Clarifying the State Action and Noerr Exemptions

Article excerpt

   A. Current Issues with the Doctrine
   B. Proposed Clarifications
   C. Recent Commission Activity Involving State
      1. Health Care
      2. The Internet
   A. Current Issues with the Doctrine
   B. Proposed Clarifications
   C. Recent Commission Activity Involving Noerr-Pennington


I would like to thank the Federalist Society for inviting me to speak. I want to address the role of antitrust in a topic that I know concerns many of you deeply: the growth of government. The "rent-seeking" (1) society seems to manifest itself in more and more of our economy. About one-third of our gross domestic product is government. (2) Even under Republican administrations, with the exception of President Ronald Reagan's first term, federal regulation and the number of federal regulators continued to grow. (3) Federal regulatory costs are approaching $1 trillion, and the number of fulltime federal employees promulgating and enforcing regulations alone stood at nearly 136,000 in 2002. (4)

Two antitrust exemptions help protect and foster that regulatory growth: the state action and Noerr-Pennington doctrines. Both have been broadly interpreted by some courts, and their overbroad interpretation has been widely criticized from the right and from the left. For example, as early as 1978 Robert Bork observed "an enormous proliferation of regulatory and licensing authorities at every level of government," and warned that the "profusion of such governmental authorities offers almost limitless possibilities for abuse." (5) More recently, the Antitrust Section of the American Bar Association noted that antitrust "immunity drives a large hole in the framework of the nation's competition laws." (6)

We know much of this growth in government harms consumers. It reflects rent-seeking, pure and simple. At its core, antitrust exists to protect consumers. Antitrust law is not a cure for rent-seeking, but I want to suggest today that it can be much better tailored to address the problem. To do so, we must properly interpret the two antitrust exemptions that protect not only legitimate government activity, but also rent-seeking.

The first exemption, for state action, was first articulated in Parker v. Brown. (7) The doctrine emerged in response to efforts to apply antitrust rules designed to regulate business conduct to the activities of state governments. The Supreme Court based the doctrine on the relatively non-controversial notion that, in passing the Sherman Act, Congress intended to protect competition, not to limit the sovereign regulatory power of the states. Thus, pursuant to the doctrine, actions that could be attributed to "[t]he state itself" would be immunized from antitrust scrutiny. (8) Since Parker, however, the doctrine has been expanded in unnecessary ways that have anticompetitive effects.

The second, and related, antitrust exemption I will discuss involves private parties who are shielded from liability for the anticompetitive effects flowing from their efforts to "petition" the government, whether through lobbying, administrative processes, or litigation. This exemption is better known to antitrust scholars as the Noerr-Pennington doctrine. As with state action, the court opinions in this area have not been entirely consistent, and leave ample room for clarification.

Both the state action and Noerr exemptions have long been concerns of the Federal Trade Commission ("FTC"), and both were active issues in the 1980s when I was at the Commission during the Reagan administration. This article will describe the FTC's current efforts to clarify these important areas of law. The Commission has given considerable thought to the federalism and First Amendment interests that these exemptions promote. When called upon to address the scope of the state action and Noerr-Pennington doctrines--whether through advocacy, amicus briefs, or litigation--the FTC has made every effort to articulate those interests coherently to leave ample room for competition to benefit consumers. …