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Law School Case Brief

FTC v. Phoebe Putney Health Sys. - 568 U.S. 216, 133 S. Ct. 1003 (2013)

Rule:

Given the fundamental national values of free enterprise and economic competition that are embodied in the federal antitrust laws, state-action immunity is disfavored, much as are repeals by implication. Consistent with this preference, a court recognizes state-action immunity only when it is clear that the challenged anticompetitive conduct is undertaken pursuant to a regulatory scheme that is the state’s own. Accordingly, closer analysis is required when the activity at issue is not directly that of the state itself, but rather is carried out by others pursuant to state authorization. When determining whether the anticompetitive acts of private parties are entitled to immunity, the court employs a two-part test, requiring first that the challenged restraint be one clearly articulated and affirmatively expressed as state policy, and second that the policy be actively supervised by the state.

Facts:

Under the Georgia's Hospital Authorities Law, political subdivisions may create special-purpose public entities called hospital authorities to provide “for the operation and maintenance of needed health care facilities in the several counties and municipalities of the state. The Law permits authorities to “exercise public and essential governmental functions” and delegates to them numerous general powers, including the ability to acquire and lease hospitals and other public health facilities. 

The Hospital Authority of Albany-Dougherty County (“Authority”) owns Phoebe Putney Memorial Hospital (Memorial), one of two hospitals in the county. The Authority formed two private nonprofit corporations to manage Memorial: Phoebe Putney Health System, Inc. (PPHS), and Phoebe Putney Memorial Hospital, Inc. (PPMH). After the Authority decided to purchase the second hospital in the county and lease it to a subsidiary of PPHS, the Federal Trade Commission (FTC) issued an administrative complaint alleging that the transaction would substantially reduce competition in the market for acute-care hospital services, in violation of § 5 of the Federal Trade Commission Act and § 7 of the Clayton Act,. The FTC and Georgia subsequently sued the Authority, PPHS, PPMH, and others (collectively “respondents”), seeking to enjoin the transaction pending administrative proceedings. The District Court denied the request for a preliminary injunction and granted respondents' motion to dismiss, holding that respondents are immune from antitrust liability under the state-action doctrine. The Eleventh Circuit affirmed. It concluded that the Authority, as a local governmental entity, was entitled to state-action immunity because the challenged anticompetitive conduct was a foreseeable result of the Law. The court reasoned that the state legislature could have readily anticipated an anticompetitive effect, given the breadth of the powers delegated to hospital authorities, particularly leasing and acquisition powers that could lead to consolidation of hospital ownership.

Issue:

Did the special-purpose public entity hospital authority's proposed purchase of the only other hospital in the authority's jurisdiction violate antitrust laws?

Answer:

Yes.

Conclusion:

Reversing, the Supreme Court of the United States unanimously held that, because the state did not clearly articulate and affirmatively express a policy allowing the special-purpose public entity hospital authorities to make acquisitions that substantially lessened competition, state-action antitrust immunity did not apply. While the state was not precluded from imposing market restraints which extended to the authority in carrying out the state's regulatory program, the state's general grant allowing the authority to acquire hospitals did not constitute a grant of the power to acquire hospitals on an anticompetitive basis. Further, the displacement of competition was not an inherent, logical, or ordinary result of granting the authority the power to acquire hospitals, and thus it could not be said that the state must have foreseen and implicitly endorsed the anticompetitive effects as being consistent with the state's policy goals in furthering the availability of affordable health care.

 

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