Articulating Trade Offs: The Political Economy of State Action Immunity

Antitrust uses economic analysis to assess various trade-offs involving efficiency. Even assuming that a competition matter implicates purely economic matters it can be exceedingly difficult to determine and measure all the relevant factors, assign them proper weights, decide on the appropriate time frames, assess the pertinent interactions, and conduct the trade-off calculations. Not surprisingly, different members of the antitrust community often take vastly differing positions regarding the economic consequences of a particular antitrust doctrine as well as the significance of those consequences. When potentially anti-competitive conduct occurs in the context of state regulation, the challenge to achieving a sensible accommodation is heightened because substantially less agreement exists regarding the appropriate balance between federalism and federal competition policy. Moreover, given that constitutional considerations arguably inform the balance struck, the necessity of achieving the correct balance is even more significant. One feature of the state action immunity doctrine around which controversy has swirled, a feature with profound practical as well as symbolic importance, is the requirement that the state clearly articulate its intention to displace competition. The central legal issue is federalism; it is not whether federal competition policy would achieve superior outcomes versus a state regulatory scheme. This essay briefly comments on the current debate regarding the “clear articulation” requirement. I first explain the basics of this requirement through synthesizing several key characteristics that the Supreme Court has expressly accepted or rejected as potential hallmarks of state activity warranting antitrust immunity. My discussion underscores a key trade-off regarding clarity of state intent that figures prominently in the Supreme Court’s legal standard. I then present several features characterizing the dominant criticism of that standard. This criticism ostensibly focuses on the judiciary’s imprecise delineation of its own “clear articulation” requirement. Yet the criticism also seems to reflect dissatisfaction with the underlying value the Supreme Court accorded federalism in its formulation of the state action immunity doctrine. In particular, many antitrust critics advocating restriction of the availability of such immunity seem to employ, albeit oftentimes implicitly, an economic-efficiency based trade-off. Many of the state action doctrine’s critics frequently seem reluctant to grapple openly with reassessing the value of federalism in this context. This is particularly unfortunate given the significant competition values at issue. Multiple trade-offs are pertinent to the state action immunity debate; this Comment seeks to illuminate them with the hope that by clarifying costs and benefits - even if they are ultimately unquantifiable or incommensurate - social discourse will have been enriched