The Lawletter Vol 40 No 3
The U.S. Supreme Court continues to refine the state-action immunity doctrine first formulated in Parker v. Brown, 317 U.S. 341 (1943). In Parker, relying on principles of federalism and state sovereignty, the Court refused to construe the Sherman Act, which prohibits contracts, combinations, or conspiracies in restraint of trade, see 15 U.S.C. § 1, as applying to the anticompetitive conduct of a state acting through its legislature. Rather, the Supreme Court ruled that the Sherman Act was intended to prohibit private restraints on trade, and it refused to infer an intent to "nullify a state's control over its officers and agents" in activities directed by the legislature. Parker, 317 U.S. at 351.
Since Parker, the Court has spent more than 70 years defining exactly what state action is immune from scrutiny under the federal antitrust laws. For example, the Court has indicated that local governmental authorities such as counties and municipalities are not beyond the reach of the antitrust laws simply by virtue of their status, because they are not themselves sovereign. City of Lafayette v. La. Power & Light Co., 435 U.S. 389, 412 (1978) (Brennan, J.). Instead, the state-action immunity doctrine of Parker extends to local subdivisions only when the alleged anticompetitive conduct is authorized by the state "pursuant to state policy to displace competition with regulation or monopoly public service." Id. at 413. Thus, to obtain Parker immunity, a local subdivision must be able to show that it acted pursuant to a "clearly articulated and affirmatively expressed . . . state policy." Id. at 410. In addition, a nonsovereign actor other than a municipality enjoys state-action immunity only when that policy is "actively supervised by the state itself." Cal. Retail Liquor Dealers Ass'n v. Midcal Aluminum, Inc., 445 U.S. 97, 105 (1980).
The Court recently noted that the second, "active supervision" prong of the Midcal test applies to a "nonsovereign actor controlled by active market participants"—in that case, a state board of dental examiners with eight members, six of whom were dentists elected by other dentists in the state. N.C. State Bd. of Dental Exam'rs v. FTC, 135 S. Ct. 1101, 1110 (2015). Assuming that the board's actions in seeking to limit nondentists from engaging in the lucrative practice of teeth whitening were taken pursuant to a clearly articulated state policy, the Court nevertheless held that the actions were not immune from antitrust scrutiny under Parker because the state did not actively supervise them. See id. at 1116 ("[T]here is no evidence here of any decision by the State to initiate or concur with the Board's actions against the nondentists."). In so doing, the Court provided some general guidelines as to what constitutes active supervision by the state: The supervisor "must review the substance of the anticompetitive decision, not merely the procedures followed to produce it," and "must have the power to veto or modify particular decisions to ensure they accord with state policy." Id. In addition, the state supervisor may not itself be an active market participant, as in the case before the Court. While the Court emphasized that the adequacy of supervision will generally depend on all the circumstances of a case, these "constant requirements" may at least provide some basis for states seeking to immunize particular conduct of substate boards and agencies from federal antitrust scrutiny.