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 interstate

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

coextensive with Co ngress’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 Sher man Act scrutiny. Nevert heless, in Cine 42nd Street

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

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

generally available to parties defending against a § 7 Clayton Ac t

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

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

nullify state regulations. I n 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 r estrictions upon the practice of

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

agency “may not exercise author ity over States a s sovereigns un less that

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

Phoebe Putney Health Sys., Inc., 133 S. Ct. 1003 (2013), the Court

considered the state action doctrine in t he context of alleged violations of

§ 5 of the FTC Act and § 7 of the Clayton Act. Id. at 1008.

3. The Tenth Amend ment to the U.S. Constitutio n provides: “The powers not

delegated to the United States b y the Constitution, nor prohibited b y it to

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