This brief essay analyzes the Supreme Court's 2015 decision in the North Carolina Dental case, assessing its implications for federalism. The decision promises to re-open old divisions that had once made the antitrust "state action" doctrine a controversial lightning rod for debate about state economic sovereignty.
One provocative issue that neither the majority nor the dissenters considered is indicated by the fact that nearly all the cartel customers in the Dental case were located within the state. By contrast, the cartel in Parker v. Brown, which the dissent held up as the correct exemplar of the doctrine, benefited California growers while visiting nearly all of its harm upon other states. This fact serves to make the Dental case more paternalistic in the sense that it amounts to federal management of a state's internal economy when there are not significant externalities, at least not as identified in the decisions.
If a state's bad economic policy injures mainly the state's own citizens, what should be the role of federal antitrust policy? The same question came up with respect to the state action doctrine's authorization requirement in the Court's 2013 Phoebe-Putney case, which involved a merger of two relatively rural hospitals in the center of the state, and that very likely served few out of state patients. Significantly, the state action doctrine's twin requirements of clear state articulation and active state supervision never make extraterritorial impact relevant. The end result, however, is to give the federal courts an antitrust role not merely in cases with a significant interstate impact, but also where state government's internal deficiencies injure its own citizens.
Hovenkamp, Herbert J., "Rediscovering Capture: Antitrust Federalism and the North Carolina Dental Case" (2015). Faculty Scholarship at Penn Law. 1801.
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