The US Supreme Court [official website] ruled [opinion, PDF] Tuesday in FTC v. Phoebe Putney Health Systems, Inc. [SCOTUSblog backgrounder] that federal antitrust laws regulating competition among health service providers apply to an anticompetitive transaction in Georgia because the state law regulating the activity did not clearly articulate authority for the entities to act anti-competitively. In this case, a government entity created by the state, using the general corporate powers given to it by the state, acquired the only competitor hospital of a private actor and then transferred control of that hospital to the private actor, effectively eliminating competition and creating a private monopoly. The court recognized that the principle of state-action immunity prevents federal antitrust laws from applying to states when they impose "market restraints as an act of government," and that this immunity may extend to non-state actors that are carrying out state regulations. It ruled, however, that the law in question failed the "clear-articulation test" because it was not made clear by the state that this type of action was contemplated and authorized by the state. In her opinion, Justice Sonia Sotomayor stated that "given the fundamental national values of free enterprise and economic competition that are embodied in the federal antitrust laws, state-action immunity is disfavored," and should only be applied when actions are taken "pursuant to a clearly articulated and affirmatively express state policy to displace competition."
The court remanded the case to determine whether the FTC and Georgia could continue their lawsuit against the entity responsible for the transaction pursuant to the Section 5 of the Federal Trade Commission Act [text], which prohibits transactions that substantially reduce competition among acute-care medical service providers. This ruling reversed the opinion [text, PDF] of the US Court of Appeals for the Eleventh Circuit [official website], which ruled that state-action immunity applied and the actions of the entity were protected from federal law. On appeal to the Supreme Court, the petitioners also posed the question of whether, despite state-action immunity, the state policy at issue would be sufficient to validate the government entity's sale of the hospital, at the behest of a private actor, when the entity neither negotiated the terms of the sale nor had any oversight of the hospital's operations. Because the Court determined that state-action immunity did not apply, it did not address this question in its opinion.