Fordham Law Review Volume 57 Issue 3 Article 3 1988 Judicial Review as Midcal Active Supervision: Immunizing Private Parties from Antitrust Liability Michal Dlouhy Follow this and additional works at: https://ir.lawnet.fordham.edu/flr Part of the Law Commons Recommended Citation Michal Dlouhy, Judicial Review as Midcal Active Supervision: Immunizing Private Parties from Antitrust Liability, 57 Fordham L. Rev. 403 (1988). Available at: https://ir.lawnet.fordham.edu/flr/vol57/iss3/3 This Article is brought to you for free and open access by FLASH: The Fordham Law Archive of Scholarship and History. It has been accepted for inclusion in Fordham Law Review by an authorized editor of FLASH: The Fordham Law Archive of Scholarship and History. For more information, please contact [email protected]. NOTES JUDICIAL REVIEW AS MIDCAL ACTIVE SUPERVISION: IMMUNIZING PRIVATE PARTIES FROM ANTITRUST LIABILITY INTRODUCTION The Parker v. Brown' state action doctrine2 may immunize3 a private party4 from liability under federal antitrust laws.5 Private conduct is im- mune, however, only when it satisfies the two-pronged test developed in CaliforniaRetail Liquor Dealers Ass'n v. Midcal Aluminum, Inc.6 The challenged conduct must be pursuant to a "clearly articulated and affirm- atively expressed" state policy, and it must be " 'actively supervised' by 1. 317 U.S. 341 (1943) (immunizing actions of a raisin cartel from liability under the Sherman Act, 26 Stat. 209 (1890) (codified as amended at 15 U.S.C. §§ 1-7 (1982 & Supp. IV 1986))). 2. The Parker state action doctrine provides that the Sherman Act was not intended to restrain state action or official action directed by a state. See 1 P. Areeda & D. Turner, Antitrust Law: An Analysis of Antitrust Principles and Their Application $ 212a, at 68 (1978); infra notes 17-18 and accompanying text. For the first fifty-three years after the enactment of the Sherman Act in 1890, litigants and courts virtually ignored the potential conflict between the antitrust laws and the anticompetitive actions of state actors. See Wiley, A Capture Theory ofAntitrust Federal- i rm, 99 Harv.L. Rev. 713, 714 (1986). In 1943, the Court created the state action immu- nity doctrine in Parker v. Brown, 317 U.S. 341 (1943). However, it was not until Goldfarb v. Virginia State Bar, 421 U.S. 773 (1975), that the Parker doctrine became controversial. Most of its substantive development has taken place in cases decided after 1975. See infra note 25 and accompanying text. 3. The state action doctrine is not a true "exemption" or "immunity" from the fed- eral antitrust laws; rather, it identifies conduct not subject to those laws. The terms ex- emption and immunity are used for the sake of convenience. See Fuchs v. Rural Elec. Convenience Coop., 1988-2 Trade Cas. (CCH) f 68,247, at 59,537 n.1 (7th Cir. 1988); see also infra note 19. 4. The scope of this Note is limited to the Parker doctrine's application to private parties. While Parkerv. Brown only immunized the actions of the state itself, the Court subsequently recognized that state action immunity could also apply in a suit against a private party. See Southern Motor Carriers Rate Conference, Inc. v. United States, 471 U.S. 48, 56-57 (1985). Parkerv. Brown was "premised on the assumption that Congress, in enacting the Sher- man Act, did not intend to compromise the States' ability to regulate their domestic commerce." Id. at 56. Regulating commerce in today's complex economy necessitates some delegation of state authority to private actors. If Parker immunity were limited to the actions of public officials, this assumed congressional purpose would be frustrated, for a state would be unable to use delegation to implement needed regulatory programs. See id. at 56. For a discussion of the private/non-private bifurcation in the Parker doctrine case law, see infra note 40. 5. Courts have generally assumed that the Parker doctrine applies to other federal antitrust laws in addition to the Sherman Act. See Note, Parker v. Brown Revisited: The State Action Doctrine after Goldfarb, Cantor, and Bates, 77 Colum. L. Rev. 898, 898 n.4 (1977). 6. 445 U.S. 97 (1980); see infra notes 43-47 and accompanying text. FORDHAM LAW REVIEW [Vol. 57 the State itself."' 7 State agency review of private anticompetitive conduct typically satisfies the second-"active supervision"-prong of the Midcal test.8 This Note examines an issue specifically left open by the Supreme Court:9 whether judicial review by state courts should likewise satisfy the active supervision requirement. Part I of this Note examines Parker v. Brown's foundations"0 and dis- cusses the conflicting policy views concerning what the Parker doctrine should be used to accomplish." Part II describes how recent applica- tions of the Midcal test indicate a return to the deferential view of Parker immunity, 2 and analyzes the constitutional and economic effects of a rigorous application of the Midcal requirements.I3 Part III of this Note examines whether judicial review, as opposed to agency review, satisfies the requirements of active state supervision. 4 This Note argues that state court supervision of state policy may be as "active" as is necessary for state action immunity, 5 and concludes that the better approach would allow judicial review as active supervision to 7. California Retail Liquor Dealers Ass'n v. Midcal Aluminum, Inc., 445 U.S. 97, 105 (1980) (citing City of Lafayette v. Louisiana Power & Light Co., 435 U.S. 389, 410 (1978)). 8. See, e.g., Southern Motor Carriers Rate Conference, Inc. v. United States, 471 U.S. 48, 62 (1985). Review by a state supreme court acting in a legislative capacity, and review by the executive branch, should also satisfy the Midcal active supervision require- ment. See Jorde, Antitrust and the New State Action Doctrine: A Return to Deferential Economic Federalism, 75 Calif. L. Rev. 227, 240 (1987); Lopatka, The State of "State Action Antitrust Immunity: A Progress Report, 46 La. L. Rev. 941, 1038 (1986). 9. See Patrick v. Burget, 108 S.Ct. 1658, 1664-65 (1988). Only a few months later the 11th Circuit concluded that judicial review may constitute active state supervision for purposes of state action immunity. See Bolt v. Halifax Hosp. Medical Center, 851 F.2d 1273, 1282 (11th Cir.), vacated, 861 F.2d 1233 (1988) (en banc). 10. The language in Parkerv. Brown accepts federalism as the basis of the state action immunity: We find nothing in the language of the Sherman Act or in its history which suggests that its purpose was to restrain a state or its officers or agents from activities directed by its legislature. In a dual system of government in which, under the Constitution, the states are sovereign, save only as Congress may constitutionally subtract from their authority, an unexpressed purpose to nullify a state's control over its officers and agents is not lightly to be attributed to Congress. The Sherman Act makes no mention of the state as such, and gives no hint that it was intended to restrain state action or official action directed by a state. Parker v. Brown, 317 U.S. 341, 350-51 (1943); see infra note 21. 11. The critical analyses of the Parker doctrine can roughly be grouped into two views-the revisionist and the deferential-depending on each author's view of what the federal antitrust laws should be used to accomplish. See infra notes 30-42 and accompa- nying text. 12. See infra note 43 and accompanying text. 13. See infra notes 48-75 and accompanying text. 14. See infra notes 76-100 and accompanying text. Bolt v. Halifax Hosp. Medical Center, 851 F.2d 1273 (11th Cir.), vacated, 861 F.2d 1233 (1988) (en banc), concluded that there is no principled basis for distinguishing judicial review from agency review. See id. at 1282. 15. See infra notes 101-115 and accompanying text. 1988] MIDCAL A CTIVE SUPER VISION immunize private parties from antitrust liability. 16 I. THE PARKER STATE ACTION IMMUNITY DOCTRINE A. Foundations The Parkerdoctrine was conceived to protect state action from federal antitrust liability.1 7 The Court in Parker v. Brown found that the Sher- man Act was intended to suppress the "business combinations" of pri- vate individuals, and not "to restrain a state or its officers or agents from activities directed by its legislature."'" There are, however, two opposing views on why the Parker immu- nity19 doctrine was originally conceived.20 One view is that Parker v. 16. Although this Note focuses, at times, on the peer review context developed in two recent cases, Bolt v. Halifax Hosp. Medical Center, 851 F.2d 1273 (11th Cir.), vacated, 861 F.2d 1233 (1988) (en banc), and Patrick v. Burget, 800 F.2d 1498 (9th Cir. 1986), reversed, 108 S. Ct. 1658 (1988), its scope is not intended to be thereby limited. Judicial review could satisfy Midcal active supervision with respect to all private party delegates of state power. 17. See P. Areeda & D. Turner, supra note 2, 212a, at 68. 18. Id. (citing Parker v. Brown, 317 U.S. 341, 350-51 (1943)). 19. Inconsistent use of the terms "immunity," "exemption" and "preemption" results in a certain degree of confusion in the Parker doctrine case law and literature. See Han- dler, Antitrust-1978, 78 Colum. L. Rev. 1363, 1378-83 (1978). "Immunity" is perhaps the best word to express the concept behind the Parker doc- trine. Immunity is an internal concept; it concerns only one law. An action is immune from liability under a federal law when the law, as drafted, was not meant to apply.