Tuesday, September 23, 2003

Antitrust News: FTC Finds Limits on Power Problematic

In antitrust there's something known as the "state action doctrine." This doctrine, like most antitrust rules, a creation of the Supreme Court, says that a state government can ignore the federal antitrust laws and "replace competition" with a state regulatory regime. The reason for this doctrine is that the courts concluded that the antitrust laws were not applicable to state governments. Federal antitrust authorities, not surprisingly, don't like this doctrine, since it restricts their ability to go after private businesses that obtain protection from states.

The moving industry is a common target of FTC-state action tension. Many states permit trade associations of competing movers to file joint tariffs with state authorities. These tariffs are legally required statements of prices movers charge customers. The FTC considers joint tariff-filing akin to price fixing, and wants to eliminate it in every state. The legal issue then becomes whether the state action doctrine protects joint tariff filing; the courts have generally said yes, but the FTC always says no.

Given this background, it's interesting to consider this press release today from the FTC:
In a staff report released today, the Federal Trade Commission’s State Action Task Force concludes that the scope of the antitrust state action doctrine has expanded dramatically since first articulated by the Supreme Court in 1943. The doctrine has become unmoored from its original objectives, the report concludes, and is frequently invoked to protect private commercial efforts with no relation to state policy. Accordingly, the “Report of the State Action Task Force” recommends a number of specific clarifications of the doctrine, including more rigorous application of the “clear articulation” and “active supervision” requirements.

“The state action doctrine can have significant benefits, but over-broad interpretations impose significant costs on consumers,” said FTC Chairman Timothy Muris. “The Task Force has identified instances in which parties with a direct financial interest in the regulated field have attempted to characterize their own protectionist efforts as the will of the state. The Supreme Court never intended to shield such conduct from antitrust enforcement.”

The report identifies recurrent areas of concerns in recent state action case law, and challenges the conventional wisdom that the anticompetitive impact of an over-broad interpretation of the doctrine can be limited to a single state.

“The Task Force Report confirms once again why exemptions from the antitrust laws must be construed narrowly,” noted Todd Zywicki, Director of the FTC’s Office of Policy Planning. “Extending the protection of the state action doctrine to parties operating under a vague grant of authority, with little or no state supervision, not only harms consumers in the state in question, but frequently results in harm to consumers outside the state imposing the restraint.”
Translation: An FTC-appointed task force decided the FTC doesn't have enough control over the economy. The argument that antitrust exemptions "must be construed narrowly" is particularly telling. You will never hear the FTC argue that their authority should be construed narrowly, or for that matter, that the FTC should even be bound by any objective law.

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