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Sasha Volokh on Antitrust Immunity for Regulatory Boards Dominated by Market Participants

Tuesday, November 8, 2016 8:57
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Sasha Volokh has a new article on analyzing recent court cases defining the contours of antitrust immunity for market-participant-dominated regulatory boards. Here’s an excerpt:

If all raisin producers got together in a room and privately agreed to limit the quantity they produced in order to raise price, this cartel would be a per se violation of the Sherman Antitrust Act. The agreement not only would be unenforceable but also would carry significant civil and criminal penalties.

But what if the state of California created a Raisin Control Board charged with imposing the same regime by statute—perhaps after lobbying by these same raisin producers? This might be worse than the private agreement. Private agreements often break down (to the benefit of consumers) because some of the producers cheat on the deal by producing more than the agreed-on quantity or undercutting the agreed-on price, or because new producers enter the market to take advantage of the high prices. But the statutory regime would be able to control these “problems” with the force of law, and would continue until repealed by the legislature—i.e., possibly forever.

Nonetheless, in Parker v. Brown (1937), the Supreme Court held that the Sherman Act had nothing to say on the subject. The legislature that passed the Act in 1890 surely didn’t mean to control states’ sovereign activity, even if it was anticompetitive; moreover, a due respect for federalism counseled against preempting state policy in this way. This was the genesis of “state action” immunity to federal antitrust law.

Read the full article here. Volokh goes on to explain that the Texas Medical Board—which regulates the practice of medicine in Texas, tried to crack down on telehealth—the practice of doctors’ seeing patients by phone or video consultation rather than face-to-face appointments. Yet the Texas Medical Board is dominated by practicing doctors, so this crackdown consisted of doctors’ regulating their own competitors. Teladoc, a telehealth firm, argued that this was invalid under federal antitrust law, based on recent precedent from the U.S. Supreme Court on the antitrust liability of regulatory boards dominated by market participants. Volokh explains how Teladoc won, in part thanks to an amicus brief that he wrote for himself and 54 other antitrust and competition policy scholars.

Volokh’s other legal analyses written for Reason Foundation are available here.


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