| Randy Stutz, Richard Brunell
Exclusionary Conduct, Exemptions & Immunities, Section 2 of the Sherman Act
The AAI has filed an amicus brief asking the U.S. Supreme Court to grant certiorari and summarily reverse the first federal court of appeals’ decision to apply the Supreme Court’s recent holding in Fed. Trade Comm’n v. Phoebe Putney Health Sys., Inc., 133 S. Ct. 1003 (2013).
In Phoebe Putney, the Court held that a sub-state entity satisfies the clear articulation element of state-action immunity if it can show that the displacement of competition follows as an inherent, logical, or ordinary result of state enabling legislation. However, the mere possibility that the state legislature may have foreseen anticompetitive conduct, without more, falls well short of satisfying the clear articulation requirement.
In United National, the Ninth Circuit purported to rely on Phoebe Putney, but it held that the displacement of competition was foreseeable where it was merely possible that anticompetitive conduct would result from state enabling legislation. After the petitioner accused the San Diego Convention Center Corporation (“SDC”), a municipal corporation that leases out the San Diego Convention Center for conventions and trade shows, of excluding it in violation of Section 2 of the Sherman Act, the court held that the SDC was entitled to state action immunity because anticompetitive exclusionary conduct was foreseeable from the State of California’s grant of authority to “manage the use” of the convention center and to “generate profits” for the municipality.
The AAI brief argues that, as in Phoebe Putney, it was foreseeable only that the SDC could have exercised its management and profit-generating authority anticompetitively. And even if, arguendo, it were foreseeable that the convention center would engage in exclusive conduct, the Ninth Circuit still had no basis to infer that anunlawful exclusive arrangement is the “ordinary” result of management and profit-generation authority. While the Ninth Circuit may have believed United’s antitrust claim was doomed to fail on the merits, the merits are separate and distinct from the immunity analysis, which assumes a violation.
Moreover, the profit-generating nature of the defendant’s conduct is a factor that warrants heightened scrutiny. It not only suggests a potentially stronger motive for the convention center to behave anticompetitively, but without more, it bespeaks a legislative intent to treat the convention center like a private actor, subject to the general antitrust rules of behavior. In a previous amicus brief to the Ninth Circuit in the same case, the AAI had urged the court to adopt a “market participant exception” in state action cases for that very reason.
The AAI brief asks for summary reversal on grounds that the Ninth Circuit’s opinion and analysis clearly contravene the Supreme Court’s recent precedent.
The brief was written by AAI Senior Counsel & Director of Special Projects Randy Stutz and AAI General Counsel Rick Brunell, with assistance from Research Fellow Geoff Kozen.
The AAI’s brief in Phoebe Putney is available here.
