FTC v. Phoebe Putney Health System

PETITIONER: Federal Trade Commission
RESPONDENT: Phoebe Putney Memorial Hospital
LOCATION: Phoebe Putney Memorial Hospital

DOCKET NO.: 11-1160
DECIDED BY: Roberts Court (2010-2016)
LOWER COURT: United States Court of Appeals for the Eleventh Circuit

CITATION: 568 US (2013)
GRANTED: Jun 25, 2012
ARGUED: Nov 26, 2012
DECIDED: Feb 19, 2013

ADVOCATES:
Benjamin J. Horwich - Assistant to the Solicitor General, Department of Justice, for the petitioner
Seth P. Waxman - for the respondent

Facts of the case

In 1941, the Georgia legislature enacted the Hospital Authorities Law, allowing the creation of hospital authorities as public bodies to oversee the public health needs of Georgia communities. The City of Albany and Dougherty County created the Hospital Authority of Albany-Dougherty County ("Authority"). Since its establishment, the Authority acquired hospitals throughout the area and leased the facilities to two non-profit corporations: Phoebe Putney Health System ("PPHS") and Phoebe Putney Memorial Hospital ("PPMH"). In December 2010, PPHS presented to the Authority a plan to buy the only remaining hospital in the area, Palmyra Hospital. The Authority approved the plan in April 2011.

Following the approval, the petitioner Federal Trade Commission ("FTC") initiated an administrative proceeding to determine whether the plan would create a monopoly in the hospital services market in Dougherty County and the surrounding area. To ensure that the plan did not come into fruition prior to the FTC's final determination, the FTC filed suit against the respondents: the Authority, PPMH, PPHS, and Palmyra. The respondents moved to dismiss the complaint on the basis that the state-action doctrine immunized the Authority and its operation of the hospitals from antitrust liability. The District Court granted the motion to dismiss and the FTC appealed to the United States Court of Appeals for the Eleventh Circuit. The appellate court affirmed the lower court decision, holding that the legislature in its enactment of the Hospital Authorities Law must have anticipated the anti-competitive effects that the FTC alleged.

Question

Does the state-action doctrine immunize a statutorily created hospital authority from antitrust liability for anti-competitive acts?

Media for FTC v. Phoebe Putney Health System

Audio Transcription for Oral Argument - November 26, 2012 in FTC v. Phoebe Putney Health System

Audio Transcription for Opinion Announcement - February 19, 2013 in FTC v. Phoebe Putney Health System

John G. Roberts, Jr.:

Justice Sotomayor has our opinion this morning in case 11-1160, Federal Trade Commission versus Phoebe Putney Health System.

Sonia Sotomayor:

This Court has recognized that the federal antitrust laws do not prevent states from imposing market restraints as an act of government.

This case concerns a scope of that state action immunity doctrine.

In Georgia, towns and counties may create special-purpose public entities called hospital authorities to provide hospital services to residents on a non-profit basis.

Georgia law gives these authorities numerous general powers including the power to acquire in these hospitals.

The hospital authority of the city of Albany and Dougherty County owns Memorial Hospital which is one of two hospitals in that county.

The authority leases Memorial to a private non-profit company which manages Memorial's day-to-day operations.

In 2010, the authority approved a plan to acquire the second hospital in the county until lease it to a corporate affiliate of the company that operates Memorial.

The Federal Trade Commission or FTC filed an administrative complaint and then sought a preliminary injunction arguing that the planned acquisition would substantially reduce competition in the market for hospital services in violation of Section 5 of the FTC Act and Sections -- Section -- Section 7 of the Clayton Act.

The District Court denied the request for a preliminary injunction and dismissed the FTCs claims on the ground that the authority and the other parties to the transaction were entitled to antitrust immunity under the state action doctrine.

The Eleventh Circuit affirmed.

The Court reasoned that Georgia's legislature must have foreseen that the grant of power to hospital authorities to acquire and lease hospitals would produce anticompetitive effects because acquisitions could consolidate ownership of competing hospitals.

We grant a certiorari and now reverse.

Under our precedent, a local governmental entity, like the authority is entitled to immunity only if it acts pursuant to a clearly articulated and affirmatively expressed state policy to displace competition.

We have applied that just practically recognizing that state legislatures do not typically catalogue all of the anticipated effects of a statute delegating authority to a local governmental entity.

But because state action immunity is disfavored, we have also applied the test rigorously insisting that the challenged anticompetitive effects must have been affirmatively contemplated by the State.

Thus, we have found the state policy to displace federal antitrust laws as sufficiently expressed in cases where the displacement of competition was the inherent logical or ordinary result of the exercise of authority delegated by the state legislature.

In that scenario, we have concluded that a state must have foreseen an implicitly endorsed the anticompetitive effects as consistent with its policy goals.

Here, there is no evidence that Georgia affirmatively contemplated that hospital authorities would displace competition by consolidating hospital ownership.

The acquisition of leasing powers exercised by the authority in the challenge transaction, mirror general powers routinely conferred by state law upon private corporations.

Such general grants of power should be, can be, and typically are used in ways that raise no federal antitrust concerns.

In concluding, otherwise, the Court of Appeals applied the concept of foreseeability from our clear articulation test too loosely.

While it is always possible that a local governmental entity might exercise general powers in anticompetitive ways, a reasonable legislature's ability to foresee that possibility fells -- falls well short of clearly articulating an affirmative state policy to displace competition.

Respondents insist that Georgia law does more than give hospital authority's permission to play in the market.

They contend that because hospital authorities are granted unique powers and responsibilities to fulfill the state's objective of providing residents with the access to adequate and affordable hospital care.

The State must have anticipated that the authorities would decide to acquire additional local hospitals to increase their capacity.

But for reasons discussed in the opinion, we find nothing in Georgia law that clearly articulates a state policy to let hospital authorities exercise their acquisition power without regard to negative effects on competition.

The judgment of the Court of Appeals for the Eleventh Circuit is reversed.

The decision of the Court is unanimous.