Supreme Court Unanimous Ruling in Federal Trade Commission Case Has Implications for Regulators

Abstract

On February 19, 2013, the U.S. Supreme Court issued a unanimous ruling in favor of the Federal Trade Commission (FTC) in the case, FTC v. Phoebe Putney Health System. The case was on appeal from the U.S. 11th Circuit Court of Appeals, and was the result of the FTC's complaint against Phoebe Putney Health System's acquisition of Palmyra Park Hospital in Albany, Georgia.The FTC argued that the merger of the only two hospitals in Albany would reduce competition, virtually creating a monopoly in the market for acute-care hospital services. The Court held that because Georgia has not clearly articulated and affirmatively expressed a policy allowing hospital authorities to make acquisitions that substantially reduce competition, state-action immunity does not apply.Federal antitrust laws prohibit private restraints on trade and are not meant “to restrain a state or its officers or agents from the activities directed by its legislatures.” This premise gave rise to the existing articulation of the state action doctrine in the 1943 case, Parker v. Brown. The state action doctrine is interpreted to confer immunity to state actors who engage in anti-competitive conduct under certain conditions.In general, in order for the state action doctrine to result in immunity to a state entity, the entity must be acting pursuant to a clearly articulated and affirmatively expressed state policy to displace competition. Thus, in FTC v. Phoebe Putney Health System, the Court examined whether the Georgia Legislature, in vesting the state's hospital authority with general corporate powers to acquire and lease hospitals and other properties, clearly articulated and affirmatively expressed a state policy to displace competition in the hospital services market. In its decision, the Court found that the state had not clearly expressed such a policy.Justice Sonia Sotomayor said in her Court opinion that an exception in antitrust law for actions taken by a state or its agencies, which in this case was the hospital authority, did not shield the transaction from having a federal antitrust concern.“We hold that Georgia has not clearly articulated and affirmatively expressed a policy to allow hospital authorities to make acquisitions that substantially lessen competition,” Justice Sonia Sotomayor wrote for the Court.The Court's treatment of the state action doctrine has far-reaching implications for state medical boards and is likely to play a central role in the pending case, North Carolina State Board of Dental Examiners v. Federal Trade Commission.