The Market-Participant Exception to State-Action Immunity from Antitrust Liability

Posted by Social Science Research Network

The Market-Participant Exception to State-Action Immunity from Antitrust Liability – Jarod M. Bona (Bona Law PC) and Luke Anthony Wake (National Federation of Independent Business)

ABSTRACT: The federal antitrust laws embody fundamental values of free enterprise and economic competition. At the same time, our federal system supports a strong degree of state sovereignty. In most cases, these values peacefully co-exist. But in a subset of cases — federal antitrust lawsuits against state and local government entities — they can collide.

Beginning with the U.S. Supreme Court’s 1943 Parker v. Brown decision, the courts have developed a doctrine called state-action immunity that isolates narrow government conduct that is state-sovereign activity and exempts it from antitrust scrutiny. But, the Supreme Court has hinted — without ever deciding — that antitrust law may still apply to these government actors when they are engaged in active competition with private business. The circuits are currently split on the question. Some recognize this “market-participant exceptions,” while others wait for further Supreme Court guidance. In this article, the authors argue that both experience and policy support this commercial-conduct exception to the limited state exemption from the federal antitrust laws.

This article further explores how the market-participant doctrine would work if applied in Sherman Act cases and explains why the doctrine is consistent with federalism principles. Finally, the article discusses the possible scope of the market participant exception, including its potential application in cases where government actors have enacted regulations for the sole purpose of displacing competition in a manner that insulates a public enterprise from competition.