Supreme Court to Hear FTC Challenge to Anticompetitive Merger

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The U.S. Supreme Court has agreed to hear the Federal Trade Commission's (FTC) appeal of an Eleventh Circuit ruling that a merger of two Georgia hospitals, Phoebe Putney Health System, Inc. (Phoebe) and Palmyra Park Hospital, Inc. (Palmyra), was exempt from antitrust scrutiny under the so-called "state action doctrine." Even though the Eleventh Circuit panel that reviewed the case agreed that the combination of Phoebe and Palmyra would likely substantially lessen competition and create a monopoly for general acute care hospital services in the Albany, Georgia area, it determined that a Georgia law creating the State's system of hospital authorities protected the merger from FTC challenge. This is the Supreme Court's first major case involving the state action doctrine in 20 years.

The state action doctrine immunizes conduct of a state or its political subdivisions from antitrust scrutiny if undertaken pursuant to a "clearly articulated and affirmatively expressed state policy" intended to replace competition with regulation. This requirement is satisfied if anticompetitive conduct is a "foreseeable result" of state legislation. The doctrine extends to actions of private entities where the private conduct is "actively supervised" by the state.

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