Federal Trade Commission v. Phoebe Putney Health System Inc., No. 11-1160; U.S. Supreme Court; opinion by Sotomayor, J.; decided February 19, 2013. On certiorari to the U.S. Court of Appeals for the Eleventh Circuit.

Under 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 th[e] 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. Ga. Code Ann. § 31-7-75.

The Hospital Authority of Albany-Dougherty County owns Phoebe Putney Memorial Hospital, 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 0of hospital ownership.

Held: Because Georgia has not clearly articulated and affirmatively expressed a policy allowing hospital authorities to make acquisitions that substantially lessen competition, state-action immunity does not apply. Pp. 6-19.

(a) This court recognized in Parker v. Brown, 317 U.S. 341, 350-52, that the federal antitrust laws do not prevent states from imposing market restraints "as an act of government…." Under the state-action doctrine, immunity from federal antitrust law may extend to nonstate actors carrying out the state’s regulatory program. See, e.g., Patrick v. Burget, 486 U.S. 94, 99-100. But given the antitrust laws’ values of free enterprise and economic competition, "state-action immunity is disfavored," FTC v. Ticor Title Ins. Co., 504 U.S. 621, 636, and is recognized only when it is clear that the challenged anticompetitive conduct is undertaken pursuant to the "State’s own" regulatory scheme, id. at 635. Immunity will attach only to activities of substate governmental entities that are undertaken pursuant to a "clearly articulated and affirmatively expressed" state policy to displace competition. Community Communications Co. v. Boulder, 455 U.S. 40, 52. A state legislature need not "expressly state" that intent, Hallie v. Eau Claire, 471 U.S. 34, 43, but the anticompetitive effect must have been the "foreseeable result" of what the state authorized, id. at 42. Pp. 6-9.

(b) Respondents’ state-action immunity defense fails under the clear-articulation test because there is no evidence the state affirmatively contemplated that hospital authorities would displace competition by consolidating hospital ownership. The authority’s powers, including its acquisition and leasing powers, mirror general powers routinely conferred by state law on private corporations. More is required to establish state-action immunity; the authority must show that it has been delegated authority not just to act, but to act or regulate anticompetitively. Columbia v. Omni Outdoor Advertising, Inc., 499 U.S. 365, 372. In Boulder, this court concluded that a Colorado law granting municipalities the power to enact ordinances governing local affairs did not satisfy the clear-articulation test, 455 U.S. at 55-56, because, when a state’s position "is one of mere neutrality respecting the municipal actions challenged as anticompetitive," the state cannot be said to have "contemplated" those anticompetitive actions, id. at 55.

That principle controls here. Grants of general corporate power allowing substate governmental entities to participate in a competitive marketplace are typically used without raising federal antitrust concerns, so a state cannot be said to have contemplated that such powers will be used anticompetitively. Here, though the law allows the authority to acquire hospitals, it does not clearly articulate and affirmatively express a state policy empowering the authority to make acquisitions of existing hospitals that will substantially lessen competition. Pp. 9-10.

(c) In concluding otherwise, the Eleventh Circuit applied the concept of "foreseeability" too loosely. This court, recognizing that no legislature "can be expected to catalog all of the anticipated effects" of a statute delegating authority to a substate governmental entity, Hallie, 471 U.S. at 43, has approached the clear-articulation inquiry practically, but without diluting the ultimate requirement that the state must have affirmatively contemplated the displacement of competition such that the challenged anticompetitive effects can be attributed to the "state itself," Parker, 317 U.S. at 352. Thus, the court has found a state policy to displace federal antitrust law was sufficiently expressed where the displacement of competition was the inherent, logical or ordinary result of the exercise of authority delegated by the state legislature. In that scenario, the state must have foreseen and implicitly endorsed the anticompetitive effects as consistent with its policy goals. See Hallie, 471 U.S. at 41; Omni, 499 U.S. at 373. By contrast, when a state grants an entity a general power to act, it does so against the backdrop of federal antitrust law. Entities might transgress antitrust requirements by exercising their powers anticompetitively, but a reasonable legislature’s ability to anticipate that possibility falls well short of clearly articulating an affirmative state policy to displace competition. The Eleventh Circuit’s argument, echoed by respondents, that the case falls within the foreseeability standard used in Hallie and Omni is rejected. Pp. 11-14.

(d) Respondents’ additional arguments are also unpersuasive. They contend that because hospital authorities are granted unique powers and responsibilities to fulfill Georgia’s objective of providing access to adequate and affordable health care, it was foreseeable that they would decide that the best way to serve their communities was to acquire an existing local hospital, instead of incurring the additional expense and regulatory burden of expanding, or constructing, a facility. But even though the authorities may differ from private corporations offering hospital services, neither the law nor any other state-law provision clearly articulates a state policy allowing authorities to exercise their general corporate powers without regard to anticompetitive effects. Respondents also contend that when there is doubt about whether the clear-articulation test is satisfied, federal courts should err on the side of recognizing immunity to avoid improper interference with state policy choices. But the law here is not ambiguous, and respondents’ suggestion is inconsistent with the principle that "state-action immunity is disfavored," Ticor Title, 504 U.S. at 636. Pp. 14-19.

663 F.3d 1369, reversed and remanded.