Recurring Policy Issues Raised by the Doctrine
| Pages | 127-149 |
CHAPTER VI
RECURRING POLICY ISSUES RAISED BY THE
DOCTRINE
The state action defense is a judicially created doctrine designed to
accommodate federal policy favoring robust competition with principles
of federalism and associated state public policies that are unrelated to or
in conflict with competition goals. Perhaps it is not surprising, then, that
the doctrine presents a number of recurring policy issues. What entities
should be eligible to invoke the doctrine? What state poli cies supplant
federal competition policies? Must the challenged conduct be supervised
by state regulators, and if so, to what extent? What if a state-sanctioned
entity competes with private actors? What if the effects of a state’s
policy are felt outside its borders? This chapter discusses several
recurring issues raised by the doctrine that have garnered the attention of
commentators and the courts.
A. What Entities Should Qualify as the State?
The Supreme Court has held that “actions of the state itself, acting as
sovereign, are covered by the state action doctrine by their very nature
and without further inquiry.”1 As explained in Hoover v. Ronwin,2
“[w]hen the conduct is that of the sovereign itself . . . the danger of
unauthorized restraint of trade does not arise.”3 “The only requirement,”
the Court continued, “is that the action be that of the State acting as a
sovereign.”4 Outside of some relatively straightforward and obvious
circumstances, however, determining precisely when the challenged
activity constitutes the state acting as sovereign is rarely simple. As
Professors Areeda and Hovenkamp have explained:
1. FTC STAFF, REPORT OF THE STATE ACTION TASK FORCE 6 (2003)
[hereinafter FTC STATE ACTION REPORT].
2. 466 U.S. 558 (1984).
3. Id. at 569.
4. Id. at 574 (quotation omitted).
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128 State Action Practice Manual
Presumably we would reserve the “state itself” designation only for
government agencie s that are both statewide in their jurisdiction and
that have no particular susceptibility to capture by a particula r business
group. This would cer tainly include the legislature, state supreme
court, and governor ’s office. It would never include agencies that are
dominated by members of the regulated industry and not directly
answerable through the electoral process . . . . Unfortunately, the cases
have been far less clear.5
Only a few cases involve direct acts of a state sovereign. The classic
examples—state legislatures6 and state supreme courts7—clearly act as
sovereigns. Therefore, as the Court stated in Hoover: “Where the conduct
at issue is in fact that of the state legislature or supreme court, we need
not address the issues of ‘clear articulation’ and ‘active supervision.’”8
“Although there is little case law on the sovereign status of
governors, some commentators have argued that governors should at
least sometimes be entitled to the same straightforward state action
exemption as actions of the state legislature or the state supreme court.”9
5. 1 A. Philip E. AREEDA & HERBERT J. HOVENKAMP, ANTITRUST LAW: AN
ANALYSIS OF ANTITRUST PR INCIPLES AND THE IR APPLICATION, ¶ 224b,
at104-105 (4th ed. 2013) [hereinafter AREEDA & HOVENKAMP].
8. Hoover, 466 U.S. at 569.
9. FTC STATE ACTION REPORT, supra note 1, at 6. Professors Lopatka and
Page agree with Areeda and Hovenkamp, see supra note 5, but would
limit that designatio n to the governor onl y, excluding all other executive
branch authorities. See J OHN E. LOPATKA & WILLIAM H. PAGE,
NARROWING THE SCOPE OF THE STATE ACTION DOCTRINE: REPORT
PREPARED FOR THE FEDERAL TRADE COMMISSION 32-33 (2001). In their
view, “the foundation of the state action doctrine—a respect for the
sovereign power of states coupled with the background norm of
competition as a fundamental national policy—coun sels that no executi ve
branch official or agency, with the l ikely exception of the governor
himself, should be considered the state itself. The strongest argument for
this conclusion is based on political legitimacy.” Id. at 33. In contrast ,
Professor Floyd would extend such treatment to all p ublic authorities that
have the power both to formulate a general policy in favor of the
anticompetitive arrangements for the state as a whole and to determine
that the specific arrangement in question falls within that policy. See C.
Douglas Floyd, Plain Ambig uities in the Clear Articulation Requirement
for State Action Antitrust Immunity: The Case of S tate Agencies, 41 B.C.
L. REV. 1059, 1081-82 (2000).
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