Parker v. Brown, the Eleventh Amendment, and Anticompetitive State Regulation

Abstract

The Parker v. Brown (or “state action”) doctrine and the Eleventh Amendment of the Constitution impose differen limits on antitrust suits challenging anticompetitive state regulation. The Supreme Court has developed these two versions of state sovereign immunity separately, and lower courts usually apply the immunities independently of each another (even in the same cases) without explaining their relationship. Nevertheless, the Court has derived the two immunities from the same principle of sovereign immunity, so it is worth considering why and how they differ, and what the consequences of the differences are for antitrust policy. The state action immunity is based on statutory interpretation of the Sherman Act; the Court has shaped the shaped the doctrine over seventy-five years, guided by both considerations of state sovereignty and antitrust policy, so it should reflect a balance of the two critical variables. The Eleventh Amendment immunity, by contrast, has nothing specifically to do with antitrust policy; it is a general constitutional doctrine based on state sovereignty, with some acknowledgment of the demands of general federal authority. Our concern is that the application of the broader immunity is can thwart the balance between state sovereignty and antitrust policy reflected in the antitrust-specific immunity.

There are many differences between the immunities, but the only significant area of concern is in the subset of cases in which Eleventh Amendment immunity applies but the state action immunity does not—cases, in other words, in which the Supreme Court has chosen to deny Parker immunity to state-connected actors, in part because of considerations of antitrust policy. In those cases, the antitrust-specific version of sovereign immunity does not protect the state actors from damage liability, but the Eleventh Amendment immunity does. Is that a problem? To make a long story short, we conclude that the effect of the conflict on consumer welfare is probably small, because of the Eleventh Amendment immunity’s own limitations, and because of adaptations that public and private enforcers can make in case of a conflict. The outcome may, entirely by accident, be efficient.