Federal Trade Commission v. Phoebe Putney Health System, Inc.
185 L. Ed. 2d 43, 133 S. Ct. 1003 (2013)
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Rule of Law:
For a substate governmental entity to receive state-action immunity from federal antitrust laws, the state's delegation of authority must clearly articulate and affirmatively express a policy to displace competition. A grant of general corporate powers, such as the power to acquire property, is insufficient to meet this test if the state's position is merely one of neutrality respecting competition.
Facts:
- In 1941, Georgia enacted the Hospital Authorities Law, which allows counties and municipalities to create public 'hospital authorities' to provide health care services.
- The law grants these authorities broad corporate powers, including the power '[t]o acquire by purchase, lease, or otherwise and to operate projects,' which include hospitals.
- The Hospital Authority of Albany-Dougherty County (the Authority), a public entity created under the law, owned Phoebe Putney Memorial Hospital (Memorial).
- The Authority leased Memorial to a private nonprofit corporation, Phoebe Putney Health System, Inc. (PPHS), for $1 per year.
- Memorial was one of two hospitals in Dougherty County, with the other being Palmyra Medical Center (Palmyra). Together, the two hospitals accounted for 86% of the local market for acute-care services.
- In 2010, PPHS negotiated a deal to acquire its only local competitor, Palmyra.
- The transaction was structured for the public Authority to purchase Palmyra using funds controlled by PPHS, and then lease Palmyra to a PPHS subsidiary for $1 per year.
- The Authority's board unanimously approved the transaction, which would give PPHS control of both hospitals in the county.
Procedural Posture:
- The Federal Trade Commission (FTC), along with the State of Georgia, filed suit in the U.S. District Court for the Middle District of Georgia against the Hospital Authority of Albany-Dougherty County and related entities (respondents).
- The suit sought a preliminary injunction to block the proposed acquisition of Palmyra Medical Center, alleging it violated federal antitrust laws.
- The District Court denied the injunction and granted respondents' motion to dismiss, finding that the transaction was protected by state-action immunity.
- The FTC (appellant) appealed the dismissal to the U.S. Court of Appeals for the Eleventh Circuit.
- The Eleventh Circuit affirmed the District Court's judgment, holding that the anticompetitive acquisition was a foreseeable result of the powers granted by the Georgia Hospital Authorities Law.
- The U.S. Supreme Court granted certiorari to review the Eleventh Circuit's decision.
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Issue:
Does a state law that grants general corporate powers to a public hospital authority, including the power to acquire hospitals, 'clearly articulate and affirmatively express' a state policy to displace competition, thereby making the authority's anticompetitive acquisition immune from federal antitrust laws?
Opinions:
Majority - Justice Sotomayor
No. A state law that grants a substate governmental entity general corporate powers, such as the power to acquire hospitals, does not clearly articulate and affirmatively express a state policy to displace competition. The Georgia law authorizing hospital authorities to acquire hospitals does not include permission to use those powers anticompetitively, and therefore the clear-articulation test is not satisfied. The state-action immunity doctrine, which is disfavored, requires that the challenged anticompetitive conduct be undertaken pursuant to a state's own regulatory scheme. For substate entities, this means the anticompetitive effect must be the 'foreseeable result' of the state's delegation. 'Foreseeable' means the displacement of competition is the inherent, logical, or ordinary result of the state authorization, not merely a possible outcome. Here, Georgia's grant of general powers, which mirror those of private corporations, reflects a position of 'mere neutrality' respecting competition. Such neutrality cannot be interpreted as an affirmative state policy to displace federal antitrust laws.
Analysis:
This decision significantly clarifies and narrows the 'foreseeability' standard within the state-action immunity doctrine's 'clear articulation' test. The Court established that a state's general grant of corporate powers to a substate entity is insufficient to confer antitrust immunity, even if it is conceivable that those powers could be used anticompetitively. This ruling forces state legislatures to be more explicit if they intend to displace competition, thereby protecting federal antitrust policy from being undermined by ambiguous state enabling statutes. Consequently, it will be more difficult for quasi-governmental entities to claim immunity for mergers and other conduct that substantially lessens competition.
