In a unanimous opinion, the U.S. Supreme Court this week tightened the standard for state action immunity under federal antitrust laws in a case involving a hospital merger. This decision arguably tightens the reins on the availability of federal antitrust immunity, in particular limiting the circumstances in which entities may assert that they are immune state actors. It also should be considered a boost for the FTC’s continued resolve to take on hospital mergers that are perceived to have anticompetitive effects.

In Federal Trade Commission v. Phoebe Putney Health System, Inc., the FTC sought to block the acquisition by Phoebe Putney Health System, a nonprofit corporation formed under Georgia’s Hospital Authorities Law, of another hospital in the same county. The law authorizes political subdivisions to create “hospital authorities” endowed with powers that include acquiring other hospitals.

Both the district court and 11th Circuit held that Phoebe Putney and its co-defendants were immune under a state action theory because the anticompetitive effect—vesting 86 percent of the market for acute care hospital services in the county in a single entity—was “foreseeable.”

In reversing and remanding, the Court was critical of the 11th Circuit’s application of the foreseeability standard to its finding that anticompetitive conduct could have been “reasonably anticipated” by the state Legislature, and thus was immune.

Instead, the Court held that state action immunity is limited to circumstances when local governments are acting under “a clearly articulated and affirmatively expressed state policy to displace competition.” In this case, the Court found “no evidence the State affirmatively contemplated that hospital authorities would displace competition by consolidating hospital ownership.”

For more information on the case or its possible effects on hospital merger challenges or antitrust actions generally, please contact Leslie E. John at 215.864.8212 or john@ballardspahr.com, Jason A. Leckerman at 215.864.8266 or leckermanj@ballardspahr.com, or Jessica M. Anthony at  215.864.8340 or anthonyj@ballardspahr.com.

http://ballardspahr.com/alertspublications/legalalerts/2013-02-21-supreme-court-hands-ftc-victory-on-state-action-immunity.aspx