The State Action Doctrine and Litigation Against State and Local Governments

AuthorChristopher L. Sagers
Nominally, an antitrust plaintiff can sue state and local government
entities, and persons acting pursuant to delegations of state authority.
States themselves are “persons” as used in the Sherman and Clayton
(though the federal government is not
), and so are state agencies
and municipal governments.
Situations are common in which a private
plaintiff might feel aggrieved by the anticompetitive effects of state or
local government action, like the thousands of laws and regulations that
constrain price, output, or entry into state or locally regulated markets.
Lawsuits against state and local actors in such cases are common, but
they confront several legal barriers meant to protect state sovereignty.
First, the state action doctrine broadly protects most state government
action and some delegations of trade-restraining power to sub-state
entities and private persons. Second, the Local Government Antitrust Act
protects local governments and their officials from per se liability and
money damages.
Finally, certain other non-antitrust rules also protect
state and local government defendants.
A. The State Action Doctrine
Under the state action doctrine, state government action is largely
exempt from federal antitrust scrutiny.
States acting in their sovereign
. Parker v. Brown, 317 U.S. 341, 351 (1943) (citing Georgia v. Evans, 316
U.S. 159 (1942)).
. See Chapter II.A.2.
. See id.
. See id.
. 15 U.S.C. §§ 34-36 (2006).
. Specifically, state and local governments and their officials enjoy some
protections under the doctrines of sovereign immunity and qualified
immunity. See part VI.C.2 of this chapter.
. Most state action cases involve the Sherman Act, but the doctrine has been
held also to apply to the Clayton Act, Cine 42nd Street Theater Corp. v.
Nederlander Org., 790 F.2d 1032, 1040 (2d Cir. 1986) (“the state action
A Handbook on the Scope of Antitrust
capacities are fully and automatically exempt.
Enactments of state
legislatures and the actions of state supreme courts in their regulatory
capacities cannot violate antitrust.
The doctrine also protects state
policies that delegate power to executive agencies, political subdivisions,
or private persons,
but in all or most such cases exemption requires
some additional showing that the state itself devised the policy and that
its operation is somehow publicly accountable.
In other words, where a
state policy delegates trade restraining authority to some person other
than the state as sovereign, there must be some additional showing that
the restraint remains action of the state itself. The doctrine is rooted in
considerations of federalism and state sovereignty. The Supreme Court,
in order to avoid constitutional issues, has interpreted the antitrust
statutes not to reach most state government actions.
defense is [also] generally available to parties defending against a § 7
Clayton Act violation.”), and the Federal Trade Commission Act, both as to
the Commission’s § 5 enforcement power, cf. FTC v. Ticor Title Ins., 504
U.S. 621, 635 (1992) (dicta), and its rulemaking power, California State
Bd. of Optometry v. FTC, 910 F.2d 976, 982 (D.C. Cir. 1990) (vacating
FTC rule that purported to create defense to any state proceeding brought
against an optometrist for violating certain state restrictions upon the
practice of optometry).
. See part VI.A.2.a below.
. See id.
. See part VI.A.1 below.
. See id.
. Parker v. Brown, 317 U.S. 341, 351 (1943) (“an unexpressed purpose to
nullify a state’s control over its officers and agents is not lightly to be
attributed to Congress.”); see also FTC v. Phoebe Putney Health Sys., 133
S. Ct. 1003, 1016 (2013) (Parker and its progeny are premised on an
understanding that respect for the States’ coordinate role in government
counsels a gainst reading the federal antitrust laws to restrict the States’
sovereign capacity to regulate their economies and provide services to their
citizens.”); FTC v. Ticor Title Ins. Co., 504 U.S. 621, 633 (1992) (“Our
decision [in Parker v. Brown, 317 U.S. 341 (1943)] was grounded in
principles of federalism.”); City of Columbia v. Omni Outdoor Adv., 499
U.S. 365, 372 (1991) (“[I]n order to prevent Pa rker from undermining the
very interests of federalism it is designed to protect, it is necessary to adopt
a concept of authority broader than what is applied to determine the legality
of the municipality’s action under state law.”); Town of Hallie v. City of
Eau Claire, 471 U.S. 34, 38 (1985) (“In Parker, relying on principles of
federalism and state sovereignty, the Court refused to construe the Sherman
Act as applying to the anticompetitive conduct of a State acting through its
legislature.”); Southern Motor Carriers Rate Conference v. United States,
Suits Against State and Local Government 103
Origins and Development
The doctrine originates in P arker v. Brown.
There the Court
considered a 1933 California law establishing an elaborate system of
state sanctioned output restraints on raisin production. Though the
system that contemplated horizontal agreements among producers, the
Court found it consistent with the Sherman Act.
While states are
“persons” under the Sherman Act,
the Court construed it not to apply to
the conduct in question (that is, not to apply to a state’s adoption of a
competition-restraining trade policy). The Court found “nothing in the
language of the Sherman Act or in its history which suggests that its
purpose was to restrain a state or its officers or agents from activities
directed by its legislature.”
In announcing its rule, the Parker Court
carefully emphasized that it applied only to acts that were genuinely acts
of the state.
It is the state which has cre ated the machinery for establishing the
prorate program. Although the organization of a prorate zone is
proposed by producers, and a prorate program, approved by the
Commission, must also be approved by referendum of producers, it is
the state, acting through the Commission, which adopts the program
and which enforces it with penal sanctions, in the execution of a
governmental policy . . . . The state itself exercises its legislative
authority in making the regulation and in prescribing the conditions of
its application.
The Court distinguished situations in which a state might attempt to
“give immunity to those who violate the Sherman Act by authorizing
471 U.S. 48, 55 (1985) (“The P arker doctrine represents an attempt to
resolve conflicts that may arise between principles of federalism and the
goal of the antitrust laws, unfettered competition in the marketplace.”).
. 317 U.S. 341 (1943). As Justice Stewart explained in his dissent in Cantor
v. Detroit Edison Co., 428 U.S. 579, 615 n.3 (1976), the progenitor of the
state action doctrine was Olsen v. Smith, 195 U.S. 332 (1904), which
upheld a Texas statute fixing rates charged by pilots operating in the Port of
Galveston. Pa rker relied on Olsen for the proposition that when a state,
acting as sovereign, imposes a restraint on commerce, such restraint does
not violate the Sherman Act. See Parker, 317 U.S. at 352.
. Par ker, 317 U.S. at 352.
. Id. at 351 (citing Georgia v. Evans, 316 U.S. 159 (1942)).
. Id. at 350-51.
. Id. at 352.

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