The FTC’s view on antitrust state-action immunity and FTC v. Phoebe Putney

In my post on the Supreme Court’s recent antitrust case, FTC v. Phoebe Putney, on the Reason Foundation’s web site (see also here and here), I noted that “the FTC has been grousing against the scope of the state action exemption for years.” As evidence of this grousing, here’s the Report of the State Action Task Force from the FTC’s Office of Policy Planning. This report was written during the previous administration, in September 2003, and note that our own Todd Zywicki was the director of that office at the time.

One section of that report (pp. 25-34) specifically complains about the move from demanding a “clear articulation” to holding that a clear articulation can be found with “foreseeability.” “Some lower courts . . . have . . . reason[ed] . . . that once action is broadly authorized, any anticompetitive effects flowing from that action must have been foreseeable, but never inquiring whether the state actually intended to displace competition” (p. 26).

On p. 27, they continue:

An extreme example highlights the problem. State corporation laws typically authorize corporate entities to merge or to acquire property. Under such a law, it is foreseeable, indeed likely, that some mergers and acquisitions will be in the same relevant market as a corporation’s current operations and will raise competition concerns. If that foreseeability suffices to invoke a state action defense, the nation’s merger review laws will have been almost entirely overridden. Of course, that is not the case. The state never intended to displace competition in this manner by its general corporation laws. Yet analysis that treats foreseeability as the end point rather than as an intermediate tool for determining state policy toward displacing competition could give exactly those wrong results.

The FTC may as well have been talking about the Eleventh Circuit’s Phoebe Putney decision, which used exactly this sort of reasoning. The FTC’s “Recommendation 1” (pp. 50-51) says that courts should “Re-affirm a clear articulation standard tailored to its original purposes and goals.” The Supreme Court’s decision in Phoebe Putney was very narrow and might not have addressed all the FTC’s concerns, but at least it’s consistent with the FTC’s concern over lower courts reading “foreseeability” too broadly, and it directly addresses the “extreme example” from the blockquote above.

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