Demystifying Antitrust State Action Doctrine

Article excerpt

Sometimes the most mystifying thing about legal doctrine is why so many commentators find it so mystifying. And so it is with antitrust state action doctrine. The federal antitrust laws do not apply to business activities that are the foreseeable result of a state regulatory program so long as public actors, as opposed to private ones, supervise the conduct in question. Commentators aplenty have bemoaned the doctrine's theoretical incoherence -- labeling it a practical mess that cannot be applied predictably.(1) The Court, they say, has simply failed to articulate a coherent theory to differentiate its conflicting decisions. For example, the doctrine has been used to exempt from antitrust scrutiny colluding motor carriers,(2) but not colluding insurance carriers,(3) even though both were subject to state regulatory schemes. At least four major law review articles have attempted to explain existing antitrust state action doctrine.(4) Unfortunately, they rely on four different theories and propose four different tests to determine when state regulation exempts private parties from federal antitrust scrutiny.

This theoretical ambiguity does not bode well for the myriad state-federal regulatory conflicts destined to arise in the next century. New approaches to telecommunications convergence,(5) efforts to regulate internet commerce,(6) and continued deregulation of utilities(7) are but three examples sure to lead to regulatory schemes with varying goals and techniques that differ widely among states and municipalities as well as the federal government.

For example, suppose that a state seeks to regulate advertising on the start-up pages of internet service providers. Advertising restrictions ordinarily raise serious antitrust concerns,(8) and antitrust surely will play a role in evaluating such a regulated environment. But when will antitrust doctrine lead regulatory policy? When will it support other policy considerations? And when should it get out of the way? To avoid a hopeless legal tangle over the line where regulation ends and antitrust begins (or is it the other way around?), a clear theory explaining antitrust state action doctrine must be found.

This Article has two purposes: (1) to articulate a descriptive theory to explain current antitrust state action doctrine, and (2) to evaluate that theory on normative grounds in comparison to the alternative theories and tests suggested by prior commentators. As to the descriptive project, the Article demystifies current antitrust state action doctrine by showing that it distinguishes government actors who are trusted to advance the collective good from businesspersons whose decisions are intended to advance their own interest in maximizing profit.(9) The doctrine is a by-product of our society's longstanding belief in two spheres of decisionmaking, public and private. This social organization, which might be called the status choice model assumes that individuals can choose to further either public-interested goals or self-interested goals, and social welfare can be maximized by dual spheres of public-interested governmental decisionmaking and self-interested private decisionmaking, each governed by appropriate background rules. Criticism of antitrust state action doctrine has invariably missed this distinction and -- implicitly or explicitly -- assumed that public actors seek to serve selfish interests just like private actors do.(10) No wonder current doctrine appears so mystifying to so many commentators.

As to the normative project, this Article concludes that current doctrine as explained by the status choice model provides an understandable and satisfying way to distinguish permissible from impermissible state regulation given modern American society's dual belief in self-interested private decisionmaking and public-interested government decisionmaking. Although one may fault current doctrine for requiring judges to rely on inherently uncertain intuitions about the extent and importance of government involvement in regulatory decisions, this intuitive test is as practical as any of the alternatives. …

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