Mere refinement of the state action doctrine will not work
Peter Hettich
By proclaiming the State Action Doctrine, the Supreme Court aims to preserve the states' rights to enact economic regulation which conflict with the federal antitrust laws. The doctrine exempts regulated private parties from antitrust enforcement when they are insulated by the State. Without granting the exemption, private parties would have to decide between obeying anticompetitive state regulation and complying with federal antitrust laws, risking punishment either way. The doctrine provides a test to determine whether to grant the immunity. Far from being settled, the test is battled heavily all the way up to the Supreme Court. In Ticor, Justice Scalia expressed skepticism whether an "exemption for state-programmed private collusion" is justified at all. Other Justices have been more favorable towards state and local regulation of commerce. Beside this more philosophical clash about the proper scope of regulation, it is generally acknowledged that the doctrine bears inherent flaws and provides little guidance. Justice O'Connor has already pointed out that it is unfair to punish regulated parties with treble damages for their compliance with anticompetitive state regulation. The State Action Task Force of the FTC acknowledges the inherent flaws of the State Action Doctrine, as do most scholars. However, all proposals made so far aim to clarify and refine the State Action Doctrine. The current proposals have their merits, but they will only mitigate the problems associated with the State Action Doctrine. The present standard requires a "clearly articulated state policy" and "active supervision" for immunity; these are purely procedural requirements. In this essay, I propose to include institutional and substantive changes to the State Action Doctrine. From an institutional perspective, the courts should reaffirm the FTC's mandate to preserve public policy; the FTC is best suited to defend the federal interest in unfettered competition. From a substantive point of view, the courts have to reengage in a moderate review of the reasonableness of state regulation. I do not ask for a revival of the Lochner era; however, the competitive process needs at least minimal protection against arbitrary state regulation.
