F.T.C. v. Phoebe Putney Health Sys., Inc. (Summary)

STATE ACTION DOCTRINE/ANTITRUST

F.T.C. v. Phoebe Putney Health Sys., Inc., No. 11-1160 (U.S. Feb. 19, 2013)

The Supreme Court of the United States reversed and remanded a holding from the United States Court of Appeals for the Eleventh Circuit.  In its holding, the Supreme Court concluded that a hospital authority created under the auspices of a Georgia state law was not entitled to state-action immunity from federal antitrust laws because the Georgia law did not clearly articulate a policy allowing the hospital authority to make acquisitions that substantially lessen competition.

Under Georgia’s Hospital Authorities Law, state authorities may create hospital authorities to provide for the operation and maintenance of needed health care facilities in the state.  The case at hand involves one of these hospital authorities.  This hospital authority owns one of two hospitals in its county, and when the hospital authority decided to purchase the second hospital, the Federal Trade Commission and Georgia sought to enjoin the acquisition because of allegations that it violated federal antitrust laws.  The hospital authority argued that it was immune from antitrust liability under the state-action doctrine.

The Supreme Court disagreed, and applied the “clear articulation” test, which states that state-action immunity will attach only to activities that are undertaken pursuant to a “clearly articulated and affirmatively expressed” state policy to displace competition.  Under this test, the Supreme Court concluded that the state-action immunity defense failed because the hospital authority failed to produce evidence that Georgia affirmatively contemplated that hospital authorities would displace competition by consolidating hospital ownership.  The Supreme Court further clarified the requirements of the test, stating that a state policy to displace federal antitrust law is sufficiently expressed when the displacement of competition is the logical or ordinary result of the authority delegated by the state legislature.  In contrast, if a state only grants a general power to act, the entity empowered through this general delegation remains subject to federal antitrust laws.  The Supreme Court concluded that the general delegation of power to the hospital authority resulted in the continued application of the federal antitrust laws to the hospital authority’s conduct.  Accordingly, the Supreme Court reversed and remanded the case for further consideration.