Rediscovering Capture: Antitrust Federalism and the North Carolina Dental Case

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Herbert Hovenkamp, Apr 27, 2015

The North Carolina Dental Examiners case is the second time in two years that the Supreme Court rejected a “state action” defense to an anticompetitive arrangement that had been approved under state law and that very likely visited any competitive harm almost entirely on its own residents. In Phoebe Putney the Court unanimously held that a state statute that permitted two hospitals to merge did not authorize an anticompetitive merger to monopoly. As a result, it did not immunize the transaction from an antitrust challenge.

In both cases the problems that the Supreme Court identified are fixable by state legislation, although the legislation would require greater transparency about the interests that the state was protecting. The facts of both cases suggested—but the Court did not consider—whether it should be relevant that the anticompetitive conduct in question was harmful mainly to the state’s own residents. If state-sanctioned anticompetitive conduct harms mainly that state’s own citizens should federal authorities be less concerned?