result of Georgia’s hospital authority’s law under Midcal.
The Georgia law provided for the formation of local hospital authorities,
and conferred on those authorities twenty-seven enumerated powers,
including the power to acquire “by purchase, lease, or otherwise”
hospitals and other types of public health facilities.”
The Court decided
that the power to acquire hospitals would not ordinarily lead to
anticompetitive results and therefore rejected the state action immunity
In making that determination, the Court explained that in
instances where it has determined anticompetitive effects from a policy
. North Caroli na State Bd. of Dental Examiners v. FTC, 135 S. Ct. 1101
. See Southern Motor Carriers Rate Conf., Inc. v. United States, 471 U.S.
48, 64 (1985).
.. Town of Hallie v. City of Eau Claire, 471 U.S. 34, 42 (1985); City of
Columbia v. Omni Outdoor Adver., 499 U.S. 365, 373 (1991).
. See Phoebe Putney, 133 S. Ct. at 1013 (q uoting Kay Elec. Co-op. v. City
of Newkirk, 647 F.3d 1039, 1043 (10th Cir. 2011)).
.. Phoebe Putney, 133 S. Ct. at 1011.
.. Id. at 1007.
.. Id. at 1014.

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