Antitrust - Michael Eric Ross

• Publication year: 1995

Antitrustby Michael Eric Ross^*

I. Introduction

The Eleventh Circuit handed down only two antitrust decisions in 1994.¹ Both affirmed judgments for defendants under the "state action" doctrine.²

II. Survey

Private conduct is protected from antitrust liability by the state action doctrine if (i) undertaken "pursuant to a 'clearly articulated and affirmatively expressed state policy' to replace competition with regulation"³ and (ii) "actively supervised" by the state.⁴ On the other hand, municipalities and other local governmental entities have to satisfy only the first prong of this test to qualify for state action immunity.⁵

Anticompetitive behavior may be fully in line with a "clearly articulated and affirmatively expressed state policy" even if not expressly authorized by the state.⁶ In Town ofHallie v. City of Eau Claire,¹ the Supreme Court held that it is enough if "[sjuch conduct is a foreseeable result" of a state regulatory scheme.⁸

By contrast, the "actively supervised" element of the state action exemption is more demanding.⁹ State officials must "have and exercise power to review particular anticompetitive acts of private parties and disapprove those that fail to accord with state policy."¹⁰

In Municipal Utilities Board v. Alabama Power Co.,¹¹ the Eleventh Circuit considered for the second time whether the state action doctrine shielded a public utility and twenty-two rural electric cooperatives in Alabama from exposure under the Sherman Act¹² for allocating service territories. The court of appeals previously held that "[t]he Alabama Legislature has clearly articulated a policy to displace competition in the retail electric market ... to prevent duplication of electric facilities" by enacting two statutes that incorporated the challenged territorial agreements.¹³ However, because these private agreements were not in the record, the Eleventh Circuit remanded the case to the district court to determine whether the "actively supervised" part of the state action test was met.¹⁴

Although the agreements, standing alone, appeared to authorize the parties to divide new customers without the Alabama Legislature's approval,¹⁵ the enabling legislation in issue expressly provided that "no subsequent agreement shall be valid unless and until it has been reviewed by the legislature."¹⁶ The Eleventh Circuit accepted the district court's interpretation of this clause to mean that the Alabama Legislature explicitly had to approve any customer allocations by defendants even if, in the meantime, the affected customers might go without electricity.¹⁷ The court of appeals refused to second-guess the wisdom of this legislative decision¹⁸ or to look into whether it reflected the independent judgment of the Alabama Legislature.¹⁹

The state action doctrine also proved to be dispositive in FTC v. Hospital Board of Directors.²⁰ Again, it was found to be available to defendants.

The FTC brought suit under Section 7 of the Clayton Act²¹ to prevent the Hospital Board of Directors of Lee County, Florida (the "Board"), d/b/a Lee Memorial Hospital ("Lee Memorial"), from acquiring Cape Coral Hospital ("Cape Coral"), a private, non-profit hospital.²² According to the Commission, this transaction would be anticompetitive by reducing the number of general hospitals in Lee County from four to three and increasing Lee Memorial's market share from forty-nine percent to sixty-seven percent.²³

The district court dismissed the case on summary judgment under the state action doctrine without any assessment of the actual competitive impact of the acquisition.²⁴ The Eleventh Circuit upheld this ruling.²⁵

The Board is a non-profit public body created in 1963 by special act of the Florida Legislature "to establish and to provide for the operation and maintenance of a public hospital" in Lee County.²⁶ By virtue of this statute the Board acquired and expanded the hospital that later became Lee Memorial, which at that time had one hundred percent of the market.²⁷ The Board's enabling legislation was amended in 1987 to authorize it, among other things, to "establish and provide for the operation and maintenance of additional hospitals" in Lee County and to "control, any . . . corporation ... or other organization, public or private, which the . . . [B]oard finds operates for the purposes consistent with, and in furtherance of, the purposes and best interests of [Lee Memorial]....."²⁸

It was uncontested that the Board is a political subdivision of the State of Florida and hence did not have to satisfy the "actively supervised" condition of the state action doctrine.²⁹ Nor was there any dispute that the Board was authorized to acquire Cape Coral.³⁰ The only question on appeal, therefore, was whether this authorization constituted a "clearly articulated and affirmatively expressed" state policy to displace competition with regulation under the "foreseeability" standard of Hallie.³¹

The FTC maintained that a foreseeable anticompetitive effect "is one that ordinarily occurs, routinely occurs, or is inherently likely to occur as result of the empowering legislation."³² As construed by the court of appeals, the Commission was "attempting to impose a narrow definition" of foreseeability that essentially turned it "into a test of inevitability, falling just short of requiring the state to expressly indicate its...