General Exemptions and Immunities

AuthorAmerican Bar Association
A. Introduction
In areas where federal, state, or local governments have adopted economic or
social policies that conflict with open competition, Congress sometimes has resolved
these conflicts by creating explicit statutory exemptionsoften industry-specific
from the antitrust laws. In the absence of a specific statutory exemption, federal
courts have developed exemptions and immunities for conduct involving some
degree of government action. These exemptions and immunities derive from
principles of federalism and other constitutional considerations, and from the related
doctrine of deference to government decision-making. This chapter discusses these
judicially created exemptions and immunities, as well as doctrines of deference
applicable to government action.
B. The State Action Doctrine
The state action doctrine, also referred to as Pa rker immunity, immunizes
anticompetitive policies that are the intentional or foreseeable result of state or local
government policy.1 The immunity was first recognized in Parker v. Brown,2 in
which the U.S. Supreme Court upheld a California program regulating the marketing
of raisins as an “act of government which the Sherman Act did not undertake to
prohibit.”3 “In a dual system of government,” the Court explained, “in which, under
the Constitution, the states are sovereign, save only as Congress may constitutionally
subtract from their authority, an unexpressed purpose to nullify a state’s control over
its officers and agents is not lightly to be attributed to Congress.”4 The Court found
no such purpose underlying the antitrust laws. The state action doctrine thus offers an
antitrust defendant an affirmative defense, with the party claiming immunity under
2. 317 U.S. 341 (1943).
3. Id. at 352.
4. Id. at 351; see also City of Columbia v. Omni Outdoor Adver., 499 U.S. 365, 370 (1991) (Pa rker
relied on “principles of federalism and state sovereignty” to hold that “the Sherman Act did not
apply to anticompetitive restraints imposed by the States ‘as an act of government’”); Bankers Ins.
Co. v. Florida Residential Prop., 137 F.3d 1293, 1295 (11th Cir. 1998) (“Out of federal deference
to state sovereignty, states are immune from federal antitrust law for their actions as sovereign.”).
the doctrine bearing the burden of proof.5 The Fourth, Fifth, Ninth, and Eleventh
Circuits have held that denial of state action immunity is not an immediately
appealable order.6 The Fifth Circuit has held that governmental, but not private,
defendants may pursue immediate appeals of such denials.7
When a state legislature acts by adopting legislation, “its actions constitute those
of the State, and ipso facto are exempt from the operation of the antitrust laws.”8
When the state’s highest court acts in a legislative capacity by enacting rules, its
actions are likewise those of the state and exempt from the antitrust laws.9 Where,
however, the actions of private actors or of subordinate government entities are
challenged, additional analysis is required to determine whether the conduct is
exempt from the antitrust laws. That analysis is described below.
1. State Action Analysis of Private Conduct
A Two-Part Framework
The Supreme Court explained in Ca lifornia Retail Liquor Dealers Ass’n v.
Midcal Aluminum10 that there are “two standards for antitrust immunity” under the
Par ker doctrine: (1) the challenged restraint must be “one clearly articulated and
affirmatively expressed as state policy,” and (2) “the policy must be ‘actively
supervised’ by the State itself.”11
Midcal’s two-pronged test has supplied the analytical framework within which
courts have determined the availability of the state action defense to private parties.
Disputes concerning the application of the state action doctrine have focused upon
satisfaction of the “clear articulation” and “active supervision” requirements, and the
treatment of policies that emanate from public entities other than a state legislature.
5. See, e.g., FTC v. Ticor Title Ins. Co., 504 U.S. 621, 625 (1992) (state action was “[o]ne of the
principal defenses” asserted); Yeager’s Fuel v. Pa. Power & Light Co., 22 F.3d 1260, 1266 (3d Cir.
1994) (“state action immunity is an affirmative defense” as to which defendant “bears the burden
of proof”); Daniel v. American Bd. of Emergency Med., 235 F. Supp. 2d 194, 206 (W.D.N.Y.
2002) (“As state action immunity has generally been treated by the courts, including the Supreme
Court, as an affirmative defense, the party asserting it bears the burden of its proof”), aff’d, 428
F.3d 408 (2d Cir. 2005).
6. See SmileDirectClub, LLC v. Battle, 2021 U.S. App. LEXIS 21393, *18-19 (11th Cir. 2021)
(denial of state action immunity not immediately appealable); Auraria Student Hous. at the
Regency, LLC v. Campus Vill. Apartments, LLC, 703 F.3d 1147, 1153 (10th Cir. 2013) (same)
(denial of state action immunity is not immediately appealable), South Carolina State Bd. of
Dentistry v. FTC, 455 F.3d 436, 447 (4th Cir. 2006) (same), and Huron Valley Hosp. v. City of
Pontiac, 792 F.2d 563, 567 (6th Cir. 1986) (same).
7. See Louisiana Real Estate Appraisers Bd. v. FTC, 976 F.3d 597, 605 (5th Cir. 2020) (denying
immediate appeal of denial of state action immunity by state board comprised of market
participants); Acoustic Sys. v. Wenger Corp., 207 F.3d 287, 292 (5th Cir. 2000) (denying
immediate appeal by private defendant); Martin v. Memorial Hosp. at Gulfport, 86 F.3d 1391,
1397 (5th Cir. 1996) (granting immediate appeal by municipality and state subdivision hospital
district). The Seventh Circuit has suggested, in dicta, that the denial of a governmental defendant’s
state action immunity is subject to immediate appeal. See Segni v. Commercial Office of Spain,
816 F.2d 344, 346 (7th Cir. 1987). In addition, the Tenth Circuit has left open the possibility of
such a distinction. See Aurar ia Student Housing, 703 F.3d at 1151 (denying immediate appeal by
private defendant and declining to address whether governmental defendants are permitted such
8. Hoover v. Ronwin, 466 U.S. 558, 567-68 (1984). See also id. at n.17 (suggesting that decisions by
the governor of a state will be deemed actions of the state).
9. Id. at 567-68.
10. 445 U.S. 97 (1980).
11. Id. at 105 (citation and footnote omitted).
To assert a state action defense, the proponent must demonstrate that the
challenged conduct was undertaken “pursuant to a ‘clearly articulated and
affirmatively expressed state policy’ to replace competition with regulation.”12 The
clear articulation requirement serves to ensure that the state has authorized departures
from free market competition as a matter of policy. In Southern Motor Ca rriers Rate
Conference v. United States,13 the Supreme Court explained that “a state policy that
expressly permits, but does not compel, an ticompetitive conduct may be ‘clearly
articulated’ within the meaning of Midcal.”14
Clear articulation of a state policy to displace competition is most often found
through an express statutory provision, commonly an enabling statute for a state
agency or program. The state, however, need not explicitly authorize specific
conduct for that conduct to satisfy the first prong of the Midcal test: “[I]f the State’s
intent to establish an anticompetitive regulatory program is clear, . . . the State’s
failure to describe the implementation of its policy in detail will not subject the
program to the restraints of the federal antitrust laws.”15
When not explicit in a statute, the state’s intent to displace competition can be
inferred if anticompetitive conduct foreseeably results from the regulation. In Town
of Hallie v. City of Eau Claire,16 the Supreme Court considered “how clearly a state
policy must be articulated for a municipality to be able to establish that its
anticompetitive activity constitutes state action.”17 Unincorporated townships located
adjacent to Eau Claire alleged that the city had violated the Sherman Act by using
“its monopoly over sewage treatment to gain an unlawful monopoly over the
provision of sewage collection and transportation services.”18 After examining the
Wisconsin statutes that authorized cities to operate sewage systems, to determine the
districts to be served, and to refuse service to unincorporated areas, the Supreme
Court rejected the contention that without express mention of anticompetitive
conduct in the statutory language there was no evidence of a state policy to displace
competition. Instead, because the challenged conduct was “a foreseeable result of
12. Hoover, 466 U.S. at 569 (citation omitted).
13. 471 U.S. 48 (1985).
14. Id. at 61; see also Snake River Valley Elec. Ass’n v. Pacificorp, 238 F.3d 1189, 1192 (9th Cir.
2001) (rejecting plaintiff’s argument that state action doctrine protects anticompetitive conduct
only if compelled by state regulation).
15. Southern Motor Carrier s, 471 U.S. at 64-65 (footnote omitted); see also Green Sols. Recycling,
LLC v. Reno Disposal Co., 814 F. App’x 218, 220 (9th Cir. 2020) (affirming summary judgment
for the city of Reno against a recycling company because the Nevada law allowing cities to
“displace or limit competition by granting an exclusive franchise to a private party for the
collection and disposal of garbage and other waste” was broad enough to include “recyclable
materials” and met the clear articulation requirement); Danner Constr. Co. v. Hillsborough Cnty.,
Fla., 608 F.3d 809 (11th Cir. 2010) (granting county exclusive control over waste stream is
evidence of authorization to act anticompetitively). But see Chamber of Commerce v. City of
Seattle, 890 F.3d 769, 779-80 (9th Cir. 2018) (relevant state statute did not clearly articulate and
affirmatively express a state policy authorizing private parties to fix prices for fees that for-hire
drivers pay to ride-sharing companies like Uber or Lyft in exchange for ride-referral services). If
the state act contains an explicit exemption from antitrust liability under state law, the legislature’s
intent to displace competition may be established for federal antitrust purposes as well. See, e.g.,
McCallum v. City of Athens, 976 F.2d 649 (11th Cir. 1992).
16. 471 U.S. 34 (1985).
17. Id. at 40.
18. Id. at 37.

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