Fed. Trade Comm'n v. Phoebe Putney Health Sys., Inc.

• Decision Date: 19 February 2013
• Docket Number: No. 11–1160.,11–1160.
• Parties: FEDERAL TRADE COMMISSION, Petitioner v. PHOEBE PUTNEY HEALTH SYSTEM, INC., et al.
• Court: U.S. Supreme Court

568 U.S. 216

133 S.Ct. 1003

185 L.Ed.2d 43

FEDERAL TRADE COMMISSION, Petitioner

v.PHOEBE PUTNEY HEALTH SYSTEM, INC., et al.

No. 11–1160.

Supreme Court of the United States

Argued Nov. 26, 2012.

Decided Feb. 19, 2013.

Benjamin J. Horwich, for Petitioner.

Seth P. Waxman, Washington, DC, for Respondents.

Willard K. Tom, General Counsel, John F. Daly, Deputy General, Counsel for Litigation.

Imad D. Abyad, Michele Arington, Attorneys, Federal Trade Commission, Washington, DC, Donald B. Verrilli, Jr., Solicitor General, Counsel of Record, Malcolm L. Stewart, Deputy Solicitor General, Renata B. Hesse, Deputy Assistant Attorney General, Benjamin J. Horwich, Assistant to the Solicitor General, Department of Justice, Washington, DC, for Petitioner.

Justice SOTOMAYOR delivered the opinion of the Court.

Under this Court's state-action immunity doctrine, when a local governmental entity acts pursuant to a clearly articulated and affirmatively expressed state policy to displace competition, it is exempt from scrutiny under the federal antitrust laws. In this case, we must decide whether a Georgia law that creates special-purpose public entities called hospital authorities and gives those entities general corporate powers, including the power to acquire hospitals, clearly articulates and affirmatively expresses a state policy to permit acquisitions that substantially lessen competition. Because Georgia's grant of general corporate powers to hospital authorities does not include permission to use those powers anticompetitively, we hold that the clear-articulation test is not satisfied and state-action immunity does not apply.

I

A

In 1941, the State of Georgia amended its Constitution to allow political subdivisions to provide health care services. 1941 Ga. Laws p. 50. The State concurrently enacted the Hospital Authorities Law (Law), id., at 241, Ga.Code Ann. § 31–7–70 et seq. (2012), "to provide a mechanism for the operation and maintenance of needed health care facilities in the several counties and municipalities of th[e] state." § 31–7–76(a). "The purpose of the constitutional provision and the statute based thereon was to ... create an organization which could carry out and make more workable the duty which the State owed to its indigent sick." DeJarnette v. Hospital Auth. of Albany, 195 Ga. 189, 200, 23 S.E.2d 716, 723 (1942) (citations omitted). As amended, the Law authorizes each county and municipality, and certain combinations of counties or municipalities, to create "a public body corporate and politic" called a "hospital authority." §§ 31–7–72(a), (d). Hospital authorities are governed by 5– to 9–member boards that are appointed by the governing body of the county or municipality in their area of operation. § 31–7–72(a).

Under the Law, a hospital authority "exercise[s] public and essential governmental functions" and is delegated "all the powers necessary or convenient to carry out and effectuate" the Law's purposes. § 31–7–75. Giving more content to that general delegation, the Law enumerates 27 powers conferred upon hospital authorities, including the power "[t]o acquire by purchase, lease, or otherwise and to operate projects," § 31–7–75(4), which are defined to include hospitals and other public health facilities, § 31–7–71(5); "[t]o construct, reconstruct, improve, alter, and repair projects," § 31–7–75(5) ; "[t]o lease ... for operation by others any project" provided certain conditions are satisfied, § 31–7–75(7) ; and "[t]o establish rates and charges for the services and use of the facilities of the authority," § 31–7–75(10). Hospital authorities may not operate or construct any project for profit, and accordingly they must set rates so as only to cover operating expenses and create reasonable reserves. § 31–7–77.

B

In the same year that the Law was adopted, the city of Albany and Dougherty County established the Hospital Authority of Albany–Dougherty County (Authority) and the Authority promptly acquired Phoebe Putney Memorial Hospital (Memorial), which has been in operation in Albany since 1911. In 1990, the Authority restructured its operations by forming two private nonprofit corporations to manage Memorial: Phoebe Putney Health System, Inc. (PPHS), and its subsidiary, Phoebe Putney Memorial Hospital, Inc. (PPMH). The Authority leased Memorial to PPMH for $1 per year for 40 years. Under the lease, PPMH has exclusive authority over the operation of Memorial, including the ability to set rates for services. Consistent with § 31–7–75(7), PPMH is subject to lease conditions that require provision of care to the indigent sick and limit its rate of return.

Memorial is one of two hospitals in Dougherty County. The second, Palmyra Medical Center (Palmyra), was established in Albany in 1971 and is located just two miles from Memorial. At the time suit was brought in this case, Palmyra was operated by a national for-profit hospital network, HCA, Inc. (HCA). Together, Memorial and Palmyra account for 86 percent of the market for acute-care hospital services provided to commercial health care plans and their customers in the six counties surrounding Albany. Memorial accounts for 75 percent of that market on its own.

In 2010, PPHS began discussions with HCA about acquiring Palmyra. Following negotiations, PPHS presented the Authority with a plan under which the Authority would purchase Palmyra with PPHS controlled funds and then lease Palmyra to a PPHS subsidiary for $1 per year under the Memorial lease agreement. The Authority unanimously approved the transaction.

The Federal Trade Commission (FTC) shortly thereafter issued an administrative complaint alleging that the proposed purchase-and-lease transaction would create a virtual monopoly and would substantially reduce competition in the market for acute-care hospital services, in violation of § 5 of the Federal Trade Commission Act, 38 Stat. 719, 15 U.S.C. § 45, and § 7 of the Clayton Act, 38 Stat. 731, 15 U.S.C. § 18. The FTC, along with the State of Georgia,¹ subsequently filed suit against the Authority, HCA, Palmyra, PPHS, PPMH, and the new PPHS subsidiary created to manage Palmyra (collectively respondents), seeking to enjoin the transaction pending administrative proceedings. See 15 U.S.C. §§ 26, 53(b).

The United States District Court for the Middle District of Georgia denied the request for a preliminary injunction and granted respondents' motion to dismiss. 793 F.Supp.2d 1356 (2011). The District Court held that respondents are immune from antitrust liability under the state-action doctrine. See id., at 1366–1381.

The United States Court of Appeals for the Eleventh Circuit affirmed. 663 F.3d 1369 (2011). As an initial matter, the court "agree[d] with the [FTC] that, on the facts alleged, the joint operation of Memorial and Palmyra would substantially lessen competition or tend to create, if not create, a monopoly." Id., at 1375. But the court concluded that the transaction was immune from antitrust liability. See id., at 1375–1378. The Court of Appeals explained that as a local governmental entity, the Authority was entitled to state-action immunity if the challenged anticompetitive conduct was a " ‘foreseeable result’ " of Georgia's legislation. Id., at 1375. According to the court, anticompetitive conduct is foreseeable if it could have been " ‘reasonably anticipated’ " by the state legislature; it is not necessary, the court reasoned, for an anticompetitive effect to " be ‘one that ordinarily occurs, routinely occurs, or is inherently likely to occur as a result of the empowering legislation.’ " Id., at 1375–1376 (quoting FTC v. Hospital Bd. of Directors of Lee Cty., 38 F.3d 1184, 1188, 1190–1191 (C.A.11 1994) ). Applying that standard, the Court of Appeals concluded that the Law contemplated the anticompetitive conduct challenged by the FTC. The court noted the "impressive breadth" of the powers given to hospital authorities, which include traditional powers of private corporations and a few additional capabilities, such as the power to exercise eminent domain. See 663 F.3d, at 1376. More specifically, the court reasoned that the Georgia Legislature must have anticipated that the grant of power to hospital authorities to acquire and lease projects would produce anticompetitive effects because "[f]oreseeably, acquisitions could consolidate ownership of competing hospitals, eliminating competition between them." Id., at 1377.²

The Court of Appeals also rejected the FTC's alternative argument that state-action immunity did not apply because the transaction in substance involved a transfer of control over Palmyra from one private entity to another, with the Authority acting as a mere conduit for the sale to evade antitrust liability. See id., at 1376, n. 12.

We granted certiorari on two questions: whether the Georgia Legislature, through the powers it vested in hospital authorities, clearly articulated and affirmatively expressed a state policy to displace competition in the market for hospital services; and if so, whether state-action immunity is nonetheless inapplicable as a result of the Authority's minimal participation in negotiating the terms of the sale of Palmyra and the Authority's limited supervision of the two hospitals' operations. See 567 U.S. ––––, 133 S.Ct. 28, 183 L.Ed.2d 674 (2012). Concluding that the answer to the first question is "no," we reverse without reaching the second question.³

II

In Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943), this Court held that because "nothing in the language of the Sherman Act [ 15 U.S.C. § 1 et seq. ] or in its history" suggested that Congress intended to restrict the sovereign capacity of the States to regulate their economies, the Act should not be read to bar States from imposing market restraints "as an act of government." Id., at 350, 352, 63 S.Ct. 307. Following Parker, we have held that under certain circumstances, immunity from the federal antitrust laws may extend to nonstate actors...