Recurring Policy Issues Raised by the Doctrine

• Pages: 127-149

CHAPTERVI

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 policies 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?Thischapter 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. FTCSTAFF,REPORTOF THE STATE ACTION TASK FORCE6 (2003)

[hereinafter FTCSTATE ACTION REPORT].

2. 466 U.S. 558 (1984).

3. Id.at 569.

4. Id.at 574 (quotation omitted).

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Presumably we would reserve the “state itself” designation only for

government agencies that are both statewide in their jurisdiction and

that have no particular susceptibility to capture by a particular business

group. This would certainly include the legislature, state supreme

court, and governor’s office. It would neverinclude 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 legislatures6and 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,ANTITRUSTLAW:AN

ANALYSIS OF ANTITRUST PR INCIPLES AND THE IR APPLICATION, ¶ 224b,

at104-105 (4thed. 2013) [hereinafter AREEDA &HOVENKAMP].

6. SeeParker v. Brown, 317 U.S. 341, 350-52 (1943).

7. SeeBates v. State Bar of Ariz., 433 U.S. 350, 359-63 (1977).

8. Hoover, 466 U.S. at 569.

9. FTCSTATE ACTION REPORT, supranote 1, at 6. Professors Lopatka and

Page agree with Areeda and Hovenkamp, see supranote 5, but would

limit that designation to the governor only, excluding all otherexecutive

branch authorities.SeeJ OHN E.LOPATKA &WILLIAM H.PAGE,

NARROWING THESCOPE OF THE STATE ACTION DOCTRINE:REPORT

PREPARED FOR THE FEDERAL TRADE COMMISSION32-33 (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 asa fundamental national policy—counsels that no executive

branch official or agency, with the likely 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 public 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 thespecific arrangement in question falls within that policy. SeeC.

Douglas Floyd, Plain Ambiguities in the Clear Articulation Requirement

for State Action Antitrust Immunity: The Case of State Agencies, 41 B.C.

L.REV. 1059, 1081-82 (2000).