Chapter I. Scope of the State Action Doctrine

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CHAPTER I

SCOPE OF THE STATE ACTION DOCTRINE

The state action doctrine is a set of judicially created rules that

determine whether the federal antitrust laws apply to particular

anticompetitive interstate commercial conduct by states or other non-

federal governmental entities1 or whether a state’s legislative and

regulatory actions remove the particular conduct from federal antitrust

scrutiny.2 At its heart, the state action doctrine respects the reserved

authority of the several states to regulate economic activity within their

respective borders3 as against the power of Congress to regulate

1. The Sherman Act’s coverage of interstate commercial conduct is

coextensive with Congress’s power over interstate commerce. See, e.g.,

Summit Health v. Pinhas, 500 U.S. 322, 329 n.10 (1991) (“It is firmly

settled that when Congress passed the Sherman Act, it ‘left no area of its

constitutional power [over commerce] unoccupied.’”) (quoting United

States v. Frankfort Distilleries, Inc., 324 U.S. 293, 298 (1945)) (alteration

in original).

2. Courts traditionally have defined the state action doctrine in terms of

immunity from Sherman Act scrutiny. Nevertheless, in Cine 42nd Street

Theater Corp. v. Nederlander Org., 790 F.2d 1032, 1040 (2d Cir. 1986),

the Second Circuit concluded that “the state action defense is [also]

generally available to parties defending against a § 7 Clayton Act

violation.” The state action doctrine’s logic has even been invoked to

restrict the Federal Trade Commission’s (FTC) rulemaking authority to

nullify state regulations. In California State Board of Optometry v. FTC,

910 F.2d 976 (D.C. Cir. 1990), the D.C. Circuit vacated an FTC rule that

purported to create a defense to any state proceeding brought against an

optometrist for violating certain state restrictions upon the practice of

optometry. Relying upon state action cases, the court held that a federal

agency “may not exercise authority over States as sovereigns unless that

authority has been unambiguously granted to it.” Id. at 982.

3. The Tenth Amendment to the U.S. Constitution provides: “The powers not

delegated to the United States by the Constitution, nor prohibited by it to