Antitrust Immunities and Defenses

• Pages: 193-209

193

CHAPTER 7

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

immunities.

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,

1

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.

2

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.

3

In two recent decisions, the Supreme Court addressed the two prongs

of the Midcal test. In the first, FTC v. Phoebe Putney Health System,

4

the

Court clarified the requirements to satisfy the clear articulation prong. In

1

. Parker v. Brown, 317 U.S. 341 (1943).

2

. 445 U.S. 97 (1980).

3

. Id. at 105-06.

4

. 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,

5

the Court clarified the circumstances under which active supervision is

required.

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.”

6

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.

7

Actual displacement is unnecessary—intent will suffice—but 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.’”

8

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.

9

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.”

10

The Court decided

that the power to acquire hospitals would not ordinarily lead to

anticompetitive results and therefore rejected the state action immunity

defense.

11

In making that determination, the Court explained that in

instances where it has determined anticompetitive effects from a policy

5

. North Caroli na State Bd. of Dental Examiners v. FTC, 135 S. Ct. 1101

(2015).

6

. See Southern Motor Carriers Rate Conf., Inc. v. United States, 471 U.S.

48, 64 (1985).

7

.. 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).

8

. 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)).

9

.. Phoebe Putney, 133 S. Ct. at 1011.

10

.. Id. at 1007.

11

.. Id. at 1014.